PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2010, 2009 AND 2008
Expressed in millions of Rupiah, unless otherwise stated
Appendix 5172 57. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES continued
b. Legal Matters
The Bank along with several other defendants are facing a civil lawsuit filed by Third Party Plaintiff related to the construction on one of the hotels and apartments located in Jakarta. The lawsuit has
been decided by the Court and punishes the Bank and some other defendants to pay the claim equally for an amount of USD8,355,163 full amount. The Bank and several other defendants and the
plaintiff is in the process of implementing this decision through a peace treaty mechanism.
In addition to the above claim, the Bank also faces a lawsuit from a party as a result of criminal fraud committed by syndicates. The lawsuit was decided by the court which sentenced the Bank to pay
compensation amounting to Rp89,083. Currently the Bank is awaiting official notification from the Court regarding this decision.
The Bank’s total potential exposure arising from outstanding lawsuits as at 31 December 2010, 2009 and 2008 amounting to Rp1,172,323, Rp2,204,722 and Rp1,277,161 respectively. As at
31 December 2010, 2009 and 2008, Bank Mandiri has provided a provision included in Other Liabilities for a number of outstanding lawsuits involving Bank Mandiri amounting to Rp574,928,
Rp514,366 and Rp176,316 respectively Note 30. Management believes that the provision is adequate to cover estimated losses arising from pending litigation or litigation cases currently in
progress.
c. Value Added Tax VAT on Bank Syariah Mandiri BSM Murabahah Transactions
There is a difference in opinions concerning tax applied on Murabahah financing transaction between the Directorate General of Taxation Tax Audit Team with the Subsidiary, Bank Syariah
Mandiri BSM.
The Directorate General of Taxation Tax Audit Team concluded that Murabahah transaction is subject to VAT according to the Law No. 8 year 1983 regarding Value Added Tax on Goods and
Services and Sales Tax on Luxury Goods, as the latest revision in Law No. 18 year 2000 article 1A paragraph 1. Related to this matter, the tax office issued a tax assessment letter confirming
underpayment SKPKB and tax collection letter STP of VAT for fiscal year 2003 for BSM’s head office and some branches totalling of Rp37,649.
On 10 January 2005, BSM submitted an objection and did not make payment on the above SKPKB and STP on the basis that, at that time, the tax regulation was not specifically address sharia
banking activities, especially Murabahah financing transactions.
BSM believes that Murabahah financing is a part of banking services as stipulated in Law No. 7 Year 1992 regarding Banking, as amended by Law No. 10 Year 1998 and Law No. 21 Year 2008
regarding Syariah Banking, as such Murabahah financing should not be subjected to VAT. This is in accordance with Law No. 8 Year 1983 as amended by Law No. 18 year 2000 regarding VAT for
goods and services and sales of luxury goods.
DGT believes that Murabahah activities transaction undertaken by BSM is subject to VAT because the transaction were based on purchasing and selling of goods principles and as such, Murabahah
transaction shall not be included as a type of banking services.
PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2010, 2009 AND 2008
Expressed in millions of Rupiah, unless otherwise stated
Appendix 5173 57. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES continued
c. Value Added Tax VAT on Bank Syariah Mandiri BSM Murabahah Financing Transactions
continued On 1 December 2005, the Directorate General of Taxation rejected BSM’s objection through its
letter No. Kep-277PJ.542005. Based on newly issued Law No. 42 year 2009 dated 15 October 2009 in relation to the third
amendment of Law No. 8 year 1983 regarding Value Added Tax on Goods and Services and Sales Tax on Luxury Goods, it is stated that financing services, which include sharia financing, is
exempted from VAT. This Law started effectively on 1 April 2010.
In 2010, the Government issued Law No. 2 Year 2010 in relation to the Amendment of Law No. 47 Year 2009 regarding State Budget of Revenues and Expenditures APBN 2010 dated 25 May
2010. The article and explanatory paragraph of this Law stated that the Government bear VAT on murabahah transactions of several sharia banks. Based on the explanatory paragraph of this Law,
the BSM’s VAT borne by the Government amounting to Rp25,542 from the total outstanding SKPKB and STP received by BSM of Rp37,649.
BSM management believes that difference between VAT borne by Government and total SKPKB and STP received by BSM will not be billed to BSM which is inline with objective and purposes of
the law.
d. Trade Financing with Asian Development Bank ADB
On 25 November 2009, Bank Mandiri signed a Confirmation Bank Agreement CBA, Issuing Bank Agreement IBA and Revolving Credit Agreement RCA under Trade Finance Facilitation Program
TFFP with ADB.
Based on CBA and IBA, Bank Mandiri can act either as confirming bank or issuing bank for its customer’s LC based export import transactions. As a confirming bank, Bank Mandiri can request a
guarantee from ADB for LC issued by issuing bank and as issuing bank, Bank Mandiri can obtain confirmation guarantee from ADB for LC that has been issued.
TFFP scheme is a program initiated by ADB to facilitate the LC based trade transactions within Asian developing countries to increase the trade-volume growth. Becoming a participant in this
program, Bank Mandiri will have an easier access to increase its trade finance credit lines, its trade volume and to open new business opportunities especially to countries that have low trade volume
with Indonesia.
Pursuant to the RCA, Bank Mandiri received a credit revolving facility up to USD25,000,000 full amount. By using the facility, Bank Mandiri will be charged with interest of total margin plus LIBOR
during the interest period.
e. Settlement Mandatory Convertible Bond MCB PT Garuda Indonesia Persero
In 2000, the debt of PT Garuda Indonesia Persero Garuda at Bank Mandiri was restructured bilaterally, through conversion of Garuda’s borrowing to Bank Mandiri amounting to USD103,000,000
full amount, which consist of loans of USD80,000,000 full amount and Rp168,409, into Mandatory Convertible Bond MCB denominated in Rupiah currency with 4.00 coupon rate per annum, 5 years
tenor and expected IRR of 18.00 per annum. This MCB facility matured on 2 November 2006.
