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