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