Accounting FEB UNPAD

November 2013

Tax Team

To provide an overview
about the implementation
of the Indonesian Tax Laws
and Regulations in Oil &
Gas industry Production
Sharing Contract (PSC)

Laws & Regulations

Applicable Taxes:

Income Tax (Withholding Tax/WHT)

Value Added Tax (VAT)
Land & Building Tax
Corporate & Dividend Tax

Uniformity Principle
Ring Fence Policy
Tax Audit
Tax Litigation
PSC Accounting vs General Taxation

UPSTREAM (HULU)

EXPORT
LNG/LPG Plant

Shipping

Minyak/Gas

Pipe
EXPLORATION &
DEVELOPMENT

PRODUCTION

DOWN STREAM (HILIR)

REFINERY

BBM
EXPORT

SPBU

SILO
End user

TRANSPORTATION

INDUSTRY

Petroleum Business Process

Develop
ment
Block

Production

Explo
ration

Abandon
ment

Acquisition

Bid round
to
Government

Finding
Reserves
Discovery

Develop
Production
Facilities

Major Activities

Petroleum
Production

Abandon
Facilities
And Wells

Relin
quish
ment

Return
Block to
Government

UU No. 28/2007 KUP

UU No. 36/2008 Income Tax
UU No. 42/2009 VAT
UU No. 14/2002 Tax Court
PMK No.73/2010 VAT Collector
PER-70/2007 WHT Object (Type of services)
PMK No.64/2006 VAT Reimbursement
PP No.79/2010 Cost Recovery
PER-11/PJ/2012 & SE-21/PJ/2012 Land & Building
Tax on Oil & Gas

Refer to UU No.36/2008 Article 4 (1):

Yang menjadi objek pajak adalah penghasilan, yaitu setiap
tambahan kemampuan ekonomis yang diterima atau diperoleh
Wajib Pajak, baik yang berasal dari Indonesia maupun yang berasal
dari luar Indonesia, yang dapat dipakai untuk konsumsi atau untuk
menambah kekayaan Wajib Pajak yang bersangkutan, dengan nama
dan dalam bentuk apapun, termasuk: ....

Art. 21/26
Art. 22
Art. 23/26
Art. 15 Final
Art. 4 (2) Final
Payment: 10th each month
Filing: 20th each month
Late payment: 2% interest/month

Art.17 Law No. 36/2008

No.

Annual Income

Tariff

1.

Up to Rp 50.000.000

5%

2.

Rp50.000.000 < up to Rp 250.000.000

15%

3.

Rp250.000.000 < up to Rp 500.000.000

25%

4.

> Rp500.000.000

30%

Apply on tax on import

Rate 2.5% from FOB (with API)

Apply on rents and services

Rate 2% - 20%

Classification

Tariff

Description of Services

SERVICES
2% Technical Services
2% Management Services
2% Consultation Services except Construction Consultant
2% Appraisal Services
2% Actuarial Services
2% Accounting Services
2% Design Services
2% Drilling Services on Oil and Gas Activities except for Permanent Establishment (PE)
2% Supporting Services on Oil and Gas activities
2% Mining and Supporting Services other than Oil and Gas Activities
2% Supporting Services on airport and flight activities
2% Extracting Forrest timber Services
2% Waste process/removal Services
2% Labor Supplier Services
2% Agency Services
2% Services on Marketable Securities
2% Custodian/Storage Services, excluding Building rental which is subject to WHT Final

2% Dubbing film Services

2% Mixing film Services
2% Services relates to computer software including fixing and maintenance
2% Installation Services of Machinery
2% Maintenance/Repair Services
2% Maklon Services
2% Security and Investigation Services
2% Event Organizer Services
2% Packaging Services
2% Services in providing placeand/or time in mass media, outdoor media or other media for
gathering information
2% Pest Control Services
2% Cleaning Services
2% Catering Services

RENTAL

Rental and other income relates to the use of assets which is given to
Domestic Individual or Corporate Taxpayer (except for Rental of Land and/building)
2% a. Rental for ground transportation
2% b. Rental for other than ground transportation

Apply on Boat and/or Aircraft charter

Rate 1.2% - 2.64%
Classification

Tariff

Description of Services

WHT ART.15 - FINAL

RENTAL/CHARTER BOAT OR AIRCRAFT

1.2% Repayment or Substitution Value received by Domestic Shipping Company

in order to carry persons and/materials based on Rental or Charter Agreement
1.8% Repayment or Substitution Value received by Domestic Flight Company
in order to carry persons and/materials based on Rental or Charter Agreement
2.64% Repayment or Substitution Value received by Non-Domestic Shipping and Flight Company
in order to carry persons and/materials based on Rental or Charter Agreement

Apply on Rental on Land and Building

Apply for Construction Services
Rate 2% - 10%
Classification

Tariff

Description of Services

WHT ART. 4(2) - FINAL

RENTAL LAND & BUILDING
CONSTRUCTION SERVICES

10% Rental Land and/building

Planning & Controlling Services on Construction
4% Service renderer is qualified as construction company
6% Service renderer is NOT qualified as construction company
Construction Activities Services
2% Service renderer is qualified as small scale company/ entrepreneur
4% Service renderer is NOT qualified as construction company
3% Service renderer is qualified as construction company

Apply on Rental and/or Services from abroad

Apply for Foreign Taxpayer
Rate 20%
Classification

Tariff

Description of Services

WHT ART.26 - FINAL

Individual Taxpayer
Corporate Taxpayer

20% Foreign Taxpayer - INDIVIDUAL

20% Foreign Taxpayer - CORPORATE

Purchase Goods and Services in Custom Area

PSC as VAT collector (Wapu PPN)
No input-output mechanism
Payment: the 15th each month
Filing: the 20th each month
Late payment: 2% interest/month
VAT will be reimbursed SKKMIGAS

PSC Paragraph 5.2 SKKMigas shall :

...assume and discharge other Indonesian Taxes of

Contractor including Value Added Tax, Import and Export
Duties on materials, equipment, and supplies brought
into Indonesia by Contractor, its contractors and
subcontractors...

VAT Reimbursement PMK 64/2004

Cost Recoverable non-reimbursable
Non-cost recoverable non-reimbursable
Claim VAT SKKMigas DJA

Pre-2010 PSC tax borne by GOI

PER-11/PJ/2012

Land
Surface Onshore (productive, non productive, emplacement,

safety) & Offshore

Below the surface

Building permanent technical construction onshore &

offshore

Apply on Exploration & Exploitation stage

Exploration high sunk cost
Exploitation Cost Recoverable

Pre-1978 PERTAMINA paid taxes

Since 1978, PSC paid taxes
Part of Government split
Rate: 40% - 56%
C&D tax payment MoF Account in BI New York
on 15th each month
Report DJA with cc to SKKMIGAS & DJP
Uniformity Principle:
Cost Recoverable = Tax Deductible

Tariff
pre-1984 1984
Corporate tax
45%
35%
Dividend tax (20%)
11%
13%
Total Income Tax
56%
48%

1994 2009 2010

30% 28%
25%
14% 14.4% 15%
44% 42.4% 40%

Revenue 100 %

Expenditures
First Tranche Petroleum (FTP) 20 %

Production
Facilities

Exploration

Development

Production

Capital

Investment Credit

Depreciation
Cost Recovery

Non-Capital

Administration

Equity To Be Split

Indonesia Share

Contractor Share
DMO
DMO Fee
Taxable Income

Production Bonus
Government Tax 44 %

Indonesia Take

Contractor Take

250

Revenue 100 %

Expenditures
5

20%x250=50

55

First Tranche Petroleum (FTP) 20 %

20
10

20%x20=4

Production
Facilities

Exploration

50x30%

Investment Credit

20
15
25

Development

Depreciation

Capital

5
Cost Recovery

40
Production

5 Administration

Non-Capital

156

35

Equity To Be Split

156x70%=109
47
70% Indonesia Share

50x70%=35

30% Contractor Share

47+4+15=66

DMO

30%x25%x250=19
DMO Fee

66-19+2=49

30%x25%x10%x250=2

Taxable Income

Production Bonus 5
Government Tax 44 %

Indonesia Take
109+35+19-2+19=180

49-5x44%=19

Contractor Take
49-19=30

15

MoF letter No. S-443a/MK.012/1982 regarding

the interpretation of MoF Decree
No.267/KMK.012/1978
Uniformity Principle costs incurred in
calculating Taxable Income equal to Cost
Recovery
Cost Recoverable = Tax Deductible

PP 35/1994 stated one contractor for one working

area.
PSC company which operates more than 1 area
shall not consolidate their costs for any costs
recovery nor tax consolidation purposes
Each entity must have NPWP

A
B

PERPAJAKAN HOME
COUNTRY
SHARE HOLDER

INDEPENDENT AUDIT

MAJOR/INDEPENDENT
OIL COMPANY
SHARE HOLDER AUDIT

INTEREST HOLDER
(PARTNER &
OPERATOR)

HOME OFFICE AUDIT

OPERATING COMMITTEE

OPERATOR KPS

PARTNER AUDIT

GOI Audit (SKKMigas,

BPKP, DJP, BC, BPK)

Performed by Directorate General of Taxation

(DJP) KPP Migas
Generally performed on

Producing Company (compliance)

Taxpayer who ask for refund
Request for deregistration of NPWP

Process: Audit Result & Discussion Audit

Report Tax Assessment

Taxpayers can only raise objections to DGT for

any:

SKPKB, SKPKBT, SKPLB, SKPN, or

Withholding or collection by third party on the basis
of provisions of taxation laws

File in the period of 3 months

Pay at least the agreed tax amount prior to filing
objection to DGT or zero
DGT must issue decision within 12 months (max)

Taxpayer

DGT

Decision

Pay the agreed tax amount

Prepare Objection Letter
File the Objection Letter

Review Objection
Discussion and request additional information
Issue Objection Decision no longer than 12 months
after receiving Objection Letter

If granted: DGT will refund the paid tax with 2% interest/month (max 24 months)
If rejected or partially granted: Taxpayer must pay the unpaid tax plus 50% penalty
If rejected, Taxpayer may propose Appeal to Tax Court

Taxpayers can only raise for appeals to Tax Court

against decisions on objection stipulated by DGT
File in the period of 3 months
Appeal Process to Tax Court: Appeal Letter
Formality Exercise Hearing Decision
In the case of Objection/Appeal is accepted, tax
payment shall be refunded plus an interest 2% per
month for 24 months max
If rejected Judicial Review to Supreme Court

File Appeal

Tax Court Decision:

Formality
Exercise

Hearing

Decision

- Favorable: DGT will have to

refund the paid tax plus 2%
interest/month (max 24 months)
- Unfavorable: Taxpayer will have
to pay the unpaid tax plus 100%
penalty

Operating cost computed based on PSC

Accounting Procedures
Pre-signing contract costs are non PSC
Costs
Intangible Drilling Costs are chargeable
when occurred
Crude Oil sold to affiliate is valued at ICP

Operating cost computed as spelled out in

the Income Tax Law, Article 6
Pre-establishment costs having >1 year
benefit shall be capitalized and amortized
Costs having more than 1 year benefit
shall be capitalized and amortized
Crude Oil sold to affiliate is valued at the
actual price, but tax office has the right to
determine the value
Tax is paid monthly based on prior years
obligation (installments), final payment
max in April of the following year
Tariffs 25%

Tax paid monthly based on actual lifting,

adjusted at end on April (Final), the

following year
Tariffs : Income Tax 25%, Final Tax on

Profit 20%, effective tariffs 40%

Un-recovered costs are carried over to
succeeding years
Losses may be compensated for 5 years

Community Development is non capital

costs and tax deductible
Interest on loan may only be applicable
to capital investment and requires
approval
Consumable items are chargeable when
landed in Indonesia
Depreciation starts beginning in the
year when an asset is placed into
service
Assets belong to the State
Acquisition costs of economic interest
are charged to Operating Costs
according to PSC Acctg Procedures
Books and Accounts are reported in
English language and in US Dollar
currency

Community Development is not tax

deductible
All interest on loan is tax deductible

Consumable items are deductible when

they are issued for usage
Depreciation starts in the month of
payment or completion of assets

Assets belong to business entity

Revaluation of assets is possible
Acquisition costs of economic interest
shall be amortized based on unit of
production
Financial Reports in Bahasa Indonesia and
in Indonesian Rupiah.