1. Tax
Clearance Certificate (“SKF”/Surat Keterangan Fiskal) from Tax
Office should be attached on the reimbursement application. To follow up this
requirement, Directorate General of Taxes (DGT) has issued procedure
to obtain the SKF through PER-32/PJ/2014 (“PER-32”), however, PER-32
is mostly intended for tax clearance in procurement process, not specific for
reimbursement process. Thus, PER-32 is not appropriate to be applied
for oil and gas industry because it will generate administrative
burden to obtain tax clearance every time PSC contractors file for
reimbursement.
Furthermore,
PER-32 has financial impact to PSC contractors as well. One of requirement in
PER-32 that should be satisfied to obtain tax clearance is a taxpayer does not
have tax arrears in any type of taxes. Apparently the government try to force
PSC Contactors to pay the disputable tax assessment (which may be
still in objection or appeal process) in order to be qualified for VAT
reimbursement.
2. Involvement of
more government agencies for documents verification, such as:
a. Tax invoices
reporting will be verified by the Directorate General of Taxes i.e.
the relevant Tax Offices in 20 working days;
b. Completeness of
reimbursement request will be verified by Directorate General of Budget
("DGB"), unfortunately number of days is unclear
c. Tax payment slips will
be confirmed to the relevant banks, however no clear time frame as previously
30 days in PMK-64.
d. Reimbursement documents will
be verified by SKK Migas but no clear time frame as previously
45 working in PMK-64. SKKMigas has issued letter No.
SRT-0322/SKKC1000/2015/S4 dated 24 Feb 2015 regarding procedure for
implementing PMK 218. In that letter, SKKMigas provides standard
forms in claiming for VAT reimbursement.
Although the title of
PMK-218 is The Procedures for Reimbursement VAT in Upstream Oil and
Gas Activities, however, it does not cover only procedures but also it provides
some provisions that violate PSC principles. Some key points which
potentially generate challenges by PSC Contractors are as follow :
- The maximum reimbursement amount should equal to the Government Share, but exclude FTP (First Tranche Petroleum);
- SKK Migas may recalculate the reimbursement value after taking into account the "Contractor's Over Lifting" that is due (unclear whether this includes any disputed amount);
- VAT reimbursement shall exclude from, among others:
a. VAT on import with
exemption facility
b. VAT from LNG plant operation
for gas processing up to sales.
In PSC contracts, the government shall reimburse VAT out of its
government share without any limitation (such as excluding FTP portion).
Therefore many PSCs are questioning the rationale of PMK-218 to exclude FTP
portion from the basis of reimbursement. This provision will impact cash flow
of the PSC contractors hence it will take longer time to receive reimbursement
from Government.
PSC Contractors is questioning the rationale of excluding VAT from
LNG processing as well. As we know, LNG for gas processing is part of upstream
activities, especially for contracts signed before Law 22/2001 on Oil and Gas
applied. However, Ministry of Finance (MoF) has an opinion that LNG processing
is covered by separate contract with Trustee Borrowing Scheme (TBS) mechanism
and there is no provision for reimbursement of VAT in TBS. Therefore, MoF
suggests that VAT for LNG processing is treated as part of TBS cost. Apparently
government tries to increase its revenue by treating VAT as part of TBS
cost because VAT will be born jointly by Government and
Contractors according to profit split in PSC.
Those violation of PSC principle by PMK-218 have
impacted on the huge amount of un-reimbursable VAT and it will affect
the project economic as well. Currently, PSC contractors have sent letters to
related government agencies to express disagreement of such violation and
requested for PMK-218 revision.
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