PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2009, 2008 AND 2007
Expressed in millions of Rupiah, unless otherwise stated
Appendix 5142 57. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES continued
b. Development Agreement with the Operational Risk Management ABN AMRO Bank N.V.
On 25 February 2005, Bank Mandiri and ABN AMRO Bank N.V. signed an agreement on the development of Operational Risk Management to assist in the implementation process of operational
risk management, and has been modified by the Addendum. This cooperation is used as a means of transferring knowledge to improve the capabilities of the Bank and their employees to apply
operational risk management methodologies, as well as improving the capabilities of calculating the allocation of capital according to Basel II standards. Based on the agreement, ABN AMRO Bank N.V.
will support the development of Bank Mandiris internal capabilities in terms of operational risk management. The capability development will be done through the nine Action Track in the form of
transfer of knowledge and consultation. The agreement is worth USD1,200,000 full amount. This cooperation ended in December 2008.
c. Legal Matters
Bank Mandiri received a request from a customer to liquidate its demand and time deposit since the Directorate General of Taxes has taken off the blockage and confiscation. Due to several conditions,
the request cannot be executed directly since Bank Mandiri has to clarify first to IBRA.
After sending the admonition, since the request to liquidate its demand and time deposit has not been fulfilled due to absence of approval from IBRA, on 7 June 2006, the customer filed a lawsuit against
the Bank as the first defendant and the Ministry of Finance of the Republic of Indonesia as the second defendant at South Jakarta High Court.
Ministry of Finance of the Republic of Indonesia in his letter dated 27 August 2008 and 28 August 2008 has asked Bank Mandiri to liquidate the customer’s demand and time deposit on behalf of the
customer because these represent loan customer’s collateral, whilst the purchase and sale agreement of the customer’s receivables with demand and time deposit as collateral have been cancelled. Based
on the cancellation agreement, the customers collateral in form of demand and time deposit was transferred to the Government to be accounted for the customer’s loan. Liquidation of the funds have
been executed and placed in the State General Treasurer’s account in Bank Indonesia.
On 23 October 2008, Bank Mandiri received notification about the cessation decision of the Supreme Court related to customer’s cassation plea submission which in principle decided that the demand and
time deposit under Bank Mandiri are owned by the customer and instructed Bank Mandiri to liquidate the demand, time deposit and its interest to the customer. Based on the cessation decision, Bank
Mandiri and Ministry of Finance applied for a judicial review on 31 March 2009. Up to the date of this consolidated financial statements the judicial review is still in process.
The Bank’s total potential exposure arising from outstanding lawsuits as at 31 December 2009, 2008 and 2007 amounting to Rp2,204,722, Rp1,277,161 and Rp2,529,424, respectively. As at
31 December 2009, 2008 and 2007, Bank Mandiri has provided a provision included in “Other Liabilities” for a number of outstanding lawsuits involving Bank Mandiri amounting to Rp514,366,
Rp176,316 and Rp205,742, respectively Note 29. Management believes that the provision is adequate to cover possible losses arising from pending litigation, or litigation cases currently in
progress.
PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2009, 2008 AND 2007
Expressed in millions of Rupiah, unless otherwise stated
Appendix 5143 57. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES continued
d. Value Added Tax VAT on Bank Sharia Mandiri Murabahah Transactions
There is a difference in opinions concerning tax applied on murabahah transaction between the Directorate General Taxes DGT Tax Audit Team with the subsidiary, Bank Syariah Mandiri BSM.
The DGT Tax Audit Team concluded that murabahah transaction is subject to Value Added Tax VAT according to the Law No. 8 year 1983 regarding Value Added Tax on Goods and Services
and Sales Tax on Luxury Goods and 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.
Based on Bank Indonesia Regulation No. 821PBI2006 dated 5 October 2006 Concerning Assets Quality Rating For Commercial Banks Conducting Business Based On Sharia Principles, and the
amendment of Bank Indonesia Regulation No. 1024PBI2008 dated 16 October 2008 it is stated that sale and purchase transaction in Murabahah Agreement is a financing transaction.
BSM concluded that murabahah is a banking transaction which is excluded from VAT object, according to the Law No. 8 year 1983 regarding Value Added Tax on Goods and Services and
Sales Tax on Luxury Goods and the latest revision in Law No. 18, 2000 article 4A paragraph 3 point d, it is stated that banking transaction is not a VAT object and this is also in accordance
with Government Regulation No. 144 year 2000 article 5 point d.
The Association of Bank Sharia Indonesia ASBISINDO concurred with BSM and on 3 August 2005 ASBISINDO submitted a letter No. 58KU-DPP08.05 to the DGT and requested that VAT
should not be imposed on financing under murabahah scheme by sharia banking.
On 1 December 2005 the Director General of Taxation issued a decision rejecting the BSM’s objection letter No. Kep-277PJ.542005.
Until this date, BSM is still in process to discuss and clarify this matter with ASBISINDO, Bank Indonesia and related financial institutions, however no conclussion has been made. Therefore,
until further clarification, BSM has not made any provision for the above SKPKB and STP for fiscal year 2003.
Based on newly issued Law No. 42 year 2009 in relation to the third amendment on 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 is effective starting 1 April 2010.
e. Long Term Fund Borrowing from the Asian Development Bank ADB
On 30 October 2009, the Bank signed a long term Loan Facility Agreement with ADB of USD105,000,000 full amount which was amended and restated on 13 November 2009. The facility
is intended to improve Bank Mandiri funding structure.
The facility consists of two tranches, Tranche A is direct loan from ADB with tenor 7-year amounted USD75,000,000 full amount; and Tranche B, a 5-years loan amounted USD30,000,000 full
amount to be provided by ADB as Lender-of-Record and funded by commercial banks under Participation Agreements between ADB and such banks ADB Participant Banks.
