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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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Thursday, 22 December 22
RUSSIAN OIL EXPORTS CRATER BY 54% IN THE FIRST FULL WEEK OF THE EU'S EMBARGO AMID A SHORTAGE OF TANKERS WILLING TO CARRY CARGOES - BUSINESS INSIDER
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Thursday, 22 December 22
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Thursday, 22 December 22
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Thursday, 22 December 22
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- Interocean Group of Companies - India
- Eastern Energy - Thailand
- Vizag Seaport Private Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Mintek Dendrill Indonesia
- Kohat Cement Company Ltd. - Pakistan
- CIMB Investment Bank - Malaysia
- Bukit Asam (Persero) Tbk - Indonesia
- Xindia Steels Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Maharashtra Electricity Regulatory Commission - India
- IEA Clean Coal Centre - UK
- Energy Development Corp, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ministry of Transport, Egypt
- Singapore Mercantile Exchange
- Goldman Sachs - Singapore
- Timah Investasi Mineral - Indoneisa
- Attock Cement Pakistan Limited
- Coalindo Energy - Indonesia
- Wilmar Investment Holdings
- Intertek Mineral Services - Indonesia
- GAC Shipping (India) Pvt Ltd
- Bukit Baiduri Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- CNBM International Corporation - China
- Ambuja Cements Ltd - India
- Banpu Public Company Limited - Thailand
- Minerals Council of Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sinarmas Energy and Mining - Indonesia
- Larsen & Toubro Limited - India
- Indian Oil Corporation Limited
- Cigading International Bulk Terminal - Indonesia
- Port Waratah Coal Services - Australia
- Altura Mining Limited, Indonesia
- Sree Jayajothi Cements Limited - India
- Videocon Industries ltd - India
- Siam City Cement PLC, Thailand
- Ministry of Finance - Indonesia
- Price Waterhouse Coopers - Russia
- Oldendorff Carriers - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PNOC Exploration Corporation - Philippines
- Gujarat Mineral Development Corp Ltd - India
- Planning Commission, India
- Barasentosa Lestari - Indonesia
- Orica Australia Pty. Ltd.
- Global Coal Blending Company Limited - Australia
- Sakthi Sugars Limited - India
- Edison Trading Spa - Italy
- Sindya Power Generating Company Private Ltd
- Kaltim Prima Coal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Romanian Commodities Exchange
- ASAPP Information Group - India
- Chamber of Mines of South Africa
- Petron Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Toyota Tsusho Corporation, Japan
- Indika Energy - Indonesia
- Semirara Mining Corp, Philippines
- Samtan Co., Ltd - South Korea
- Eastern Coal Council - USA
- ICICI Bank Limited - India
- Aditya Birla Group - India
- Posco Energy - South Korea
- VISA Power Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Thai Mozambique Logistica
- SN Aboitiz Power Inc, Philippines
- Bhoruka Overseas - Indonesia
- Maheswari Brothers Coal Limited - India
- Cement Manufacturers Association - India
- Tamil Nadu electricity Board
- Vijayanagar Sugar Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Electricity Authority, New Zealand
- Kobexindo Tractors - Indoneisa
- Bulk Trading Sa - Switzerland
- Bangladesh Power Developement Board
- Indian Energy Exchange, India
- PetroVietnam Power Coal Import and Supply Company
- Baramulti Group, Indonesia
- Mercuria Energy - Indonesia
- Australian Coal Association
- Leighton Contractors Pty Ltd - Australia
- Billiton Holdings Pty Ltd - Australia
- Alfred C Toepfer International GmbH - Germany
- Iligan Light & Power Inc, Philippines
- Miang Besar Coal Terminal - Indonesia
- Pendopo Energi Batubara - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- TeaM Sual Corporation - Philippines
- Meenaskhi Energy Private Limited - India
- Gujarat Electricity Regulatory Commission - India
- Neyveli Lignite Corporation Ltd, - India
- Ind-Barath Power Infra Limited - India
- Tata Chemicals Ltd - India
- GMR Energy Limited - India
- Holcim Trading Pte Ltd - Singapore
- PTC India Limited - India
- Parliament of New Zealand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Deloitte Consulting - India
- Thiess Contractors Indonesia
- Formosa Plastics Group - Taiwan
- Marubeni Corporation - India
- AsiaOL BioFuels Corp., Philippines
- Kideco Jaya Agung - Indonesia
- Grasim Industreis Ltd - India
- Meralco Power Generation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Global Green Power PLC Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Economic Council, Georgia
- Carbofer General Trading SA - India
- New Zealand Coal & Carbon
- Africa Commodities Group - South Africa
- Medco Energi Mining Internasional
- SMC Global Power, Philippines
- Makarim & Taira - Indonesia
- Power Finance Corporation Ltd., India
- Commonwealth Bank - Australia
- MS Steel International - UAE
- Gujarat Sidhee Cement - India
- Bharathi Cement Corporation - India
- Ceylon Electricity Board - Sri Lanka
- Kalimantan Lumbung Energi - Indonesia
- Sical Logistics Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Coastal Gujarat Power Limited - India
- Therma Luzon, Inc, Philippines
- Australian Commodity Traders Exchange
- Bhatia International Limited - India
- Rio Tinto Coal - Australia
- The Treasury - Australian Government
- Essar Steel Hazira Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Coal and Oil Company - UAE
- McConnell Dowell - Australia
- Lanco Infratech Ltd - India
- Malabar Cements Ltd - India
- Georgia Ports Authority, United States
- Sarangani Energy Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- London Commodity Brokers - England
- Wood Mackenzie - Singapore
- Bayan Resources Tbk. - Indonesia
- Jaiprakash Power Ventures ltd
- Electricity Generating Authority of Thailand
- Indogreen Group - Indonesia
- Global Business Power Corporation, Philippines
- India Bulls Power Limited - India
- Uttam Galva Steels Limited - India
- Madhucon Powers Ltd - India
- Borneo Indobara - Indonesia
- Standard Chartered Bank - UAE
- Central Electricity Authority - India
- Energy Link Ltd, New Zealand
- Mjunction Services Limited - India
- Trasteel International SA, Italy
- Orica Mining Services - Indonesia
- The State Trading Corporation of India Ltd
- San Jose City I Power Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Agrawal Coal Company - India
- LBH Netherlands Bv - Netherlands
- Karaikal Port Pvt Ltd - India
- Parry Sugars Refinery, India
- Straits Asia Resources Limited - Singapore
- Star Paper Mills Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Kepco SPC Power Corporation, Philippines
- Indonesian Coal Mining Association
- Antam Resourcindo - Indonesia
- Central Java Power - Indonesia
- IHS Mccloskey Coal Group - USA
- Manunggal Multi Energi - Indonesia
- Salva Resources Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- Vedanta Resources Plc - India
- Savvy Resources Ltd - HongKong
- Binh Thuan Hamico - Vietnam
- Ministry of Mines - Canada
- Independent Power Producers Association of India
- Bukit Makmur.PT - Indonesia
- International Coal Ventures Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Directorate Of Revenue Intelligence - India
- Latin American Coal - Colombia
- Jorong Barutama Greston.PT - Indonesia
- Metalloyd Limited - United Kingdom
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bhushan Steel Limited - India
- Sojitz Corporation - Japan
- Merrill Lynch Commodities Europe
- Riau Bara Harum - Indonesia
- Chettinad Cement Corporation Ltd - India
- Dalmia Cement Bharat India
- Heidelberg Cement - Germany
- Petrochimia International Co. Ltd.- Taiwan
- Aboitiz Power Corporation - Philippines
- Simpson Spence & Young - Indonesia
- Kumho Petrochemical, South Korea
- The University of Queensland
- PowerSource Philippines DevCo
- SMG Consultants - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- OPG Power Generation Pvt Ltd - India
- Anglo American - United Kingdom
- Globalindo Alam Lestari - Indonesia
- GVK Power & Infra Limited - India
- Siam City Cement - Thailand
- Renaissance Capital - South Africa
- White Energy Company Limited
- Mercator Lines Limited - India
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