Government completes tax regulation for gross split scheme
Saturday, October 28 2017 - 03:11 AM WIB
The Ministry of Energy and Mineral Resources (MEMR) and the Ministry of Finance have finally completed drafting tax regulation to be applied in oil and gas production sharing contracts based on the new gross split mechanism.
Director General of Oil and Gas at MEMR Ego Syahrial said on Friday that the government regulation on the gross split scheme tax system is expected to be issued soon, following approval by President Joko Widodo, so as to allow participants of ongoing tender for 15 oil and gas working areas to study the tax system before the tender is closed on November 27. The MEMR plans to apply the gross split scheme in new oil and gas contracts.
He said that the Directorate General of Oil and Gas, the Ministry of Finance, and the Indonesia Petroleum Association (IPA) as stakeholder reached on Thursday agreement on the last two remaining issues, namely the tax loss carry forward and indirect tax.
?The minister of finance has sent a letter to the president seeking approval to issue the new government regulation. The minister of energy and mineral resources, today will also send a similar letter to the president,? Ego said.
He expected the president to sign the new government regulation before the close of the oil and gas working areas tender on November 27 in the hope that the winning bidders can be announced early 2018.
Meanwhile, the Directorate General of Oil and Gas said in a statement on Friday that Deputy Minister of Energy and Mineral Resources Arcandra Tahar last week had reached agreement with Minister of Finance Sri Mulyani Indrawati on two key issues in the gross split tax regulation, namely the tax loss carry forward and indirect tax.
The statement said that the Ministry of Finance has agreed to extend the tax loss carry forward in the upstream oil and gas industry to 10 years, which is better than the seven years proposed by IPA.
Arcandra said previously that under the current Law No 36/2008 on income tax, the tax loss carry forward is limited for five years. He, however, said that the five-year limit is not possible to be implemented in the upstream oil and gas industry as exploration activity alone could take up to 10 years. As such, the tax loss carry forward in the upstream sector must be given for a period of more than five years.
Regarding indirect tax, contractors will still be obliged to pay the tax, but will be compensated with additional output split worth equal to the amount of tax paid, the statement said.
Editing by Reiner Simanjuntak