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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.
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Friday, 02 February 24
DRY BULK MARKET: THE DOWNWARD REVISION IN THE GROWTH OF CAPESIZE TONNE DAYS IN JANUARY WITH THE BCI DROPPING - MARIA BERTZELETOU
In the last week of January, the dry freight market sustained weakness in the Capesize segment, while the number of ballasters in the Southeast (SE ...
Friday, 02 February 24
COAL INDIA ACHIEVES NEARLY 80% OF ITS FY24 PRODUCTION TARGET IN TEN MONTHS - CNBCTV18
For the month of January, the company’s production grew by 9.1% from the same period last year to 78.4 Million Tonnes (MT), from 71.9 MT last ...
Thursday, 01 February 24
CHINA'S WIND, SOLAR CAPACITY TO OVERTAKE COAL IN 2024 - INDUSTRY BODY, REUTERS REPORTED
China’s installed wind and solar capacity is expected to overtake coal for the first time this year, according to industry forecasts.
&nb ...
Thursday, 01 February 24
ANTI-DEDUCTION CLAUSES: CAN A CHARTERER WITHHOLD HIRE WITHOUT AN OWNER'S CONSENT? - SKULD
KNOWLEDGE TO ELEVATE
Summary
In The Anna Dorothea, the Court found that where a charterparty provides that no deduction from hire may be m ...
Thursday, 01 February 24
INDIA REBUILDS COAL STOCKS TO ENSURE ELECTRIC RELIABILITY - REUTERS
India’s electricity supply is much more comfortable at the start of 2024 than in either 2023 or 2022 as coal production has ramped up and the ...
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- Sree Jayajothi Cements Limited - India
- TeaM Sual Corporation - Philippines
- Riau Bara Harum - Indonesia
- Indian Energy Exchange, India
- South Luzon Thermal Energy Corporation
- Planning Commission, India
- Petron Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- PNOC Exploration Corporation - Philippines
- Agrawal Coal Company - India
- Jindal Steel & Power Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- SN Aboitiz Power Inc, Philippines
- Xindia Steels Limited - India
- Semirara Mining Corp, Philippines
- GAC Shipping (India) Pvt Ltd
- McConnell Dowell - Australia
- Timah Investasi Mineral - Indoneisa
- Parliament of New Zealand
- Mercuria Energy - Indonesia
- Kumho Petrochemical, South Korea
- Pipit Mutiara Jaya. PT, Indonesia
- European Bulk Services B.V. - Netherlands
- Ministry of Mines - Canada
- Antam Resourcindo - Indonesia
- Energy Link Ltd, New Zealand
- Sinarmas Energy and Mining - Indonesia
- Eastern Coal Council - USA
- Singapore Mercantile Exchange
- Malabar Cements Ltd - India
- Coal and Oil Company - UAE
- Uttam Galva Steels Limited - India
- Kartika Selabumi Mining - Indonesia
- Mercator Lines Limited - India
- Sical Logistics Limited - India
- Kapuas Tunggal Persada - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Chamber of Mines of South Africa
- Aboitiz Power Corporation - Philippines
- Salva Resources Pvt Ltd - India
- Ambuja Cements Ltd - India
- Marubeni Corporation - India
- Dalmia Cement Bharat India
- Savvy Resources Ltd - HongKong
- Indogreen Group - Indonesia
- Karaikal Port Pvt Ltd - India
- Lanco Infratech Ltd - India
- Attock Cement Pakistan Limited
- Price Waterhouse Coopers - Russia
- Directorate General of MIneral and Coal - Indonesia
- Sakthi Sugars Limited - India
- Electricity Authority, New Zealand
- Essar Steel Hazira Ltd - India
- Pendopo Energi Batubara - Indonesia
- Metalloyd Limited - United Kingdom
- Minerals Council of Australia
- Meralco Power Generation, Philippines
- Maheswari Brothers Coal Limited - India
- Gujarat Sidhee Cement - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Star Paper Mills Limited - India
- Alfred C Toepfer International GmbH - Germany
- Independent Power Producers Association of India
- PowerSource Philippines DevCo
- Bulk Trading Sa - Switzerland
- Commonwealth Bank - Australia
- Leighton Contractors Pty Ltd - Australia
- Goldman Sachs - Singapore
- Indika Energy - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- GMR Energy Limited - India
- Rashtriya Ispat Nigam Limited - India
- Siam City Cement - Thailand
- Edison Trading Spa - Italy
- Central Electricity Authority - India
- Bahari Cakrawala Sebuku - Indonesia
- IEA Clean Coal Centre - UK
- CIMB Investment Bank - Malaysia
- Vizag Seaport Private Limited - India
- Cigading International Bulk Terminal - Indonesia
- Parry Sugars Refinery, India
- Semirara Mining and Power Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Deloitte Consulting - India
- Ministry of Transport, Egypt
- Mjunction Services Limited - India
- Meenaskhi Energy Private Limited - India
- Sarangani Energy Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Aditya Birla Group - India
- CNBM International Corporation - China
- Indian Oil Corporation Limited
- Petrochimia International Co. Ltd.- Taiwan
- PetroVietnam Power Coal Import and Supply Company
- Port Waratah Coal Services - Australia
- SMC Global Power, Philippines
- Intertek Mineral Services - Indonesia
- Chettinad Cement Corporation Ltd - India
- Ind-Barath Power Infra Limited - India
- Therma Luzon, Inc, Philippines
- Samtan Co., Ltd - South Korea
- GVK Power & Infra Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indonesian Coal Mining Association
- Medco Energi Mining Internasional
- ICICI Bank Limited - India
- India Bulls Power Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Binh Thuan Hamico - Vietnam
- GN Power Mariveles Coal Plant, Philippines
- Tata Chemicals Ltd - India
- Eastern Energy - Thailand
- Bukit Makmur.PT - Indonesia
- London Commodity Brokers - England
- Karbindo Abesyapradhi - Indoneisa
- Global Coal Blending Company Limited - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Latin American Coal - Colombia
- Krishnapatnam Port Company Ltd. - India
- Global Green Power PLC Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Globalindo Alam Lestari - Indonesia
- Romanian Commodities Exchange
- Bukit Baiduri Energy - Indonesia
- Australian Commodity Traders Exchange
- Power Finance Corporation Ltd., India
- Oldendorff Carriers - Singapore
- Coastal Gujarat Power Limited - India
- International Coal Ventures Pvt Ltd - India
- Tamil Nadu electricity Board
- MS Steel International - UAE
- Standard Chartered Bank - UAE
- Vedanta Resources Plc - India
- Heidelberg Cement - Germany
- Billiton Holdings Pty Ltd - Australia
- PTC India Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Iligan Light & Power Inc, Philippines
- IHS Mccloskey Coal Group - USA
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Larsen & Toubro Limited - India
- LBH Netherlands Bv - Netherlands
- Trasteel International SA, Italy
- Coalindo Energy - Indonesia
- Africa Commodities Group - South Africa
- Madhucon Powers Ltd - India
- Simpson Spence & Young - Indonesia
- Siam City Cement PLC, Thailand
- Carbofer General Trading SA - India
- Global Business Power Corporation, Philippines
- Bhatia International Limited - India
- Bharathi Cement Corporation - India
- VISA Power Limited - India
- Videocon Industries ltd - India
- Miang Besar Coal Terminal - Indonesia
- Renaissance Capital - South Africa
- Thai Mozambique Logistica
- Anglo American - United Kingdom
- Barasentosa Lestari - Indonesia
- Energy Development Corp, Philippines
- Georgia Ports Authority, United States
- Bayan Resources Tbk. - Indonesia
- New Zealand Coal & Carbon
- San Jose City I Power Corp, Philippines
- Borneo Indobara - Indonesia
- Mintek Dendrill Indonesia
- Bhushan Steel Limited - India
- AsiaOL BioFuels Corp., Philippines
- Thiess Contractors Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Asmin Koalindo Tuhup - Indonesia
- Baramulti Group, Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Kaltim Prima Coal - Indonesia
- Sindya Power Generating Company Private Ltd
- Gujarat Electricity Regulatory Commission - India
- ASAPP Information Group - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Electricity Generating Authority of Thailand
- Toyota Tsusho Corporation, Japan
- Cement Manufacturers Association - India
- Orica Australia Pty. Ltd.
- Ministry of Finance - Indonesia
- Wood Mackenzie - Singapore
- Sojitz Corporation - Japan
- Holcim Trading Pte Ltd - Singapore
- Posco Energy - South Korea
- Australian Coal Association
- Kideco Jaya Agung - Indonesia
- Rio Tinto Coal - Australia
- Kepco SPC Power Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Grasim Industreis Ltd - India
- Altura Mining Limited, Indonesia
- White Energy Company Limited
- Bangladesh Power Developement Board
- Banpu Public Company Limited - Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Wilmar Investment Holdings
- Indo Tambangraya Megah - Indonesia
- The University of Queensland
- The State Trading Corporation of India Ltd
- Economic Council, Georgia
- Interocean Group of Companies - India
- Kobexindo Tractors - Indoneisa
- Central Java Power - Indonesia
- Makarim & Taira - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- The Treasury - Australian Government
- Merrill Lynch Commodities Europe
- Kalimantan Lumbung Energi - Indonesia
- Formosa Plastics Group - Taiwan
- SMG Consultants - Indonesia
- Orica Mining Services - Indonesia
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