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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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Friday, 22 March 24
INDONESIA APPROVES 922.14 MLN T COAL PRODUCTION QUOTA FOR 2024, ABOVE TARGET - REUTERS
Indonesia has approved coal production quotas totalling 922.14 million metric tons for 2024, Bambang Suswantono, a senior official at the mining mi ...
Friday, 22 March 24
CHINA COAL INDUSTRY GROUP EXPECTS OUTPUT GROWTH TO SLOW IN 2024 - REUTERS
China’s coal output is expected to increase 36 million metric tons, or 0.8%, to about 4.7 billion tonnes in 2024, a Chinese coal industry gro ...
Monday, 18 March 24
THREE KEY TAKEAWAYS FROM OUR EUROPE GAS MARKETS SHORT-TERM OUTLOOK Q1 2024 - WOOD MACKENZIE
European gas prices are currently back to pre-crisis levels, but with a complex series of factors affecting future supply and demand, are they set ...
Wednesday, 06 March 24
INDONESIA AIMS TO FINISH MINING OUTPUT QUOTAS APPROVAL BY END-MARCH, OFFICIAL SAYS - REUTERS
Indonesia’s has approved the mining production quotarequests from more than 120mineral companies and aims to complete the approval process th ...
Monday, 04 March 24
IS YOUR GUARANTEE A GUARANTEE? NOTE TO SHIPOWNERS - GARD
KNOWLEDGE TO ELEVATE
The law of guarantees is not always obvious or easy to understand without proper guidance. This article clarifies the dif ...
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- Medco Energi Mining Internasional
- Intertek Mineral Services - Indonesia
- Tata Chemicals Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Aditya Birla Group - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bayan Resources Tbk. - Indonesia
- International Coal Ventures Pvt Ltd - India
- Standard Chartered Bank - UAE
- The State Trading Corporation of India Ltd
- Power Finance Corporation Ltd., India
- SMG Consultants - Indonesia
- Deloitte Consulting - India
- Wood Mackenzie - Singapore
- PNOC Exploration Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Mercator Lines Limited - India
- Karaikal Port Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Vizag Seaport Private Limited - India
- Samtan Co., Ltd - South Korea
- Formosa Plastics Group - Taiwan
- VISA Power Limited - India
- Jaiprakash Power Ventures ltd
- Jindal Steel & Power Ltd - India
- Baramulti Group, Indonesia
- Siam City Cement PLC, Thailand
- Bukit Makmur.PT - Indonesia
- Sarangani Energy Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Sinarmas Energy and Mining - Indonesia
- Sree Jayajothi Cements Limited - India
- Posco Energy - South Korea
- Price Waterhouse Coopers - Russia
- Orica Mining Services - Indonesia
- Barasentosa Lestari - Indonesia
- Australian Commodity Traders Exchange
- Romanian Commodities Exchange
- Borneo Indobara - Indonesia
- Madhucon Powers Ltd - India
- Kumho Petrochemical, South Korea
- Indika Energy - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Timah Investasi Mineral - Indoneisa
- Siam City Cement - Thailand
- Bhatia International Limited - India
- Bharathi Cement Corporation - India
- The University of Queensland
- Sojitz Corporation - Japan
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Transport, Egypt
- Alfred C Toepfer International GmbH - Germany
- Jorong Barutama Greston.PT - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Merrill Lynch Commodities Europe
- Pipit Mutiara Jaya. PT, Indonesia
- Independent Power Producers Association of India
- Indian Energy Exchange, India
- Gujarat Electricity Regulatory Commission - India
- Larsen & Toubro Limited - India
- Thai Mozambique Logistica
- Uttam Galva Steels Limited - India
- Kartika Selabumi Mining - Indonesia
- Kideco Jaya Agung - Indonesia
- Energy Link Ltd, New Zealand
- Straits Asia Resources Limited - Singapore
- ICICI Bank Limited - India
- Africa Commodities Group - South Africa
- Interocean Group of Companies - India
- Karbindo Abesyapradhi - Indoneisa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Anglo American - United Kingdom
- Eastern Coal Council - USA
- OPG Power Generation Pvt Ltd - India
- Meralco Power Generation, Philippines
- Kepco SPC Power Corporation, Philippines
- Cement Manufacturers Association - India
- Carbofer General Trading SA - India
- Tamil Nadu electricity Board
- PTC India Limited - India
- Grasim Industreis Ltd - India
- McConnell Dowell - Australia
- IHS Mccloskey Coal Group - USA
- Orica Australia Pty. Ltd.
- Semirara Mining and Power Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Central Java Power - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Bukit Baiduri Energy - Indonesia
- Essar Steel Hazira Ltd - India
- Attock Cement Pakistan Limited
- Neyveli Lignite Corporation Ltd, - India
- Coal and Oil Company - UAE
- MS Steel International - UAE
- Krishnapatnam Port Company Ltd. - India
- Parliament of New Zealand
- Maheswari Brothers Coal Limited - India
- LBH Netherlands Bv - Netherlands
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- PowerSource Philippines DevCo
- Leighton Contractors Pty Ltd - Australia
- Vedanta Resources Plc - India
- Economic Council, Georgia
- Xindia Steels Limited - India
- Global Business Power Corporation, Philippines
- Sical Logistics Limited - India
- Mjunction Services Limited - India
- Port Waratah Coal Services - Australia
- Star Paper Mills Limited - India
- Wilmar Investment Holdings
- Agrawal Coal Company - India
- Bhoruka Overseas - Indonesia
- Aboitiz Power Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- Mintek Dendrill Indonesia
- Rashtriya Ispat Nigam Limited - India
- Videocon Industries ltd - India
- Mercuria Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Eastern Energy - Thailand
- Altura Mining Limited, Indonesia
- Therma Luzon, Inc, Philippines
- Indian Oil Corporation Limited
- Toyota Tsusho Corporation, Japan
- Energy Development Corp, Philippines
- Indo Tambangraya Megah - Indonesia
- Ambuja Cements Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Sakthi Sugars Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Marubeni Corporation - India
- SN Aboitiz Power Inc, Philippines
- Commonwealth Bank - Australia
- Manunggal Multi Energi - Indonesia
- Edison Trading Spa - Italy
- The Treasury - Australian Government
- Iligan Light & Power Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Banpu Public Company Limited - Thailand
- Bahari Cakrawala Sebuku - Indonesia
- Globalindo Alam Lestari - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Global Coal Blending Company Limited - Australia
- Trasteel International SA, Italy
- Asmin Koalindo Tuhup - Indonesia
- Indogreen Group - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Kaltim Prima Coal - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Lanco Infratech Ltd - India
- Salva Resources Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Electricity Authority, New Zealand
- Petron Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Australian Coal Association
- GAC Shipping (India) Pvt Ltd
- GVK Power & Infra Limited - India
- Coastal Gujarat Power Limited - India
- Bangladesh Power Developement Board
- Simpson Spence & Young - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Georgia Ports Authority, United States
- Electricity Generating Authority of Thailand
- European Bulk Services B.V. - Netherlands
- India Bulls Power Limited - India
- New Zealand Coal & Carbon
- Minerals Council of Australia
- Heidelberg Cement - Germany
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- White Energy Company Limited
- Bhushan Steel Limited - India
- Oldendorff Carriers - Singapore
- Rio Tinto Coal - Australia
- Indonesian Coal Mining Association
- CNBM International Corporation - China
- Ind-Barath Power Infra Limited - India
- Ceylon Electricity Board - Sri Lanka
- Miang Besar Coal Terminal - Indonesia
- Renaissance Capital - South Africa
- Antam Resourcindo - Indonesia
- Sindya Power Generating Company Private Ltd
- Maharashtra Electricity Regulatory Commission - India
- Binh Thuan Hamico - Vietnam
- TeaM Sual Corporation - Philippines
- GMR Energy Limited - India
- Parry Sugars Refinery, India
- Riau Bara Harum - Indonesia
- Goldman Sachs - Singapore
- Ministry of Mines - Canada
- Pendopo Energi Batubara - Indonesia
- Makarim & Taira - Indonesia
- Singapore Mercantile Exchange
- Malabar Cements Ltd - India
- Thiess Contractors Indonesia
- Ministry of Finance - Indonesia
- Gujarat Sidhee Cement - India
- Planning Commission, India
- Dalmia Cement Bharat India
- Bulk Trading Sa - Switzerland
- Semirara Mining Corp, Philippines
- San Jose City I Power Corp, Philippines
- Chettinad Cement Corporation Ltd - India
- Central Electricity Authority - India
- SMC Global Power, Philippines
- Latin American Coal - Colombia
- Savvy Resources Ltd - HongKong
- London Commodity Brokers - England
- Coalindo Energy - Indonesia
- Metalloyd Limited - United Kingdom
- ASAPP Information Group - India
- Chamber of Mines of South Africa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Global Green Power PLC Corporation, Philippines
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