Indonesia Relaxes Tax Regulations for the Mining Industry

Updated on Friday 24th August 2018

The Freeport Indonesia is one of the largest mining sites owned by the Indonesian government, which is why the government decided to improve the tax regulations related to this activity for miners converting work contracts into mining permits. The new tax regulations were issued in July and provide for improved tax regulations for miners. Our company formation agents in Indonesia can offer more information on the tax rules applicable in this country.

Regulation No. 37/2018 on the taxation in the mining sector

Mining is one of the most important economic sectors in Indonesia, with Freeport Indonesia representing the largest mining sites operated by the government. In order to improve the conditions for those working here, the government has issued new tax rules under the Regulation No. 37/2018 on Tax Treatment and/or Non-Tax Government Revenue in the Mineral Mining Sector which provides for a corporate tax rate of 25% for those exchanging their work contracts for mining permits. Also, the miners will be levied with a 4% tax on their net profit to the central authorities and a 6% tax to the local government.

The most important provision of the regulation is that the new tax rates will not change until the mining permit expires, therefore miners and companies will benefit from a higher degree of transparency and certainty with respect to the taxes they pay.

Our Indonesia company incorporation consultants can help foreign investors who want to set up businesses in the mining industry.

The impact of the new regulations on the mining industry in Indonesia

One of the most important tax regulations imposed on mining companies in Indonesia was the 35% corporate tax which was reduced at 25% for special mining permits, which means a lower income for the central government, but more revenue for the local authorities who will have substantial gains from mining activities.

The state company also plans on investing in the creation of a new smelter which will increase the capacity of companies to melt minerals.

We remind investors that earlier this year the government removed several legal hurdles for private companies seeking to bid for mining license areas, and if you are interested in exploring this industry, please contact us.