ICMA wants confirmation on VAT reimbursement

By Tri Subhki R

The Indonesia Coal Mining Association (ICMA) wants clarification from the Finance Minister regarding the value added tax (VAT) reimbursement for coal miners holding the third generation Coal Contracts of Work (CCoW). ICMA previously revealed that the Directorate General of Taxation under the ministry has been inconsistent in reimbursing VAT for holders of the third generation CCoWs.

?We want confirmation from Finance Minister regarding the VAT reimbursement for holders of third generation CCoWs,? Supriatna Suhala, Executive Director of ICMA, said on Wednesday. He added that some of its members, particularly foreign investors, have complained about the inconsistency of the tax office regarding VAT reimbursement.

As has been reported previously, some third generation CCoW coal miners had not been able to get VAT restitution from the tax office, while other miners holding the same type of contract have been successful in getting the reimbursement. Such discrimination by the tax office has triggered protest from the association. It is said that the different treatment arises because of different interpretation by the tax office regarding the status of coal, whether it is a taxable good or not particularly following the issuance of new government regulation in 2000 which excludes coal from taxable good category, contradicting the third generation CCoW, which defines coal as taxable good.

ICMA?s stance follows the Supreme Audit Agency (BPK)?s recommendation in a May 25, 2015 report to the government that states ?recommends Finance Minister as the government representative to confirm whether coal is taxable product or not.? If coal is classified as taxable product, miners can claim reimbursement for the overpaid tax.

Third generation CCoW, an agreement between foreign and/or domestic contractors with the government of Indonesia, holds a lex specialis status which means the contractors are obliged to comply with the laws when the contract was signed. So, contractors do not have obligation to comply with any new law or regulation enacted after the contract signing.

In the third generation CCoW, the contract states that the holders have to pay 10 percent VAT for domestic sales and 0 percent for export sales based on Law No 11/1994 regarding VAT. Contractors can apply for reimbursement in case of overpayment.

Meanwhile, David Hamzah Damian, Partner, Tax Compliance and Litigation Services of Danny Darussalam Tax Center, confirmed that there are different interpretation of law and regulation regarding VAT reimbursement dispute for third generation CCoWs. ?There are different law interpretations in the tax court on the issue,? he said.

David revealed that he has represented six holders of third generation CCoW. ?Some of them are still undergoing proceedings in the tax court,? he said. David notes that the dispute settlement in the tax court takes long time, normally 12 months.

Editing by Reiner Simanjuntak