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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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Tuesday, 13 February 24
WHAT IS THE OUTLOOK FOR THE NATURAL GAS SPOT PRICE IN 2024 AND 2025? EIA
We expect the U.S. benchmark Henry Hub natural gas spot price to average higher in 2024 and 2025 than in 2023, but to remain lower than $3.00 per m ...
Monday, 12 February 24
US THERMAL COAL EXPORTS HIT 5-YEAR HIGHS AND TOP $5 BLN IN 2023 - REUTERS
United States exporters of thermal coal earned more than $5 billion in 2023 as they shipped out more than 32.5 million metric tons of the high-poll ...
Tuesday, 06 February 24
NEW E-FUELS PROJECT TO MAKE INTERNATIONAL SHIPPING CLIMATE-NEUTRAL - RINA
Transport and trade on the ocean blue must be made much greener. This is the goal of the new €17 million European GAMMA project, where compani ...
Tuesday, 06 February 24
INDIA SEES ANNUAL COAL OUTPUT UP 10.9% IN 2024/25 - REUTERS
India expects domestic coal output to increase by 10.9% to 1.13 billion metric tons in the fiscal year ending March 2025, a senior government offic ...
Tuesday, 06 February 24
INDIA'S COAL PRODUCTION INCREASES BY 10.3% TO 99.73 MILLION TONNE IN JANUARY - PTI
The country’s coal output rose 10.3 per cent to 99.73 Million Tonne (MT) in January, over the same month in the previous fiscal.
...
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- Neyveli Lignite Corporation Ltd, - India
- Cement Manufacturers Association - India
- Metalloyd Limited - United Kingdom
- Planning Commission, India
- Ambuja Cements Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Kideco Jaya Agung - Indonesia
- Petron Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Anglo American - United Kingdom
- The State Trading Corporation of India Ltd
- Thiess Contractors Indonesia
- Independent Power Producers Association of India
- Medco Energi Mining Internasional
- Mercator Lines Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- London Commodity Brokers - England
- TeaM Sual Corporation - Philippines
- Edison Trading Spa - Italy
- Ministry of Mines - Canada
- Oldendorff Carriers - Singapore
- Salva Resources Pvt Ltd - India
- Australian Commodity Traders Exchange
- Savvy Resources Ltd - HongKong
- CNBM International Corporation - China
- Singapore Mercantile Exchange
- Sarangani Energy Corporation, Philippines
- Orica Australia Pty. Ltd.
- Gujarat Sidhee Cement - India
- Mjunction Services Limited - India
- Leighton Contractors Pty Ltd - Australia
- Timah Investasi Mineral - Indoneisa
- Coalindo Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Carbofer General Trading SA - India
- VISA Power Limited - India
- South Luzon Thermal Energy Corporation
- Mercuria Energy - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Gujarat Electricity Regulatory Commission - India
- Malabar Cements Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Indian Oil Corporation Limited
- Economic Council, Georgia
- Barasentosa Lestari - Indonesia
- SMC Global Power, Philippines
- Marubeni Corporation - India
- GAC Shipping (India) Pvt Ltd
- Samtan Co., Ltd - South Korea
- Iligan Light & Power Inc, Philippines
- Formosa Plastics Group - Taiwan
- San Jose City I Power Corp, Philippines
- Bangladesh Power Developement Board
- Parliament of New Zealand
- Australian Coal Association
- Thai Mozambique Logistica
- Altura Mining Limited, Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Heidelberg Cement - Germany
- PNOC Exploration Corporation - Philippines
- India Bulls Power Limited - India
- Bhoruka Overseas - Indonesia
- Trasteel International SA, Italy
- Binh Thuan Hamico - Vietnam
- Mintek Dendrill Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Directorate Of Revenue Intelligence - India
- Grasim Industreis Ltd - India
- IEA Clean Coal Centre - UK
- Kapuas Tunggal Persada - Indonesia
- Kobexindo Tractors - Indoneisa
- AsiaOL BioFuels Corp., Philippines
- Xindia Steels Limited - India
- Vizag Seaport Private Limited - India
- Manunggal Multi Energi - Indonesia
- Kaltim Prima Coal - Indonesia
- Meenaskhi Energy Private Limited - India
- ASAPP Information Group - India
- Toyota Tsusho Corporation, Japan
- Ind-Barath Power Infra Limited - India
- Intertek Mineral Services - Indonesia
- Baramulti Group, Indonesia
- Indika Energy - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Energy Link Ltd, New Zealand
- Price Waterhouse Coopers - Russia
- Sindya Power Generating Company Private Ltd
- Globalindo Alam Lestari - Indonesia
- Aboitiz Power Corporation - Philippines
- The University of Queensland
- Coal and Oil Company - UAE
- Straits Asia Resources Limited - Singapore
- Siam City Cement - Thailand
- Africa Commodities Group - South Africa
- Miang Besar Coal Terminal - Indonesia
- Port Waratah Coal Services - Australia
- Deloitte Consulting - India
- Latin American Coal - Colombia
- Tamil Nadu electricity Board
- SN Aboitiz Power Inc, Philippines
- Dalmia Cement Bharat India
- Star Paper Mills Limited - India
- Georgia Ports Authority, United States
- Posco Energy - South Korea
- Offshore Bulk Terminal Pte Ltd, Singapore
- SMG Consultants - Indonesia
- Sojitz Corporation - Japan
- Alfred C Toepfer International GmbH - Germany
- European Bulk Services B.V. - Netherlands
- Banpu Public Company Limited - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Larsen & Toubro Limited - India
- PowerSource Philippines DevCo
- Romanian Commodities Exchange
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- LBH Netherlands Bv - Netherlands
- Goldman Sachs - Singapore
- IHS Mccloskey Coal Group - USA
- Jaiprakash Power Ventures ltd
- The Treasury - Australian Government
- Global Business Power Corporation, Philippines
- Kumho Petrochemical, South Korea
- Orica Mining Services - Indonesia
- White Energy Company Limited
- Wood Mackenzie - Singapore
- Merrill Lynch Commodities Europe
- ICICI Bank Limited - India
- Kepco SPC Power Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Sical Logistics Limited - India
- Bayan Resources Tbk. - Indonesia
- Karaikal Port Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Jorong Barutama Greston.PT - Indonesia
- Vedanta Resources Plc - India
- Indogreen Group - Indonesia
- Chettinad Cement Corporation Ltd - India
- Commonwealth Bank - Australia
- Global Coal Blending Company Limited - Australia
- Indian Energy Exchange, India
- Indonesian Coal Mining Association
- Ministry of Finance - Indonesia
- Eastern Coal Council - USA
- Global Green Power PLC Corporation, Philippines
- Madhucon Powers Ltd - India
- MS Steel International - UAE
- Sinarmas Energy and Mining - Indonesia
- Simpson Spence & Young - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Central Java Power - Indonesia
- Central Electricity Authority - India
- Agrawal Coal Company - India
- Rio Tinto Coal - Australia
- Bukit Makmur.PT - Indonesia
- Antam Resourcindo - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Ministry of Transport, Egypt
- Lanco Infratech Ltd - India
- Indo Tambangraya Megah - Indonesia
- McConnell Dowell - Australia
- Semirara Mining and Power Corporation, Philippines
- Parry Sugars Refinery, India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Borneo Indobara - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- GVK Power & Infra Limited - India
- Cigading International Bulk Terminal - Indonesia
- Electricity Authority, New Zealand
- Bahari Cakrawala Sebuku - Indonesia
- Bukit Baiduri Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Uttam Galva Steels Limited - India
- Maheswari Brothers Coal Limited - India
- Chamber of Mines of South Africa
- PTC India Limited - India
- Eastern Energy - Thailand
- Videocon Industries ltd - India
- Sree Jayajothi Cements Limited - India
- Ceylon Electricity Board - Sri Lanka
- GMR Energy Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- International Coal Ventures Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Semirara Mining Corp, Philippines
- New Zealand Coal & Carbon
- Power Finance Corporation Ltd., India
- Bhatia International Limited - India
- Therma Luzon, Inc, Philippines
- Siam City Cement PLC, Thailand
- Jindal Steel & Power Ltd - India
- Sakthi Sugars Limited - India
- Aditya Birla Group - India
- Holcim Trading Pte Ltd - Singapore
- Energy Development Corp, Philippines
- Makarim & Taira - Indonesia
- Essar Steel Hazira Ltd - India
- Tata Chemicals Ltd - India
- Electricity Generating Authority of Thailand
- Riau Bara Harum - Indonesia
- CIMB Investment Bank - Malaysia
- Attock Cement Pakistan Limited
- Directorate General of MIneral and Coal - Indonesia
- Wilmar Investment Holdings
- Minerals Council of Australia
- Meralco Power Generation, Philippines
- Bhushan Steel Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Interocean Group of Companies - India
- Bharathi Cement Corporation - India
- Renaissance Capital - South Africa
- Standard Chartered Bank - UAE
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