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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.
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Wednesday, 07 December 22
MARKET INSIGHT - INTERMODAL
China’s coal imports from January to October were 230.1m mt, a decrease of around 10.7% y-o-y (2021 totalled 323.2m mt). The question is if t ...
Wednesday, 07 December 22
INDIA'S STEEL MINISTRY SEEKS IMPORT TAX WAIVER FOR COKING COAL - SOURCES REUTERS REPORTED
India’s steel ministry has asked the finance ministry for a waiver of import tax on coking coal among a slew of raw materials, as it scramble ...
Tuesday, 06 December 22
INDIA'S COAL PRODUCTION RISES 17% IN APR-NOV PERIOD - PTI
The country’s coal production increased 17 per cent to 524.20 million tonnes in the April-November period of the ongoing fiscal.
...
Tuesday, 06 December 22
INDONESIA AIMS TO STARTS COLLECTING COAL LEVY IN Q1 2023 - MINISTER, REUTERS REPORTED
Indonesia aims to establish a coal fund agency and start collecting a coal levy in the first quarter next year, to help ensure supply security for ...
Saturday, 03 December 22
COMPLEX RUSSIAN PRICE CAP MAKES MARITIME VISIBILITY A MUST - WINDWARD
Many commentators and analysts are speculating about the potential impact the Russian seaborne oil price cap will have on organizations and entitie ...
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- Billiton Holdings Pty Ltd - Australia
- Carbofer General Trading SA - India
- Merrill Lynch Commodities Europe
- Petrochimia International Co. Ltd.- Taiwan
- Tamil Nadu electricity Board
- Bukit Baiduri Energy - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Timah Investasi Mineral - Indoneisa
- Thai Mozambique Logistica
- Kalimantan Lumbung Energi - Indonesia
- Bhoruka Overseas - Indonesia
- Central Java Power - Indonesia
- Central Electricity Authority - India
- Planning Commission, India
- Cement Manufacturers Association - India
- Commonwealth Bank - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- London Commodity Brokers - England
- Parry Sugars Refinery, India
- TeaM Sual Corporation - Philippines
- Toyota Tsusho Corporation, Japan
- Bharathi Cement Corporation - India
- Attock Cement Pakistan Limited
- The University of Queensland
- Globalindo Alam Lestari - Indonesia
- Electricity Generating Authority of Thailand
- Port Waratah Coal Services - Australia
- Oldendorff Carriers - Singapore
- Ministry of Transport, Egypt
- Lanco Infratech Ltd - India
- IHS Mccloskey Coal Group - USA
- Pendopo Energi Batubara - Indonesia
- Barasentosa Lestari - Indonesia
- Bayan Resources Tbk. - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Tata Chemicals Ltd - India
- IEA Clean Coal Centre - UK
- White Energy Company Limited
- Eastern Coal Council - USA
- Interocean Group of Companies - India
- Vizag Seaport Private Limited - India
- Renaissance Capital - South Africa
- Parliament of New Zealand
- OPG Power Generation Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Minerals Council of Australia
- Bukit Makmur.PT - Indonesia
- GMR Energy Limited - India
- Coalindo Energy - Indonesia
- Directorate Of Revenue Intelligence - India
- Mjunction Services Limited - India
- New Zealand Coal & Carbon
- Global Business Power Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Baramulti Group, Indonesia
- Coastal Gujarat Power Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Cigading International Bulk Terminal - Indonesia
- PNOC Exploration Corporation - Philippines
- Energy Link Ltd, New Zealand
- LBH Netherlands Bv - Netherlands
- Essar Steel Hazira Ltd - India
- Rio Tinto Coal - Australia
- Indian Oil Corporation Limited
- SN Aboitiz Power Inc, Philippines
- Electricity Authority, New Zealand
- India Bulls Power Limited - India
- Kobexindo Tractors - Indoneisa
- Meenaskhi Energy Private Limited - India
- Miang Besar Coal Terminal - Indonesia
- Coal and Oil Company - UAE
- GN Power Mariveles Coal Plant, Philippines
- Kartika Selabumi Mining - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Georgia Ports Authority, United States
- Uttam Galva Steels Limited - India
- San Jose City I Power Corp, Philippines
- PTC India Limited - India
- Kumho Petrochemical, South Korea
- Kaltim Prima Coal - Indonesia
- Goldman Sachs - Singapore
- Binh Thuan Hamico - Vietnam
- TNB Fuel Sdn Bhd - Malaysia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Iligan Light & Power Inc, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Savvy Resources Ltd - HongKong
- Deloitte Consulting - India
- Standard Chartered Bank - UAE
- Sojitz Corporation - Japan
- Indo Tambangraya Megah - Indonesia
- Kideco Jaya Agung - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Manunggal Multi Energi - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Bhatia International Limited - India
- Sarangani Energy Corporation, Philippines
- Ministry of Finance - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- International Coal Ventures Pvt Ltd - India
- Sakthi Sugars Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Videocon Industries ltd - India
- Mercator Lines Limited - India
- GAC Shipping (India) Pvt Ltd
- Kepco SPC Power Corporation, Philippines
- Madhucon Powers Ltd - India
- Grasim Industreis Ltd - India
- Romanian Commodities Exchange
- SMC Global Power, Philippines
- Samtan Co., Ltd - South Korea
- Medco Energi Mining Internasional
- Ind-Barath Power Infra Limited - India
- Indian Energy Exchange, India
- SMG Consultants - Indonesia
- CNBM International Corporation - China
- Altura Mining Limited, Indonesia
- Leighton Contractors Pty Ltd - Australia
- Thiess Contractors Indonesia
- Anglo American - United Kingdom
- Vijayanagar Sugar Pvt Ltd - India
- MS Steel International - UAE
- Australian Commodity Traders Exchange
- Gujarat Sidhee Cement - India
- ASAPP Information Group - India
- Bulk Trading Sa - Switzerland
- Dalmia Cement Bharat India
- Siam City Cement PLC, Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Independent Power Producers Association of India
- Xindia Steels Limited - India
- Indogreen Group - Indonesia
- CIMB Investment Bank - Malaysia
- Intertek Mineral Services - Indonesia
- Orica Australia Pty. Ltd.
- Edison Trading Spa - Italy
- Mintek Dendrill Indonesia
- Maheswari Brothers Coal Limited - India
- Heidelberg Cement - Germany
- Ceylon Electricity Board - Sri Lanka
- Posco Energy - South Korea
- Aboitiz Power Corporation - Philippines
- Malabar Cements Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Latin American Coal - Colombia
- Siam City Cement - Thailand
- VISA Power Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Price Waterhouse Coopers - Russia
- Semirara Mining Corp, Philippines
- The Treasury - Australian Government
- Ministry of Mines - Canada
- Makarim & Taira - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Salva Resources Pvt Ltd - India
- Petron Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Antam Resourcindo - Indonesia
- Marubeni Corporation - India
- Simpson Spence & Young - Indonesia
- Bhushan Steel Limited - India
- Meralco Power Generation, Philippines
- Wilmar Investment Holdings
- Sical Logistics Limited - India
- PowerSource Philippines DevCo
- Bangladesh Power Developement Board
- Ambuja Cements Ltd - India
- Singapore Mercantile Exchange
- McConnell Dowell - Australia
- Orica Mining Services - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Energy Development Corp, Philippines
- Kapuas Tunggal Persada - Indonesia
- Star Paper Mills Limited - India
- GVK Power & Infra Limited - India
- Trasteel International SA, Italy
- Eastern Energy - Thailand
- Global Coal Blending Company Limited - Australia
- Banpu Public Company Limited - Thailand
- Therma Luzon, Inc, Philippines
- Economic Council, Georgia
- Chettinad Cement Corporation Ltd - India
- Sindya Power Generating Company Private Ltd
- Straits Asia Resources Limited - Singapore
- Mercuria Energy - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Vedanta Resources Plc - India
- ICICI Bank Limited - India
- Gujarat Electricity Regulatory Commission - India
- Jindal Steel & Power Ltd - India
- Indika Energy - Indonesia
- Larsen & Toubro Limited - India
- Alfred C Toepfer International GmbH - Germany
- Jaiprakash Power Ventures ltd
- Indonesian Coal Mining Association
- Agrawal Coal Company - India
- The State Trading Corporation of India Ltd
- Chamber of Mines of South Africa
- Metalloyd Limited - United Kingdom
- Aditya Birla Group - India
- Australian Coal Association
- Africa Commodities Group - South Africa
- Riau Bara Harum - Indonesia
- Formosa Plastics Group - Taiwan
- South Luzon Thermal Energy Corporation
- Karaikal Port Pvt Ltd - India
- Wood Mackenzie - Singapore
- Rashtriya Ispat Nigam Limited - India
- Holcim Trading Pte Ltd - Singapore
- Power Finance Corporation Ltd., India
- Borneo Indobara - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
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