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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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Sunday, 08 January 23
ELEVATED COAL PRICE A DRAG ON MARGINS OF DOMESTIC BASE METAL PLAYERS: ICRA
The increased price of coal continue to be a drag on the margin of domestic base metal players with no immediate relief in sight, rating agency ICR ...
Monday, 02 January 23
CHINA’S COAL CONSUMPTION TO PEAK BY 2035: REPORT - REUTERS
China’s primary energy consumption is likely to peak at nearly 6.03 billion tonnes of standard coal between 2030 and 2035, refining giant Chi ...
Thursday, 29 December 22
INDIA'S COAL DEMAND LIKELY TO PEAK BETWEEN 2030-2035: MINISTER - ANI
The demand for coal in India will continue and is likely to peak between 2030-2035, Union Minister of Coal, Mines, and Parliamentary Affairs Pralha ...
Thursday, 29 December 22
RIO TINTO AND PARTNERS COULD RECEIVE AS MUCH AS $450M IN GOVERNMENT COMPENSATION FOR COAL PRICE CAP - THE GUARDIAN
Compensation payments for the Gladstone power plant remain the sticking point in the federal government’s coal price cap compensation negotia ...
Wednesday, 28 December 22
MARKET INSIGHT - INTERMODAL
The United Nations Conference on Trade and Development (UNCTAD) published a Global Trade Update on December 13th highlighting that global trade wou ...
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- Therma Luzon, Inc, Philippines
- Gujarat Sidhee Cement - India
- Malabar Cements Ltd - India
- Carbofer General Trading SA - India
- Bangladesh Power Developement Board
- Bank of Tokyo Mitsubishi UFJ Ltd
- South Luzon Thermal Energy Corporation
- Billiton Holdings Pty Ltd - Australia
- Ministry of Finance - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Salva Resources Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Parliament of New Zealand
- Ind-Barath Power Infra Limited - India
- Simpson Spence & Young - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Lanco Infratech Ltd - India
- Indian Oil Corporation Limited
- Formosa Plastics Group - Taiwan
- Interocean Group of Companies - India
- Pipit Mutiara Jaya. PT, Indonesia
- Riau Bara Harum - Indonesia
- Merrill Lynch Commodities Europe
- Petrochimia International Co. Ltd.- Taiwan
- Offshore Bulk Terminal Pte Ltd, Singapore
- Semirara Mining Corp, Philippines
- The State Trading Corporation of India Ltd
- Kalimantan Lumbung Energi - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Essar Steel Hazira Ltd - India
- Planning Commission, India
- Star Paper Mills Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Indian Energy Exchange, India
- Minerals Council of Australia
- TNB Fuel Sdn Bhd - Malaysia
- Maharashtra Electricity Regulatory Commission - India
- Barasentosa Lestari - Indonesia
- Maheswari Brothers Coal Limited - India
- Standard Chartered Bank - UAE
- Semirara Mining and Power Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Energy Development Corp, Philippines
- Larsen & Toubro Limited - India
- The Treasury - Australian Government
- SMC Global Power, Philippines
- Orica Mining Services - Indonesia
- Electricity Authority, New Zealand
- Chamber of Mines of South Africa
- Indika Energy - Indonesia
- International Coal Ventures Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Baramulti Group, Indonesia
- Thai Mozambique Logistica
- Krishnapatnam Port Company Ltd. - India
- Petron Corporation, Philippines
- IEA Clean Coal Centre - UK
- Mjunction Services Limited - India
- Straits Asia Resources Limited - Singapore
- AsiaOL BioFuels Corp., Philippines
- OPG Power Generation Pvt Ltd - India
- Port Waratah Coal Services - Australia
- Australian Commodity Traders Exchange
- The University of Queensland
- Jindal Steel & Power Ltd - India
- Deloitte Consulting - India
- Kapuas Tunggal Persada - Indonesia
- Kepco SPC Power Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Intertek Mineral Services - Indonesia
- Vizag Seaport Private Limited - India
- India Bulls Power Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- GVK Power & Infra Limited - India
- Iligan Light & Power Inc, Philippines
- Goldman Sachs - Singapore
- Heidelberg Cement - Germany
- Kideco Jaya Agung - Indonesia
- PowerSource Philippines DevCo
- Independent Power Producers Association of India
- Australian Coal Association
- Kohat Cement Company Ltd. - Pakistan
- Bulk Trading Sa - Switzerland
- Singapore Mercantile Exchange
- Thiess Contractors Indonesia
- Grasim Industreis Ltd - India
- Eastern Coal Council - USA
- Videocon Industries ltd - India
- Miang Besar Coal Terminal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- London Commodity Brokers - England
- Jaiprakash Power Ventures ltd
- Mercator Lines Limited - India
- Chettinad Cement Corporation Ltd - India
- Central Electricity Authority - India
- GAC Shipping (India) Pvt Ltd
- Anglo American - United Kingdom
- Xindia Steels Limited - India
- Mintek Dendrill Indonesia
- Africa Commodities Group - South Africa
- MS Steel International - UAE
- Indogreen Group - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Bhatia International Limited - India
- Ministry of Mines - Canada
- CIMB Investment Bank - Malaysia
- Sarangani Energy Corporation, Philippines
- ICICI Bank Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Pendopo Energi Batubara - Indonesia
- GMR Energy Limited - India
- Altura Mining Limited, Indonesia
- Latin American Coal - Colombia
- Directorate Of Revenue Intelligence - India
- Wood Mackenzie - Singapore
- SMG Consultants - Indonesia
- Attock Cement Pakistan Limited
- Renaissance Capital - South Africa
- Sojitz Corporation - Japan
- Global Business Power Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- McConnell Dowell - Australia
- Toyota Tsusho Corporation, Japan
- Bukit Asam (Persero) Tbk - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Uttam Galva Steels Limited - India
- Trasteel International SA, Italy
- Dalmia Cement Bharat India
- LBH Netherlands Bv - Netherlands
- Aboitiz Power Corporation - Philippines
- Bukit Baiduri Energy - Indonesia
- Marubeni Corporation - India
- Bhushan Steel Limited - India
- Kartika Selabumi Mining - Indonesia
- Wilmar Investment Holdings
- Leighton Contractors Pty Ltd - Australia
- Timah Investasi Mineral - Indoneisa
- White Energy Company Limited
- Madhucon Powers Ltd - India
- Posco Energy - South Korea
- Meralco Power Generation, Philippines
- IHS Mccloskey Coal Group - USA
- Jorong Barutama Greston.PT - Indonesia
- Agrawal Coal Company - India
- Energy Link Ltd, New Zealand
- Mercuria Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Binh Thuan Hamico - Vietnam
- Price Waterhouse Coopers - Russia
- Manunggal Multi Energi - Indonesia
- Coastal Gujarat Power Limited - India
- Orica Australia Pty. Ltd.
- VISA Power Limited - India
- Commonwealth Bank - Australia
- Rashtriya Ispat Nigam Limited - India
- TeaM Sual Corporation - Philippines
- SN Aboitiz Power Inc, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Tamil Nadu electricity Board
- Indo Tambangraya Megah - Indonesia
- Ministry of Transport, Egypt
- CNBM International Corporation - China
- Samtan Co., Ltd - South Korea
- Tata Chemicals Ltd - India
- Borneo Indobara - Indonesia
- Oldendorff Carriers - Singapore
- PNOC Exploration Corporation - Philippines
- European Bulk Services B.V. - Netherlands
- Georgia Ports Authority, United States
- Eastern Energy - Thailand
- Bhoruka Overseas - Indonesia
- Cement Manufacturers Association - India
- ASAPP Information Group - India
- Rio Tinto Coal - Australia
- Global Coal Blending Company Limited - Australia
- Vedanta Resources Plc - India
- Savvy Resources Ltd - HongKong
- Power Finance Corporation Ltd., India
- Sree Jayajothi Cements Limited - India
- PTC India Limited - India
- Siam City Cement - Thailand
- Siam City Cement PLC, Thailand
- Sindya Power Generating Company Private Ltd
- Sakthi Sugars Limited - India
- Edison Trading Spa - Italy
- Medco Energi Mining Internasional
- New Zealand Coal & Carbon
- Makarim & Taira - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Coalindo Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- Economic Council, Georgia
- Bharathi Cement Corporation - India
- Kaltim Prima Coal - Indonesia
- Aditya Birla Group - India
- Sical Logistics Limited - India
- Electricity Generating Authority of Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Coal and Oil Company - UAE
- Ceylon Electricity Board - Sri Lanka
- Banpu Public Company Limited - Thailand
- Indonesian Coal Mining Association
- Sinarmas Energy and Mining - Indonesia
- Central Java Power - Indonesia
- Parry Sugars Refinery, India
- Ambuja Cements Ltd - India
- Kumho Petrochemical, South Korea
- Bayan Resources Tbk. - Indonesia
- Globalindo Alam Lestari - Indonesia
- Romanian Commodities Exchange
- Metalloyd Limited - United Kingdom
- Cigading International Bulk Terminal - Indonesia
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