Ministry seeks to conclude oil, gas tax loss carry forward issue soon

By Bonha Ventura Sebayang

The Ministry of Energy and Mineral Resources, and the Ministry of Finance are still in discussions over the taxation system to be applied in oil and gas contracts based on the new gross split scheme, with two remaining unsettled issues, namely the tax loss carry forward and indirect tax.

This was said by Deputy Minister of Energy and Mineral Resources Arcandra Tahar over the weekend. He expected the two issues to be settled soon before the ongoing tender for 15 oil and gas blocks is closed on November 20. The government plans to apply the new gross split scheme in in new oil and gas block contracts, but it has yet to determine the taxation system of the new scheme, which replaces the cost recovery mechanism.

Arcandra said 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.

Arcandra expects the new government regulation regarding taxation system in the gross split scheme can be issued before November 20, when the current tender of 15 oil and gas blocks is closed.

Editing by Reiner Simanjuntak