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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, 13 December 22
AUSTRALIA TO CAP PRICES OF COAL, GAS TO DRIVE DOWN ENERGY BILLS - REUTERS
Australia will cap coal and gas prices for a year in a bid to shave utility bills for households and businesses hit by soaring costs because of the ...
Tuesday, 13 December 22
YANCOAL AUSTRALIA TO PREPAY $459 MLN DEBT AS RECORD COAL PRICES BOOST CASHFLOWS - REUTERS
Coal miner Yancoal Australia Ltd. said on Friday it intended to prepay $459 million of its debt on or around Dec. 16, as elevated coal prices were ...
Tuesday, 13 December 22
WHY COAL LEADS THE RISE IN COMMODITIES THIS YEAR - MARKETWATCH
This year marked a resurgence for coal, often known — and loathed — by environmentalists as the dirtiest energy source, with prices mor ...
Thursday, 08 December 22
BIMCO TO REVISE WAR RISK CLAUSES
Work to revise the BIMCO War Cancellation Clause 2004, the BIMCO War Risks Clause for Time Chartering 2013 (CONWARTIME 2013) and the BIMCO War Risk ...
Thursday, 08 December 22
COAL ROYALTY PAYMENTS BOOST AUSTRALIAN STATE'S BUDGET FORECAST - REUTERS
Australia’s Queensland state on Wednesday forecast a record surplus for the current financial year, largely driven by higher royalty payments ...
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- Baramulti Group, Indonesia
- Ambuja Cements Ltd - India
- SN Aboitiz Power Inc, Philippines
- Semirara Mining Corp, Philippines
- The Treasury - Australian Government
- Gujarat Mineral Development Corp Ltd - India
- Dalmia Cement Bharat India
- Xindia Steels Limited - India
- TeaM Sual Corporation - Philippines
- Meralco Power Generation, Philippines
- Barasentosa Lestari - Indonesia
- Mintek Dendrill Indonesia
- San Jose City I Power Corp, Philippines
- Gujarat Sidhee Cement - India
- Pipit Mutiara Jaya. PT, Indonesia
- Ministry of Finance - Indonesia
- Ind-Barath Power Infra Limited - India
- Essar Steel Hazira Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Mjunction Services Limited - India
- AsiaOL BioFuels Corp., Philippines
- New Zealand Coal & Carbon
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Kobexindo Tractors - Indoneisa
- Attock Cement Pakistan Limited
- Madhucon Powers Ltd - India
- Tamil Nadu electricity Board
- Bank of Tokyo Mitsubishi UFJ Ltd
- Antam Resourcindo - Indonesia
- Coal and Oil Company - UAE
- Commonwealth Bank - Australia
- Tata Chemicals Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Goldman Sachs - Singapore
- Global Green Power PLC Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Riau Bara Harum - Indonesia
- Petron Corporation, Philippines
- The University of Queensland
- Indogreen Group - Indonesia
- Renaissance Capital - South Africa
- Metalloyd Limited - United Kingdom
- Bulk Trading Sa - Switzerland
- Global Coal Blending Company Limited - Australia
- Sinarmas Energy and Mining - Indonesia
- GMR Energy Limited - India
- Borneo Indobara - Indonesia
- Rio Tinto Coal - Australia
- Krishnapatnam Port Company Ltd. - India
- Posco Energy - South Korea
- Globalindo Alam Lestari - Indonesia
- Karaikal Port Pvt Ltd - India
- Trasteel International SA, Italy
- Parry Sugars Refinery, India
- Bayan Resources Tbk. - Indonesia
- Malabar Cements Ltd - India
- Siam City Cement - Thailand
- Port Waratah Coal Services - Australia
- Eastern Coal Council - USA
- Maheswari Brothers Coal Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Thai Mozambique Logistica
- Semirara Mining and Power Corporation, Philippines
- Anglo American - United Kingdom
- Wilmar Investment Holdings
- Gujarat Electricity Regulatory Commission - India
- Central Electricity Authority - India
- Kideco Jaya Agung - Indonesia
- Sical Logistics Limited - India
- Orica Mining Services - Indonesia
- Energy Development Corp, Philippines
- Aditya Birla Group - India
- Manunggal Multi Energi - Indonesia
- Georgia Ports Authority, United States
- Indonesian Coal Mining Association
- Australian Coal Association
- Therma Luzon, Inc, Philippines
- Agrawal Coal Company - India
- Cement Manufacturers Association - India
- Power Finance Corporation Ltd., India
- VISA Power Limited - India
- ICICI Bank Limited - India
- Ministry of Transport, Egypt
- Electricity Authority, New Zealand
- Pendopo Energi Batubara - Indonesia
- Bukit Baiduri Energy - Indonesia
- Global Business Power Corporation, Philippines
- Lanco Infratech Ltd - India
- South Luzon Thermal Energy Corporation
- Coastal Gujarat Power Limited - India
- Ministry of Mines - Canada
- Larsen & Toubro Limited - India
- Australian Commodity Traders Exchange
- Jindal Steel & Power Ltd - India
- Chamber of Mines of South Africa
- Makarim & Taira - Indonesia
- Indo Tambangraya Megah - Indonesia
- Kepco SPC Power Corporation, Philippines
- Independent Power Producers Association of India
- Jaiprakash Power Ventures ltd
- Bangladesh Power Developement Board
- Deloitte Consulting - India
- TNB Fuel Sdn Bhd - Malaysia
- Merrill Lynch Commodities Europe
- Medco Energi Mining Internasional
- Kaltim Prima Coal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Maharashtra Electricity Regulatory Commission - India
- Interocean Group of Companies - India
- Standard Chartered Bank - UAE
- Meenaskhi Energy Private Limited - India
- SMC Global Power, Philippines
- Vedanta Resources Plc - India
- Jorong Barutama Greston.PT - Indonesia
- Siam City Cement PLC, Thailand
- Minerals Council of Australia
- Bukit Makmur.PT - Indonesia
- PNOC Exploration Corporation - Philippines
- Karbindo Abesyapradhi - Indoneisa
- Kapuas Tunggal Persada - Indonesia
- Intertek Mineral Services - Indonesia
- McConnell Dowell - Australia
- Indian Oil Corporation Limited
- GAC Shipping (India) Pvt Ltd
- Videocon Industries ltd - India
- International Coal Ventures Pvt Ltd - India
- ASAPP Information Group - India
- Salva Resources Pvt Ltd - India
- SMG Consultants - Indonesia
- Heidelberg Cement - Germany
- Altura Mining Limited, Indonesia
- Central Java Power - Indonesia
- Latin American Coal - Colombia
- CIMB Investment Bank - Malaysia
- OPG Power Generation Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Chettinad Cement Corporation Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Planning Commission, India
- Billiton Holdings Pty Ltd - Australia
- Bharathi Cement Corporation - India
- Straits Asia Resources Limited - Singapore
- Binh Thuan Hamico - Vietnam
- Samtan Co., Ltd - South Korea
- Mercator Lines Limited - India
- GVK Power & Infra Limited - India
- Iligan Light & Power Inc, Philippines
- Coalindo Energy - Indonesia
- Parliament of New Zealand
- Simpson Spence & Young - Indonesia
- Grasim Industreis Ltd - India
- Edison Trading Spa - Italy
- Asmin Koalindo Tuhup - Indonesia
- Price Waterhouse Coopers - Russia
- Alfred C Toepfer International GmbH - Germany
- Vijayanagar Sugar Pvt Ltd - India
- Wood Mackenzie - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Orica Australia Pty. Ltd.
- Directorate Of Revenue Intelligence - India
- Sindya Power Generating Company Private Ltd
- Marubeni Corporation - India
- Toyota Tsusho Corporation, Japan
- Sree Jayajothi Cements Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Energy Link Ltd, New Zealand
- Holcim Trading Pte Ltd - Singapore
- India Bulls Power Limited - India
- Sakthi Sugars Limited - India
- Romanian Commodities Exchange
- The State Trading Corporation of India Ltd
- Timah Investasi Mineral - Indoneisa
- Economic Council, Georgia
- Oldendorff Carriers - Singapore
- European Bulk Services B.V. - Netherlands
- Indian Energy Exchange, India
- Star Paper Mills Limited - India
- PTC India Limited - India
- Sarangani Energy Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Thiess Contractors Indonesia
- IHS Mccloskey Coal Group - USA
- Aboitiz Power Corporation - Philippines
- Formosa Plastics Group - Taiwan
- London Commodity Brokers - England
- Africa Commodities Group - South Africa
- Sojitz Corporation - Japan
- Rashtriya Ispat Nigam Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- LBH Netherlands Bv - Netherlands
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- MS Steel International - UAE
- Electricity Generating Authority of Thailand
- CNBM International Corporation - China
- Indika Energy - Indonesia
- Mercuria Energy - Indonesia
- Savvy Resources Ltd - HongKong
- PowerSource Philippines DevCo
- Eastern Energy - Thailand
- Bhushan Steel Limited - India
- Carbofer General Trading SA - India
- White Energy Company Limited
- Kalimantan Lumbung Energi - Indonesia
- Kartika Selabumi Mining - Indonesia
- Uttam Galva Steels Limited - India
- Bhoruka Overseas - Indonesia
- Singapore Mercantile Exchange
- PetroVietnam Power Coal Import and Supply Company
- GN Power Mariveles Coal Plant, Philippines
- Bhatia International Limited - India
- Kumho Petrochemical, South Korea
- Vizag Seaport Private Limited - India
- Banpu Public Company Limited - Thailand
- IEA Clean Coal Centre - UK
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