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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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Showing 31 to 35 news of total 6871 |
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- Renaissance Capital - South Africa
- McConnell Dowell - Australia
- Vedanta Resources Plc - India
- Indogreen Group - Indonesia
- Minerals Council of Australia
- Oldendorff Carriers - Singapore
- Ceylon Electricity Board - Sri Lanka
- Sical Logistics Limited - India
- Sree Jayajothi Cements Limited - India
- Aditya Birla Group - India
- Kepco SPC Power Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Attock Cement Pakistan Limited
- Bhushan Steel Limited - India
- TeaM Sual Corporation - Philippines
- Holcim Trading Pte Ltd - Singapore
- The State Trading Corporation of India Ltd
- MS Steel International - UAE
- Straits Asia Resources Limited - Singapore
- Mercuria Energy - Indonesia
- Wood Mackenzie - Singapore
- Kaltim Prima Coal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- India Bulls Power Limited - India
- IHS Mccloskey Coal Group - USA
- Parry Sugars Refinery, India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- International Coal Ventures Pvt Ltd - India
- GMR Energy Limited - India
- Savvy Resources Ltd - HongKong
- GAC Shipping (India) Pvt Ltd
- Rashtriya Ispat Nigam Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bangladesh Power Developement Board
- Cigading International Bulk Terminal - Indonesia
- Australian Coal Association
- Wilmar Investment Holdings
- Coalindo Energy - Indonesia
- Petron Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Thiess Contractors Indonesia
- Georgia Ports Authority, United States
- Grasim Industreis Ltd - India
- San Jose City I Power Corp, Philippines
- South Luzon Thermal Energy Corporation
- Agrawal Coal Company - India
- GVK Power & Infra Limited - India
- Jindal Steel & Power Ltd - India
- Thai Mozambique Logistica
- Independent Power Producers Association of India
- IEA Clean Coal Centre - UK
- Offshore Bulk Terminal Pte Ltd, Singapore
- Chamber of Mines of South Africa
- Toyota Tsusho Corporation, Japan
- ASAPP Information Group - India
- TNB Fuel Sdn Bhd - Malaysia
- Ministry of Finance - Indonesia
- Global Business Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Maheswari Brothers Coal Limited - India
- Chettinad Cement Corporation Ltd - India
- Deloitte Consulting - India
- Coal and Oil Company - UAE
- Marubeni Corporation - India
- Asmin Koalindo Tuhup - Indonesia
- Anglo American - United Kingdom
- Ministry of Mines - Canada
- The Treasury - Australian Government
- New Zealand Coal & Carbon
- Medco Energi Mining Internasional
- Heidelberg Cement - Germany
- Krishnapatnam Port Company Ltd. - India
- Bayan Resources Tbk. - Indonesia
- Sarangani Energy Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Madhucon Powers Ltd - India
- Australian Commodity Traders Exchange
- Romanian Commodities Exchange
- Edison Trading Spa - Italy
- Kohat Cement Company Ltd. - Pakistan
- Barasentosa Lestari - Indonesia
- Electricity Authority, New Zealand
- VISA Power Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- PetroVietnam Power Coal Import and Supply Company
- Gujarat Electricity Regulatory Commission - India
- Pipit Mutiara Jaya. PT, Indonesia
- Siam City Cement PLC, Thailand
- Siam City Cement - Thailand
- Parliament of New Zealand
- Kapuas Tunggal Persada - Indonesia
- Rio Tinto Coal - Australia
- Baramulti Group, Indonesia
- Orica Australia Pty. Ltd.
- The University of Queensland
- Xindia Steels Limited - India
- Energy Development Corp, Philippines
- Economic Council, Georgia
- Indian Oil Corporation Limited
- Directorate General of MIneral and Coal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- SMG Consultants - Indonesia
- PNOC Exploration Corporation - Philippines
- Energy Link Ltd, New Zealand
- SMC Global Power, Philippines
- Malabar Cements Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Meenaskhi Energy Private Limited - India
- Price Waterhouse Coopers - Russia
- White Energy Company Limited
- Bukit Asam (Persero) Tbk - Indonesia
- Tamil Nadu electricity Board
- Semirara Mining Corp, Philippines
- LBH Netherlands Bv - Netherlands
- PTC India Limited - India
- Samtan Co., Ltd - South Korea
- London Commodity Brokers - England
- PowerSource Philippines DevCo
- Meralco Power Generation, Philippines
- Timah Investasi Mineral - Indoneisa
- Commonwealth Bank - Australia
- Antam Resourcindo - Indonesia
- CNBM International Corporation - China
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ministry of Transport, Egypt
- Star Paper Mills Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Eastern Energy - Thailand
- Salva Resources Pvt Ltd - India
- Cement Manufacturers Association - India
- Larsen & Toubro Limited - India
- Jaiprakash Power Ventures ltd
- Global Coal Blending Company Limited - Australia
- Borneo Indobara - Indonesia
- Goldman Sachs - Singapore
- Aboitiz Power Corporation - Philippines
- Indika Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- Indonesian Coal Mining Association
- Jorong Barutama Greston.PT - Indonesia
- Electricity Generating Authority of Thailand
- Therma Luzon, Inc, Philippines
- Miang Besar Coal Terminal - Indonesia
- Latin American Coal - Colombia
- European Bulk Services B.V. - Netherlands
- Iligan Light & Power Inc, Philippines
- Sojitz Corporation - Japan
- Videocon Industries ltd - India
- Ind-Barath Power Infra Limited - India
- Sinarmas Energy and Mining - Indonesia
- Riau Bara Harum - Indonesia
- OPG Power Generation Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Tata Chemicals Ltd - India
- Kideco Jaya Agung - Indonesia
- Carbofer General Trading SA - India
- Metalloyd Limited - United Kingdom
- Planning Commission, India
- Global Green Power PLC Corporation, Philippines
- Mintek Dendrill Indonesia
- Formosa Plastics Group - Taiwan
- Orica Mining Services - Indonesia
- Trasteel International SA, Italy
- Kumho Petrochemical, South Korea
- Bhoruka Overseas - Indonesia
- Manunggal Multi Energi - Indonesia
- Gujarat Sidhee Cement - India
- Vizag Seaport Private Limited - India
- Uttam Galva Steels Limited - India
- Interocean Group of Companies - India
- Kobexindo Tractors - Indoneisa
- Banpu Public Company Limited - Thailand
- Mercator Lines Limited - India
- Power Finance Corporation Ltd., India
- Lanco Infratech Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Leighton Contractors Pty Ltd - Australia
- Karaikal Port Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Binh Thuan Hamico - Vietnam
- Semirara Mining and Power Corporation, Philippines
- Eastern Coal Council - USA
- Gujarat Mineral Development Corp Ltd - India
- Indo Tambangraya Megah - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Pendopo Energi Batubara - Indonesia
- Africa Commodities Group - South Africa
- Bukit Makmur.PT - Indonesia
- Makarim & Taira - Indonesia
- Sindya Power Generating Company Private Ltd
- Karbindo Abesyapradhi - Indoneisa
- Globalindo Alam Lestari - Indonesia
- Central Electricity Authority - India
- ICICI Bank Limited - India
- Altura Mining Limited, Indonesia
- Kartika Selabumi Mining - Indonesia
- Simpson Spence & Young - Indonesia
- Bhatia International Limited - India
- Standard Chartered Bank - UAE
- Essar Steel Hazira Ltd - India
- Bharathi Cement Corporation - India
- Central Java Power - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sakthi Sugars Limited - India
- Posco Energy - South Korea
- Directorate Of Revenue Intelligence - India
- Dalmia Cement Bharat India
- Singapore Mercantile Exchange
- Indian Energy Exchange, India
- Bulk Trading Sa - Switzerland
- GN Power Mariveles Coal Plant, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Merrill Lynch Commodities Europe
- Port Waratah Coal Services - Australia
- Alfred C Toepfer International GmbH - Germany
- Mjunction Services Limited - India
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