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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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Monday, 24 June 24
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- Ministry of Finance - Indonesia
- Sarangani Energy Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Makarim & Taira - Indonesia
- Independent Power Producers Association of India
- Indika Energy - Indonesia
- Standard Chartered Bank - UAE
- Alfred C Toepfer International GmbH - Germany
- Thai Mozambique Logistica
- Kideco Jaya Agung - Indonesia
- Straits Asia Resources Limited - Singapore
- Maheswari Brothers Coal Limited - India
- GAC Shipping (India) Pvt Ltd
- Heidelberg Cement - Germany
- Indogreen Group - Indonesia
- Orica Mining Services - Indonesia
- Salva Resources Pvt Ltd - India
- Cement Manufacturers Association - India
- Kartika Selabumi Mining - Indonesia
- Semirara Mining Corp, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Mercuria Energy - Indonesia
- Savvy Resources Ltd - HongKong
- Bharathi Cement Corporation - India
- Sinarmas Energy and Mining - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Bukit Baiduri Energy - Indonesia
- IEA Clean Coal Centre - UK
- Global Business Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
- London Commodity Brokers - England
- New Zealand Coal & Carbon
- Gujarat Sidhee Cement - India
- Aditya Birla Group - India
- Interocean Group of Companies - India
- Global Green Power PLC Corporation, Philippines
- Minerals Council of Australia
- Billiton Holdings Pty Ltd - Australia
- The State Trading Corporation of India Ltd
- European Bulk Services B.V. - Netherlands
- Karaikal Port Pvt Ltd - India
- Bhushan Steel Limited - India
- Miang Besar Coal Terminal - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Manunggal Multi Energi - Indonesia
- Economic Council, Georgia
- Parliament of New Zealand
- Ind-Barath Power Infra Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Antam Resourcindo - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Renaissance Capital - South Africa
- Meenaskhi Energy Private Limited - India
- Marubeni Corporation - India
- Latin American Coal - Colombia
- Carbofer General Trading SA - India
- Pipit Mutiara Jaya. PT, Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Kumho Petrochemical, South Korea
- McConnell Dowell - Australia
- Riau Bara Harum - Indonesia
- Sindya Power Generating Company Private Ltd
- Coal and Oil Company - UAE
- Karbindo Abesyapradhi - Indoneisa
- Mercator Lines Limited - India
- TeaM Sual Corporation - Philippines
- GMR Energy Limited - India
- Directorate Of Revenue Intelligence - India
- Ceylon Electricity Board - Sri Lanka
- Kaltim Prima Coal - Indonesia
- VISA Power Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Sical Logistics Limited - India
- Jindal Steel & Power Ltd - India
- South Luzon Thermal Energy Corporation
- IHS Mccloskey Coal Group - USA
- ICICI Bank Limited - India
- Xindia Steels Limited - India
- Ambuja Cements Ltd - India
- Kobexindo Tractors - Indoneisa
- Jorong Barutama Greston.PT - Indonesia
- Wilmar Investment Holdings
- PTC India Limited - India
- Coastal Gujarat Power Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Indonesian Coal Mining Association
- Formosa Plastics Group - Taiwan
- Romanian Commodities Exchange
- Commonwealth Bank - Australia
- Energy Development Corp, Philippines
- Holcim Trading Pte Ltd - Singapore
- Anglo American - United Kingdom
- The Treasury - Australian Government
- Jaiprakash Power Ventures ltd
- Georgia Ports Authority, United States
- Central Java Power - Indonesia
- Merrill Lynch Commodities Europe
- Lanco Infratech Ltd - India
- Eastern Energy - Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Australian Commodity Traders Exchange
- Bulk Trading Sa - Switzerland
- Sojitz Corporation - Japan
- GVK Power & Infra Limited - India
- Global Coal Blending Company Limited - Australia
- CNBM International Corporation - China
- SMC Global Power, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- International Coal Ventures Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- Energy Link Ltd, New Zealand
- Uttam Galva Steels Limited - India
- Agrawal Coal Company - India
- Kepco SPC Power Corporation, Philippines
- Meralco Power Generation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Metalloyd Limited - United Kingdom
- Simpson Spence & Young - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Australian Coal Association
- Neyveli Lignite Corporation Ltd, - India
- LBH Netherlands Bv - Netherlands
- Essar Steel Hazira Ltd - India
- Larsen & Toubro Limited - India
- Price Waterhouse Coopers - Russia
- Tata Chemicals Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Posco Energy - South Korea
- Star Paper Mills Limited - India
- Parry Sugars Refinery, India
- Coalindo Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Deloitte Consulting - India
- Goldman Sachs - Singapore
- Baramulti Group, Indonesia
- Bangladesh Power Developement Board
- White Energy Company Limited
- Therma Luzon, Inc, Philippines
- Vedanta Resources Plc - India
- Videocon Industries ltd - India
- PowerSource Philippines DevCo
- Rashtriya Ispat Nigam Limited - India
- Grasim Industreis Ltd - India
- Sakthi Sugars Limited - India
- SN Aboitiz Power Inc, Philippines
- Trasteel International SA, Italy
- Ministry of Mines - Canada
- Globalindo Alam Lestari - Indonesia
- Wood Mackenzie - Singapore
- The University of Queensland
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Vizag Seaport Private Limited - India
- Mintek Dendrill Indonesia
- Dalmia Cement Bharat India
- Siam City Cement - Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Rio Tinto Coal - Australia
- MS Steel International - UAE
- Planning Commission, India
- Timah Investasi Mineral - Indoneisa
- Semirara Mining and Power Corporation, Philippines
- Central Electricity Authority - India
- Pendopo Energi Batubara - Indonesia
- Madhucon Powers Ltd - India
- Toyota Tsusho Corporation, Japan
- Africa Commodities Group - South Africa
- Electricity Generating Authority of Thailand
- Intertek Mineral Services - Indonesia
- Tamil Nadu electricity Board
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- ASAPP Information Group - India
- Medco Energi Mining Internasional
- Eastern Coal Council - USA
- Kapuas Tunggal Persada - Indonesia
- Indian Oil Corporation Limited
- Attock Cement Pakistan Limited
- Bhatia International Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Siam City Cement PLC, Thailand
- Thiess Contractors Indonesia
- India Bulls Power Limited - India
- SMG Consultants - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Sree Jayajothi Cements Limited - India
- Indian Energy Exchange, India
- Mjunction Services Limited - India
- Chamber of Mines of South Africa
- PetroVietnam Power Coal Import and Supply Company
- San Jose City I Power Corp, Philippines
- Electricity Authority, New Zealand
- Ministry of Transport, Egypt
- Port Waratah Coal Services - Australia
- Bukit Makmur.PT - Indonesia
- Barasentosa Lestari - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Borneo Indobara - Indonesia
- Power Finance Corporation Ltd., India
- Orica Australia Pty. Ltd.
- Oldendorff Carriers - Singapore
- Samtan Co., Ltd - South Korea
- Kohat Cement Company Ltd. - Pakistan
- AsiaOL BioFuels Corp., Philippines
- Altura Mining Limited, Indonesia
- OPG Power Generation Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Malabar Cements Ltd - India
- Bhoruka Overseas - Indonesia
- Petron Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Edison Trading Spa - Italy
- Cigading International Bulk Terminal - Indonesia
- Singapore Mercantile Exchange
- Bayan Resources Tbk. - Indonesia
- Iligan Light & Power Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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