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Monday, 03 January 11
TAXATION FOR COAL MINING COMPANIES IN INDONESIA - A TAX EXPERTS VIEW
 COALspot.com - Mrs. Sri Wahyuni Sujono, managing partner of SF Consulting has wrote an exclusive report regarding taxation for coal mining companies in Indonesia for COALspot.com subscribers.
Currently, the conduct of Coal exploration, development and production in Indonesia is regulated by:
1.The Izin Usaha Pertambangan (IUP)/Mining Business License; and
2. The Perjanjian Karya Pengusahaan Pertambangan Batubara(PKP2B)/Coal Contract of Work (CCoW).
Tax Regime for a Coal Mining Company
The IUP company is subject to prevailing Indonesian tax laws. Unlike the CCoW, the IUP regulatory regime does not specify distinct tax rules. A CCoW company taxation terms in the Contract is lex specialis– that is, the terms in the contract override the general tax laws. For example, when certain specific tax rules are set out in a Contract, these tax rules take precedence over the prevailing tax laws. Generally, the tax rules in a Contract reflect those that are in force at the time the contract were signed, although there may be some exceptions. Typically, a Contract fixes the tax rules for the duration of the contract (with the exception of second generation CCAs where they generally follow the prevailing tax regulations).
Income Tax Rate
Under the prevailing Tax Law Regulations, a company is subject to corporate income tax on its net taxable profit. Net taxable profit is calculated based on gross income minus deductible expenses. The prevailing corporate tax rate for 2010 and onward is a flat rate of 25% of net taxable profit. If a Contract stipulates a specific corporate income tax rate, the Contract company may not be entitled to 25% corporate tax.
Income
Gross income usually represents sales of mining products and any other income earned by the mining company.
General Expenses
In general, deductible expenses are expenditures incurred to generate, maintain and collect taxable income and generally include an amount paid or accrued for all expenditures attributable to the company’s operations in a year which typically have a useful life of less than one year. Certain expenditures may not be tax deductible under the prevailing Income Tax law, e.g. donations and benefits-in-kind provided to employees. Some types of benefits-in-kind provided at the mining site may be deductible if the mine is located in a remote area (which is usually the case) and an approval from the DGT is obtained.
Exploration and Development Expenses
Exploration and development expenses may include camp construction, drilling, access road, project communication facilities, etc. On-site exploration expenses are generally deductible in the year the expenses are incurred provided the expenses meet the general deductibility criteria required. Exploration and mine development expenses should generally be capitalized and amortized upon spending rather than production.
Depreciation of Fixed Assets
Fixed assets are categorized into four categories, depending on the nature of the asset and its expected useful life. The rate at which the asset can be depreciated will depend upon the category of the asset. Assets are generally depreciated over 4, 8, 16 or 20 years and taxpayers may apply a diminishing balance or straight line approach to depreciation.
Amortization of Intangible Assets
Intangible assets may include pre-operating costs, patents, rights, licenses, etc. Costs incurred in the acquisition of mining rights with a beneficial life of more than one year should be amortized based on a production unit method, not exceeding 20% per annum.
Tax Losses Carried Forward
Tax losses can be carried forward for up to five years under the Tax Law and are utilized on a first-in-first-out basis. Tax losses cannot be carried back.
Reclamation Reserve
For accounting purposes, a mining company is usually required to maintain a reclamation reserve for environmental management and reclamation work during the contract period and at the end of the life of the mine. The reclamation reserve amount should be tax deductible provided that it is calculated in accordance with the prevailing energy/mineral resources sector laws/regulations. If the actual cost exceeds the reserve, the balance is generally tax deductible.
VAT
Under VAT Law No. 42/2009, coal is not subject to VAT. As a consequence, the input VAT paid to the company’s suppliers are not creditable. Some Contracts may adopt a VAT regime different than the prevailing VAT regulations. For example, there may be provision that Input VAT may be creditable/refundable despite the fact that the coal being produced is not subject to VAT. During the pre-production stage of the Contract, the company shall not have any Output VAT due to there being no delivery of mining product at that point. Therefore, VAT overpayment is likely as the company should pay its Input VAT to vendors for purchases of taxable goods/services. Some Contract companies should collect and pay VAT charged by its vendors (i.e. Output VAT) directly to the State Treasury (act as a VAT collector) as required by the relevant Contract.
Withholding Tax
The Contract company is obliged to withhold income tax from payments of dividends, interest, royalties and most types of services. The Withholding tax rate will depend on the type of service and whether the service provider is a resident or non-resident that stipulated in the tax rules Contract. The general withholding tax rate for services is 2%. The Withholding tax on dividends, interest, royalty paid to Indonesia tax resident is at 15% while for non-resident is set at 20%, though this rate is reduced by most of Indonesia’s double tax avoidance agreements. Some Contracts may provide a reduced Withholding tax rate into nil or 7.5%.
OTHER TAXES
Royalties
Royalties are payable quarterly to the Government based on the actual volume of production according to details set out in the IUP/CCoW. The royalty is tax deductible.
Land and Building Tax
The company is required to pay land and building tax as set out in the IUP/CCoW. Dead rent is an annual charge based on the number of hectares in the Mining Area. The land and building taxes are deductible for income tax.
To download this report click here.
Writer’s Profile :
Mrs. Sri Wahyuni Sujono, graduated with a Business Administration degree from the University of Wisconsin-Madison, USA. She is a certified Tax Attorney, Tax Consultant and holds a Brevet C – the highest working license qualification, and is the managing partner of SF Consulting. Sri also has expertise outside tax consultancy; she is a Chartered Financial Consultant (ChFC) and a qualified lawyer, giving a more holistic outlook and approach to her services.
Sri has had over fifteen years of experience of tax consulting with Arthur Andersen and Ernst and Young Indonesia; three years of which she was a Tax and Business Partner. She is the Vice Chairman of the Taxation Committee at the Indonesian Chamber of Commerce (KADIN), the Head of Foreign Affairs in the Indonesian Tax Consultant Association (IKPI) and sits in the Board of Experts in the Indonesian Chinese Association (INTI).
Disclaimer: This report has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this report without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this report, and, to extent permitted by law. SF Consulting and COALspot.com, its directors, members, employees, agents do not accept or assume any liability, responsibility or duty of care of any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this report or for any decision based on it.
If you believe an article violates your rights or the rights of others, please contact us.
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Tuesday, 17 January 23
CHINA'S SHANXI TARGETS 2023 COAL PRODUCTION OF NEARLY 1.37B TONS - XINHUA
China’s coal-rich province of Shanxi has set a coal production target of nearly 1.37 billion metric tons for 2023, according to a government ...
Tuesday, 17 January 23
MARKET INSIGHT - INTERMODAL
Rumor has it that the New Year has come, to set the pace in, for Russia to continue hostilities against Ukraine. Ten months on the go, into Russia& ...
Tuesday, 17 January 23
INDONESIA IS ACCOUNTING FOR 32.3% OF THE GLOBAL SEABORNE COAL MARKET IN 2022 - BENCHERO COSTA
After a slow start in the first quarter, global coal trade has really picked up pace last year, and is now fully back to pre-Covid levels, Benchero ...
Tuesday, 10 January 23
INDONESIAN HBA IS SEEING A SPIKE IN JANUARY 2023 INSTEAD OF A SIGNIFICANT FALL IN DECEMBER 2022
COALspot.com: Indonesian Coal Price Reference up 8.43% in January 2023.
HBA is seeing a dramatic spike in January 2023 i ...
Sunday, 08 January 23
INDIAN COAL POWER PLANTS SHOULD BE COMPENSATED FOR 2022 FORCED GENERATION – REGULATOR : REUTERS
Indian power plants that rely on imported coal should be fully compensated when forced to supply electricity, the country’s power regulator s ...
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- Asmin Koalindo Tuhup - Indonesia
- Aboitiz Power Corporation - Philippines
- White Energy Company Limited
- Bhoruka Overseas - Indonesia
- Sojitz Corporation - Japan
- Savvy Resources Ltd - HongKong
- Merrill Lynch Commodities Europe
- Attock Cement Pakistan Limited
- Bhatia International Limited - India
- Agrawal Coal Company - India
- Anglo American - United Kingdom
- Jorong Barutama Greston.PT - Indonesia
- Coalindo Energy - Indonesia
- Formosa Plastics Group - Taiwan
- ICICI Bank Limited - India
- Bharathi Cement Corporation - India
- Billiton Holdings Pty Ltd - Australia
- Uttam Galva Steels Limited - India
- Georgia Ports Authority, United States
- Altura Mining Limited, Indonesia
- Orica Australia Pty. Ltd.
- Global Coal Blending Company Limited - Australia
- Coastal Gujarat Power Limited - India
- Banpu Public Company Limited - Thailand
- European Bulk Services B.V. - Netherlands
- Tamil Nadu electricity Board
- Borneo Indobara - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Trasteel International SA, Italy
- Electricity Generating Authority of Thailand
- Carbofer General Trading SA - India
- Standard Chartered Bank - UAE
- Wood Mackenzie - Singapore
- Sical Logistics Limited - India
- Kaltim Prima Coal - Indonesia
- Pendopo Energi Batubara - Indonesia
- Africa Commodities Group - South Africa
- India Bulls Power Limited - India
- PNOC Exploration Corporation - Philippines
- Power Finance Corporation Ltd., India
- Heidelberg Cement - Germany
- Mercuria Energy - Indonesia
- Economic Council, Georgia
- Australian Commodity Traders Exchange
- Leighton Contractors Pty Ltd - Australia
- South Luzon Thermal Energy Corporation
- London Commodity Brokers - England
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Siam City Cement PLC, Thailand
- Sree Jayajothi Cements Limited - India
- Commonwealth Bank - Australia
- Ceylon Electricity Board - Sri Lanka
- Bulk Trading Sa - Switzerland
- Eastern Energy - Thailand
- IHS Mccloskey Coal Group - USA
- Medco Energi Mining Internasional
- Edison Trading Spa - Italy
- TeaM Sual Corporation - Philippines
- Holcim Trading Pte Ltd - Singapore
- Renaissance Capital - South Africa
- Parry Sugars Refinery, India
- Xindia Steels Limited - India
- Binh Thuan Hamico - Vietnam
- LBH Netherlands Bv - Netherlands
- Therma Luzon, Inc, Philippines
- Jaiprakash Power Ventures ltd
- Aditya Birla Group - India
- Singapore Mercantile Exchange
- Neyveli Lignite Corporation Ltd, - India
- Antam Resourcindo - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Orica Mining Services - Indonesia
- PTC India Limited - India
- Rio Tinto Coal - Australia
- Kartika Selabumi Mining - Indonesia
- GMR Energy Limited - India
- Indonesian Coal Mining Association
- Rashtriya Ispat Nigam Limited - India
- Marubeni Corporation - India
- Intertek Mineral Services - Indonesia
- Meralco Power Generation, Philippines
- Semirara Mining Corp, Philippines
- Indo Tambangraya Megah - Indonesia
- Indogreen Group - Indonesia
- Larsen & Toubro Limited - India
- Jindal Steel & Power Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Bangladesh Power Developement Board
- Krishnapatnam Port Company Ltd. - India
- Simpson Spence & Young - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Electricity Authority, New Zealand
- Indika Energy - Indonesia
- Baramulti Group, Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Grasim Industreis Ltd - India
- Kumho Petrochemical, South Korea
- Planning Commission, India
- Goldman Sachs - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- Globalindo Alam Lestari - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Tata Chemicals Ltd - India
- Timah Investasi Mineral - Indoneisa
- Thiess Contractors Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Indian Energy Exchange, India
- Chamber of Mines of South Africa
- Alfred C Toepfer International GmbH - Germany
- Cigading International Bulk Terminal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- McConnell Dowell - Australia
- GAC Shipping (India) Pvt Ltd
- Directorate General of MIneral and Coal - Indonesia
- Petron Corporation, Philippines
- Latin American Coal - Colombia
- VISA Power Limited - India
- Miang Besar Coal Terminal - Indonesia
- Karaikal Port Pvt Ltd - India
- Lanco Infratech Ltd - India
- Posco Energy - South Korea
- New Zealand Coal & Carbon
- Central Electricity Authority - India
- Mjunction Services Limited - India
- Toyota Tsusho Corporation, Japan
- Deloitte Consulting - India
- Chettinad Cement Corporation Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Iligan Light & Power Inc, Philippines
- OPG Power Generation Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Madhucon Powers Ltd - India
- Barasentosa Lestari - Indonesia
- SMC Global Power, Philippines
- International Coal Ventures Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- The State Trading Corporation of India Ltd
- Vijayanagar Sugar Pvt Ltd - India
- Star Paper Mills Limited - India
- Indian Oil Corporation Limited
- SMG Consultants - Indonesia
- Oldendorff Carriers - Singapore
- Eastern Coal Council - USA
- Minerals Council of Australia
- Makarim & Taira - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Vizag Seaport Private Limited - India
- Energy Development Corp, Philippines
- Videocon Industries ltd - India
- Ambuja Cements Ltd - India
- Bukit Baiduri Energy - Indonesia
- Global Business Power Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Ministry of Transport, Egypt
- Romanian Commodities Exchange
- Bank of Tokyo Mitsubishi UFJ Ltd
- Manunggal Multi Energi - Indonesia
- ASAPP Information Group - India
- CIMB Investment Bank - Malaysia
- Ministry of Finance - Indonesia
- The University of Queensland
- Independent Power Producers Association of India
- Sarangani Energy Corporation, Philippines
- The Treasury - Australian Government
- GN Power Mariveles Coal Plant, Philippines
- Gujarat Sidhee Cement - India
- Price Waterhouse Coopers - Russia
- Interocean Group of Companies - India
- Siam City Cement - Thailand
- Maharashtra Electricity Regulatory Commission - India
- Gujarat Electricity Regulatory Commission - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ministry of Mines - Canada
- Gujarat Mineral Development Corp Ltd - India
- Sakthi Sugars Limited - India
- Maheswari Brothers Coal Limited - India
- Samtan Co., Ltd - South Korea
- Australian Coal Association
- Thai Mozambique Logistica
- Straits Asia Resources Limited - Singapore
- Malabar Cements Ltd - India
- PowerSource Philippines DevCo
- Port Waratah Coal Services - Australia
- MS Steel International - UAE
- Dalmia Cement Bharat India
- SN Aboitiz Power Inc, Philippines
- Parliament of New Zealand
- Kobexindo Tractors - Indoneisa
- IEA Clean Coal Centre - UK
- Wilmar Investment Holdings
- Coal and Oil Company - UAE
- AsiaOL BioFuels Corp., Philippines
- Salva Resources Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Sindya Power Generating Company Private Ltd
- CNBM International Corporation - China
- GVK Power & Infra Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Bayan Resources Tbk. - Indonesia
- Kideco Jaya Agung - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Essar Steel Hazira Ltd - India
- San Jose City I Power Corp, Philippines
- Kepco SPC Power Corporation, Philippines
- Semirara Mining and Power Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Cement Manufacturers Association - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bhushan Steel Limited - India
- Mintek Dendrill Indonesia
- Central Java Power - Indonesia
- Vedanta Resources Plc - India
- Ind-Barath Power Infra Limited - India
- Mercator Lines Limited - India
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