Indonesia: New taxation rules for certain mineral mining companies

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Indonesia: New taxation rules for certain mineral mining companies

intl-updates-small.jpg

On August 2 2018, Government Regulation 37 of 2018 concerning treatment of taxation and/or non-tax state revenue in the mineral mining business field (GR 37/2018) was enacted. The purpose of this regulation is to provide legal certainty in terms of taxation and/or the imposition of non-tax state revenue for holders of mineral mining licences in Indonesia. GR 37/2018 stipulates that the income tax provisions regulated thereunder will only apply to certain mineral mining companies, those being: (i) holders of a Mining Business Licence (Izin Usaha Pertambangan, or IUP); (ii) holders of a Special Mining Business Licence (Izin Usaha Pertambangan Khusus, or IUPK); (iii) holders of a People’s Mining Licence (Izin Pertambangan Rakyat, or IPR); (iv) holders of an Operation-Production Special Mining Business Licence (Izin Usaha Pertambangan Khusus Operasi Produksi, or IUPK Operasi Produksi) from the conversion of an unexpired contract of work; and (v) holders of a contract of work which stipulates income tax obligations in accordance with the prevailing income tax laws (i.e., the Indonesian Income Tax Law). For holders of a contract of work that stipulates income tax obligations in line with the prevailing Income Tax Law, the taxation provisions under that contract of work will apply until the contract expires.

Specifically for mineral mining companies that hold an IUPK Operasi Produksi from the conversion of an unexpired contract of work, the following taxation, non-tax state revenue, and regional/local revenue provisions will apply: (i) royalty (iuran produksi) and land rent (iuran tetap); (ii) non-tax state revenue in the field of environment and forestry; (iii) non-tax state revenue in the form of the central government portion: 4% of net profits; (iv) corporate income tax: 25%; (v) land and building tax; and (vi) the regional/local government portion: 6% of net profits, until the IUPK Operasi Produksi expires. ‘Net profits’ in this case refers to net profits after deducting income tax annually from the start of production, based on financial statements audited by public accountants. Other types of tax, non-tax state revenue, and regional/local revenue, such as VAT, import-export duty, and excise duty, are also applicable (as relevant). It is important to note that Article 20 of GR 37/2018 stipulates that the taxation provisions under the regulation will only come into effect as of the 2019 tax year (next year).

Under GR 37/2018, existing mineral mining companies, such as PT Freeport Indonesia, which have obtained an IUPK Operasi Produksi from the conversion of an unexpired contract of work, will be subject to income tax of 25% (in line with the tariff under the Indonesian Income Tax Law for corporate bodies) starting from the 2019 tax year, until the expiry of their IUPK Operasi Produksi. Apart from income tax, these companies will also be paying portions for the central government and regional/local government, at 4% and 6% rates, respectively, as elaborated above.

more across site & shared bottom lb ros

More from across our site

AI-powered tax agents are likely to be the next big development in tax technology, says Russell Gammon of Tax Systems
FTI Consulting’s EMEA head of employment tax and reward tells ITR about celebrating diversity in the profession, his love of musicals, and what makes tax cool
Canadian Prime Minister Mark Carney and US President Donald Trump have agreed that the countries will look to conclude a deal by July 21, 2025
The firm’s lack of transparency regarding its tax leaks scandal should see the ban extended beyond June 30, senators Deborah O’Neill and Barbara Pocock tell ITR
Despite posing significant administrative hurdles, digital services taxes remain ‘the best way forward’ for emerging economies, says Neil Kelley, COO of Ascoria
A ‘joint understanding’ among G7 countries that ‘defends American interests’ is set to be announced, Scott Bessent claimed
The ‘big four’ firm’s inaugural annual report unveiled a sharp drop in profits for 2024; in other news, Baker McKenzie and Perkins Coie expanded their US tax benches
Representatives from the two countries focused on TP as they met this week to evaluate progress under a previously signed agreement – it is understood
The UK accountancy firm’s transfer pricing lead tells ITR about his expat lifestyle, taking risks, and what makes tax cool
Dolphin Drilling intends to discuss the final liability amount and manner of settlement with HM Revenue and Customs
Gift this article