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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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Tuesday, 04 January 11
BALI, INDONESIA HOST OF WORLD RENEWABLE ENERGY AND ENERGY EFFICIENCY CONFERENCE
Press Release - Indonesian Renewable Energy Society (METI – IRES) has launched the plan for organizing the international gathering ...
Tuesday, 04 January 11
DRY BULK MARKET TO RANGE BETWEEN 1,700 AND 2,600 POINTS IN THE FIRST QUARTER OF 2011, ANALYSTS SAY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
As we entered 2011, ship owners and analysts, as well as shipbrokers are looking into their “crystal balls” to try to decode the dry bul ...
Sunday, 02 January 11
JAISWAL TO SEEK COAL MINES IN AFRICA - HINDUSTAN TIMES
Coal Minister Sriprakash Jaiswal will talk with his counterparts in South Africa and Mozambique during his visit from January 5 to secure coal asset ...
Saturday, 01 January 11
COAL PRODUCTION EXPECTED TO EXCEED 340 MILLION TONS THIS YEAR - THE JAKARTA POST
The Jakarta Post reported that, Indonesian coal miners expect to produce 340 million tons of coal in 2011, an increase of 23 percent from 275 millio ...
Friday, 31 December 10
STC TO FINALIZE 12 MILLION MT OF COAL IMPORT CONTRACT TO TWO INDIAN AND A DUBAI BASED COAL TRADER - SOURCES
COALspot.com - World's single largest coal import tender floated by STC on behalf of state utility NTPC to finalize its suppliers or already finali ...
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- PetroVietnam Power Coal Import and Supply Company
- Sical Logistics Limited - India
- Coal and Oil Company - UAE
- Global Green Power PLC Corporation, Philippines
- Toyota Tsusho Corporation, Japan
- Oldendorff Carriers - Singapore
- Salva Resources Pvt Ltd - India
- Indian Oil Corporation Limited
- Banpu Public Company Limited - Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sojitz Corporation - Japan
- Ceylon Electricity Board - Sri Lanka
- Chamber of Mines of South Africa
- Straits Asia Resources Limited - Singapore
- Miang Besar Coal Terminal - Indonesia
- Chettinad Cement Corporation Ltd - India
- Edison Trading Spa - Italy
- Power Finance Corporation Ltd., India
- Formosa Plastics Group - Taiwan
- Siam City Cement - Thailand
- The Treasury - Australian Government
- Metalloyd Limited - United Kingdom
- Bahari Cakrawala Sebuku - Indonesia
- Therma Luzon, Inc, Philippines
- Cement Manufacturers Association - India
- Planning Commission, India
- Singapore Mercantile Exchange
- McConnell Dowell - Australia
- Gujarat Electricity Regulatory Commission - India
- Australian Commodity Traders Exchange
- Electricity Generating Authority of Thailand
- The University of Queensland
- Interocean Group of Companies - India
- Meenaskhi Energy Private Limited - India
- CNBM International Corporation - China
- Posco Energy - South Korea
- Intertek Mineral Services - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Mintek Dendrill Indonesia
- Rio Tinto Coal - Australia
- CIMB Investment Bank - Malaysia
- GN Power Mariveles Coal Plant, Philippines
- LBH Netherlands Bv - Netherlands
- Electricity Authority, New Zealand
- Semirara Mining Corp, Philippines
- Georgia Ports Authority, United States
- Malabar Cements Ltd - India
- Latin American Coal - Colombia
- Bangladesh Power Developement Board
- Globalindo Alam Lestari - Indonesia
- SMC Global Power, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Riau Bara Harum - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Indogreen Group - Indonesia
- Larsen & Toubro Limited - India
- ASAPP Information Group - India
- Directorate Of Revenue Intelligence - India
- Xindia Steels Limited - India
- VISA Power Limited - India
- Indonesian Coal Mining Association
- Commonwealth Bank - Australia
- Altura Mining Limited, Indonesia
- Merrill Lynch Commodities Europe
- SN Aboitiz Power Inc, Philippines
- Central Electricity Authority - India
- MS Steel International - UAE
- Leighton Contractors Pty Ltd - Australia
- GAC Shipping (India) Pvt Ltd
- San Jose City I Power Corp, Philippines
- Wood Mackenzie - Singapore
- Kumho Petrochemical, South Korea
- Meralco Power Generation, Philippines
- Medco Energi Mining Internasional
- Bhatia International Limited - India
- Sarangani Energy Corporation, Philippines
- Eastern Energy - Thailand
- Kobexindo Tractors - Indoneisa
- International Coal Ventures Pvt Ltd - India
- Renaissance Capital - South Africa
- Maharashtra Electricity Regulatory Commission - India
- Lanco Infratech Ltd - India
- Aboitiz Power Corporation - Philippines
- Sinarmas Energy and Mining - Indonesia
- PTC India Limited - India
- Thiess Contractors Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Timah Investasi Mineral - Indoneisa
- Indika Energy - Indonesia
- Madhucon Powers Ltd - India
- Trasteel International SA, Italy
- Baramulti Group, Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Global Coal Blending Company Limited - Australia
- Goldman Sachs - Singapore
- Thai Mozambique Logistica
- Orica Mining Services - Indonesia
- Marubeni Corporation - India
- Savvy Resources Ltd - HongKong
- Minerals Council of Australia
- GVK Power & Infra Limited - India
- Price Waterhouse Coopers - Russia
- Uttam Galva Steels Limited - India
- Vedanta Resources Plc - India
- Sakthi Sugars Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Romanian Commodities Exchange
- The State Trading Corporation of India Ltd
- Ind-Barath Power Infra Limited - India
- Bukit Makmur.PT - Indonesia
- India Bulls Power Limited - India
- Economic Council, Georgia
- AsiaOL BioFuels Corp., Philippines
- Global Business Power Corporation, Philippines
- Eastern Coal Council - USA
- Bayan Resources Tbk. - Indonesia
- Dalmia Cement Bharat India
- Deloitte Consulting - India
- Mercator Lines Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Bhushan Steel Limited - India
- Vizag Seaport Private Limited - India
- Bharathi Cement Corporation - India
- Attock Cement Pakistan Limited
- Gujarat Sidhee Cement - India
- New Zealand Coal & Carbon
- Central Java Power - Indonesia
- Parry Sugars Refinery, India
- Grasim Industreis Ltd - India
- White Energy Company Limited
- Pendopo Energi Batubara - Indonesia
- Tata Chemicals Ltd - India
- Essar Steel Hazira Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sree Jayajothi Cements Limited - India
- Kideco Jaya Agung - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Port Waratah Coal Services - Australia
- Standard Chartered Bank - UAE
- Maheswari Brothers Coal Limited - India
- IHS Mccloskey Coal Group - USA
- Jaiprakash Power Ventures ltd
- Tamil Nadu electricity Board
- Jorong Barutama Greston.PT - Indonesia
- Petron Corporation, Philippines
- PowerSource Philippines DevCo
- Gujarat Mineral Development Corp Ltd - India
- Semirara Mining and Power Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Cigading International Bulk Terminal - Indonesia
- Aditya Birla Group - India
- Ministry of Finance - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Samtan Co., Ltd - South Korea
- Coalindo Energy - Indonesia
- Ambuja Cements Ltd - India
- Ministry of Mines - Canada
- Manunggal Multi Energi - Indonesia
- Binh Thuan Hamico - Vietnam
- Borneo Indobara - Indonesia
- Parliament of New Zealand
- Indo Tambangraya Megah - Indonesia
- Kaltim Prima Coal - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Kepco SPC Power Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bulk Trading Sa - Switzerland
- Energy Development Corp, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Africa Commodities Group - South Africa
- Simpson Spence & Young - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Mercuria Energy - Indonesia
- Wilmar Investment Holdings
- OPG Power Generation Pvt Ltd - India
- Agrawal Coal Company - India
- Iligan Light & Power Inc, Philippines
- Anglo American - United Kingdom
- Krishnapatnam Port Company Ltd. - India
- Makarim & Taira - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Energy Link Ltd, New Zealand
- TNB Fuel Sdn Bhd - Malaysia
- Independent Power Producers Association of India
- Indian Energy Exchange, India
- Sindya Power Generating Company Private Ltd
- South Luzon Thermal Energy Corporation
- Directorate General of MIneral and Coal - Indonesia
- Karaikal Port Pvt Ltd - India
- London Commodity Brokers - England
- Carbofer General Trading SA - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- SMG Consultants - Indonesia
- PNOC Exploration Corporation - Philippines
- Jindal Steel & Power Ltd - India
- Bhoruka Overseas - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- GMR Energy Limited - India
- European Bulk Services B.V. - Netherlands
- Orica Australia Pty. Ltd.
- Heidelberg Cement - Germany
- Videocon Industries ltd - India
- Barasentosa Lestari - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Australian Coal Association
- Ministry of Transport, Egypt
- Siam City Cement PLC, Thailand
- Rashtriya Ispat Nigam Limited - India
- ICICI Bank Limited - India
- Antam Resourcindo - Indonesia
- Mjunction Services Limited - India
- Coastal Gujarat Power Limited - India
- Bukit Baiduri Energy - Indonesia
- Star Paper Mills Limited - India
- IEA Clean Coal Centre - UK
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