PT ADARO ENERGY Tbk AND SUBSIDIARIES Schedule 552
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 AND 2013
Expressed in thousands of US Dollars, unless otherwise stated
35. OTHER EXPENSES, NET
2014 2013
Gain from sales of investment in an associate Note 13 11,436
- Foreign exchange loss, net
13,304 53,198
Loss on mining properties impairment Note 14 40,705
- Loss on goodwill impairment Note 15
16,743 101,877
Negative goodwill from business acquisition Note 5 -
145,578 Others
7,397 22,315
Total, net 66,713
31,812 36.
TAXATION a.
Prepaid taxes 2014
2013
Corporate income tax 75,734
144,229 VAT
52,191 42,487
Total 127,925
186,716
Less current portion 80,452
186,716
Non-current portion
47,473 -
b. Recoverable taxes
2014 2013
Sales Tax 24,633
- Vehicle fuel tax receivables
19,334 9,694
Overpayment of Government’s royalty 571
- Deposit to Government
17 12,301
Others 1,224
1,181 45,779
23,176
Less current portion 45,779
10,875
Non-current portion
- 12,301
According to the CCA, Adaro is subject to sales tax on services rendered in Indonesia, pursuant to prevailing laws and regulations governing sales tax. With the enactment of Law No. 8 of 1983 which introduced VAT, sales tax was
repealed. Adaro is of the opinion that VAT is different from sales tax in both form and substance, and therefore VAT is considered to be a new tax. According to the provisions of the CCA, the Government will pay and assume and hold
Adaro harmless from all Indonesian taxes, duties, rentals and royalties levied by the Government imposed after the date of the CCA. Accordingly, Adaro had offset claims for recoverable VAT against royalties payable.
For the year ended 31 December 2014, Adaro had offset claim for recoverable VAT amounting to US510 31 December 2013: US44,466. From 1 January 2001 up to 31 December 2014, Adaro had offset
a cumulative amount of US752,776. In May 2006, the MoEMR, on behalf of the Government, alleged that Adaro had underpaid royalties due from coal sales
for the years from 2001 and demanded payment thereof. Adaro strongly rejected the allegation because it had discharged its obligation to pay such royalties by way of set off described above. Adaro accordingly filed an objection at
the Jakarta Administrative Court against the MoEMR. In May 2006, the Jakarta Administrative Court granted an order restricting the MoEMR from taking any further administrative steps on the issue until a final and binding judgment is
made.
204
PT ADARO ENERGY Tbk AND SUBSIDIARIES Schedule 553
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 AND 2013
Expressed in thousands of US Dollars, unless otherwise stated
36. TAXATION continued
b. Recoverable taxes continued
In September 2006, the Jakarta Administrative Court issued a decision in favour of Adaro. The Jakarta Administrative High Court concurred with the Jakarta Administrative Court in February 2007. On 26 September 2008, on cassation,
the Supreme Court concurred with the decision of the Jakarta Administrative High Court. The decision of the Supreme Court is final and binding.
Separately in June 2006, the MoEMR granted authority to the Committee for State Claim Affairs the “Committee” to pursue the alleged underpayment of royalties on its behalf. In July 2007, the Committee issued a demand for payment
to Adaro. As this is an industry-wide problem, similar demands were made by the Committee to other first-generation coal companies. In September 2007, Adaro filed an objection with the Jakarta Administrative Court against the
Committee. In September 2007 the Jakarta Administrative Court granted an order restricting the Committee from taking any further administrative steps on the issue until a final and binding judgment is made. On 15 February 2008,
the Jakarta Administrative Court issued a decision in favour of Adaro. The Jakarta Administrative High Court concurred with the Jakarta Administrative Court on 1 July 2008. On 22 July 2009, on cassation, the Supreme Court
concurred with the decision of the Jakarta Administrative High Court. On 29 January 2010, the Committee filed a civil review Peninjauan Kembali against the decision of the Supreme Court. On 31 January 2011, the Jakarta
Administrative Court informed Adaro that the civil review Peninjauan Kembali had passed judgement, where the Supreme Court by its decision No.47PKTUN2010 dated 20 July 2010 had rejected the request for civil review
Peninjauan Kembali by the Committee. The Supreme Court decision is therefore final and binding.
In 2008, the Government through the Financial and Development Supervisory Board “BPKP”, commenced an audit to resolve the dispute on the offset of claims for recoverable VAT paid against royalties payable for the fiscal years
2001 to 2007. In September 2008, in good faith, Adaro placed a deposit amounting to Rp150 billion equivalent to US12,301 as at 31 December 2013 with the Government to signify its willingness to pay any duly determined
unpaid amounts in relation to the dispute the “Deposit”.
In August 2009, BPKP continued its audit in relation to VAT paid and the amount offset against royalties payable and sales tax for the fiscal years prior to 2001, as well as fiscal years 2008 to 2012. As at the date of these consolidated
financial statements, the audit is still ongoing. Management is of the opinion that the audit result will not have a material impact on the Group’s financial position and cash flow.
On 6 December 2012, the Minister of Finance issued Regulation No. 194PMK.032012 ”PMK 194” that governs procedures of collection, remittance and reporting of sales tax and treatment of VAT andor Luxury Goods Sales Tax
on the first generation CCA contractors, including Adaro. PMK 194 became effective on 1 January 2013. PMK 194 stipulates that the first generation of CCA contractors must collect, remit and report Sales Tax on the utilisation of
particular services as listed in the regulation. PMK 194 also stipulates that VAT andor Luxury Goods sales tax are not collected on the delivery of VAT-able goods andor services by a VAT-able Entrepreneur to the contractors, including
Adaro. Management is of the opinion that the law “Undang-Undang” to impose sales tax had been repealed and there is no prevailing law that serves as valid legal basis for the Government to impose sales tax on Adaro, despite the
fact that the Government had issued PMK 194. For this reason, management believes that sales tax cannot currently be legally imposed on Adaro.
On 17 December 2014, the DGT, on behalf of the Government, and Adaro agreed to a settlement of the dispute on the offset of claims for recoverable VAT against royalties payable for the fiscal years 2001 to 2007 the Settlement. The
Government, agreed in the Settlement, to acknowledge the offset of claims for recoverable VAT against royalties payable.
On 22 December 2014, in furtherance of the Settlement, Adaro received a letter from the DGT which informed the results of the recalculation of rights and obligations of the Government and Adaro performed by BPKP for the fiscal
years 2001 to 2007. The result shows an overpayment of royalties amounting to Rp7.1 billion, equivalent to US571, inclusive of interest of Rp2.3 billion, equivalent to US185 and underpayment of sales tax amounting to
Rp109.1 billion equivalent to US8,770 for the years 2001 to 2007 and administrative fees of Rp402.3 million equivalent to US32.
205
AdARo ENERgy 2014 ANNuAl REPoRT
PT ADARO ENERGY Tbk AND SUBSIDIARIES Schedule 554
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 AND 2013
Expressed in thousands of US Dollars, unless otherwise stated
36. TAXATION continued
b. Recoverable taxes continued
