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Indonesia unveils new tax regulations for miners

Indonesia unveiled new tax regulations intended to provide legal certainty for mining companies that are shifting current contracts to special mining permits, Reuters reported Aug. 8.

The new rules include a 25% corporate tax, in line with the country's current rate, a 4% levy on net profit going to central government and a 6% levy to local government. The rates and other obligations will remain unchanged during the duration of the permit.

The regulation is effective Aug. 2, according to a statement from President Joko Widodo's office. The government recently extended Freeport Indonesia's temporary special mining permit until the end of August.

The move could help Freeport-McMoRan Inc. and the Indonesian government conclude a US$3.85 billion agreement related to the giant Grasberg copper-gold mine, which contemplates the miner selling a majority interest in its PT Freeport Indonesia unit to state-owned miner PT Indonesia Asahan Aluminium (Persero), or Inalum.

Freeport had indicated it wanted some guarantee on fiscal terms before agreeing to the complex deal, which would also involve Rio Tinto transferring its 40% participating interest in the mine to Inalum.

The Freeport Indonesia unit, which pays corporate tax at 35% with no levies to central or local governments under its current contract, is planning to review the new regulations.

"The terms are consistent with our expectations and will form the basis for establishing fiscal certainty to be incorporated into our long-term license arrangements," Freeport spokesperson Eric Kinneberg told S&P Global Market Intelligence.

"The issuance of this new regulation is another important milestone in the mutual efforts by the Indonesian government and Freeport to reach a new long-term agreement for the benefit of all stakeholders."