Mining Company Shall Pay for Royalty Charge in Amount of 10% of Its Net Profit (According to the New Mining Law)

The biggest income of Indonesia’s State is come from tax. Business activity like investment has gives big income for the state. One of the biggest incomes for the state is come from the mining business. In this case, the Mining Permit holders or Special Mining Permit holders must pay state income and regional income. In the draft of the new Mining Law, this provision is explicitly stated in Article 128 (1).

State income as mentioned above is include tax revenue and non-tax state revenues Tax revenue is every tax which shall be paid to the government in accordance to the prevailing tax regulations. According to the Article 128 (3) of the draft of New Mining Law, tax revenue shall include:

a. taxes within the authority of the Government under the provisions of laws and regulations in the field of taxation; and

b. customs and excise duties.

Then, non-tax state revenue non-tax state revenues according to the Article 128 (4) of the draft of New Mining Law shall include:

a. dead rents;

b. exploration royalties;

c. production royalties; and

d. compensation for data/information.

Regional income according to the Article 128 (5) of the draft of New Mining Law shall include:

a. regional taxes;

b. regional charges; and

c. other lawful income under provisions of laws and regulations.

The total amount which shall be paid by the mining company to the Government is in amount of 10% of its net profit. Article 129 (1) stated that metal mineral and coal Production Operation Special Mining Permit holders must pay 4% (four percent) to the Government and 6% (six percent) to the regional government, of net profits since commencing production. Furthermore, the regional government allotment will be divided again to be given as follows (Article 129 (2)):

a. the provincial government shall receive a portion of 1% (one percent);

b. the producing district/city government shall receive a portion of 2.5% (two point five percent); and

c. other district/city government within the same province shall receive a portion of 2.5% (two point five percent).

10% of net profits are a quite big amount. Moreover, as stated on the hukumonline.com, this provision has become controversy among the public, particularly the mining company since Article 129 is appear suddenly at the end of the discussion of the Mining Law and the said article also not an initiative from the government.

Against this matter, Listi Witanni, a legal staff from ANTAM said that they feel like to have pay for two times. Considered to be a big burden, ANTAM as one of mining company is still trying to clarify this matter to the General Directorate of Mineral, Coal and Geothermal of Energy and Mineral Department (known as “Dirjen Minerba DESDM”).


Too Many Cost

Formerly, in all this time, royalty charge is categorized as non-tax state revenues. This provision is provided in the Government Regulation No. 45 Year 2003 concerning on the Category of Non-Tax State Revenue in Department of Energy and Mineral. The said Government Regulation also provided provisions on dead rents amount for the Mining Right (known as “Kuasa Pertambangan”), Contract of Work (known as “Kontrak Karya”) and Coal Contract of Work (known as “Perjanjian Karya Pengusahaan Pertambangan Batubara”). According to the said Government Regulation, the amount of production contribution tariff for Mining Right and Contract of Work and Royalty is calculated by tariff time graving material selling price.

The Coal Production Outcome Fund itself (known as “Dana Hasil Produksi Batubara”) is provided in the President Decree No. 75 Year 1996 concerning on the Coal Contract of Work Provision (“PKP2B”). As stated in Article 3 (1) of the President Decree No. 75 Year 1996, Private Contractor Company shall pay 13,50% of their coal production outcome to the Government by cash upon the Free on Board price or at sale point.

The said amount which comes from the Coal Production Outcome Fund is the Government’s allotment in order to coal development defrayal, coal resource investment, environment management supervising cost and work safety on mining, exploration tariff payment, exploitation tariff and also for value added tax.