REGULATION OF THE MINISTER OF FINANCE
No. 178/PMK.11/2007

CONCERNING
GOVERNMENT BORNE VALUE ADDED TAX ON THE IMPORT OF GOODS FOR THE NEED OF UPSTREAM BUSINESS ACTIVITIES OF PETROLEUM AND NATURAL GAS AS WELL AS GEOTHERMAL EXPLORATION

THE MINISTER OF FINANCE,

Considering:

• a. that in the framework of increasing national petroleum and natural gas (migas) as well as geothermal production, it is necessary to provide fiscal incentives for upstream activities of petroleum and natural gas as well as geothermal exploration;
• b. that based on the consideration as described in a. and in the framework of implementing the provision of article 3 paragraph (3) of Law No. 45/2007 concerning the State Budget of Revenue and Expenditure in Fiscal Year 2008, it is necessary to stipulate a regulation of the Minister of Finance concerning Government Borne Value Added Tax on the Import of Goods for the Need of Upstream Business Activities of Petroleum and Natural Gas as well as Geothermal Exploration;

In view of:

• 1. Law No. 17/2003 concerning State Finance (Statute Book No. 47/2003, Supplement to Statute Book No. 4286);
• 2. Law No. 1/2004 concerning State Treasury (Statute Book No. 5/2004, Supplement to Statute Book No. 4355);
• 3. Law No. 45/2007 concerning the State Budget of Revenue and Expenditure (APBN) in Fiscal Year 2008 (Statute Book No. 133/2007, Supplement to Statute Book No. 4778);
• 4. Presidential Decree No. 20/P/2005;

HAS DECIDED:

To stipulate:

THE REGULATION OF THE MINISTER OF FINANCE CONCERNING GOVERNMENT BORNE VALUE ADDED TAX ON THE IMPORT OF GOODS FOR THE NEED OF USPTREAM BUSINESS ACTIVITIES OF PETROLEUM AND NATURAL GAS AS WELL AS GEOTHERMAL EXPLORATION

Article 1

In this regulation, "Government Borne Value Added Tax" refers to value added tax paid by the government by budget ceiling on the basis of the provision of Article 3 paragraph (3) of Law No. 45/2007 concerning the State Budget of Revenue and Expenditure (APBN) in Fiscal Year 2008.

Article 2

(l) The government shall bear value added tax on the import of goods used for the need of exploration business activities by upstream petroleum and natural gas as well as geothermal business communities.

(2) The government borne value added tax as described in paragraph (1) shall be granted to goods decidedly used for exploration, business activities in the upstream petroleum and natural gas as well as geothermal sectors with the provision as follows:

• 1. the goods have not been able to produce in the country;
• 2. the goods have been produced in the country but have not met the required specifications; or
• 3. the goods have been produced in the country but the production has not been sufficient to the need of industries.

(3) Exploration in the upstream petroleum and natural gas sector as described in paragraph (1) shall be an activity aiming at obtaining information about geological condition to find and obtain estimated reserves of petroleum and natural gas in stipulated areas.

(4) Exploration in the geothermal sector as described in paragraph (1) shall be an activity covering geological, geophysics, geochemical survey, drilling test, drilling of exploration wells aiming at obtaining and supplementing information about geological condition below the surface and obtaining estimated potential of geothermal.

Article 3

The business communities as described in Article 2 paragraph (1) cover:

• 1. Business communities operating in the upstream petroleum and natural gas sector signing cooperation contract with the Government of the Republic of Indonesia following the enforcement of Law No. 22/2001 concerning Petroleum and Natural Gas;
• 2. Business communities in the geothermal sector already signing contract with the Government of the Republic of Indonesia or securing geothermal mining business license after December 31, 1994 or business communities in the geothermal sector already securing assignment to undertake preliminary survey from the Government of the Republic of Indonesia.

Article 4

The goods as described in Article 2 paragraph (1) shall be goods contained in Customs Declaration of Import already securing registration number from Customs and Excise Supervision and Service Offices or Primary Service Office of Customs and Excise overseeing the importing ports as from January 1, 2008.

Article 5

(1) The application for securing the government-borne value added tax on the import of goods used for the need of exploration activities in the upstream petroleum and natural gas sector as described in Article 2 paragraph (3) shall be submitted to the Director General of Customs and Excise, enclosed by Import Plan of Goods (RIB) for the need in 12 (twelve) months, which has been approved and validated by the Director General of Petroleum and Natural Gas, Ministry of Energy and Mineral Resources, by observing the provision as described in Article 2 paragraph (2).

(2)The application for securing the government-borne value added tax on the import of goods used for the need of exploration activities in the geothermal sector as described in Article 2 paragraph (4) shall be submitted to the Director General of Customs and Excise, enclosed by Import Plan of Goods (RIB) for the need in 12 (twelve) months, which has been approved and validated by the Director General of Mineral, Coal and Geothermal, Ministry of Energy and Mineral Resources, by observing the provision as described in Article 2 paragraph (2).

(3) RIB as described in paragraphs (1) and (2) shall contain at least elements of the following data:

• 1. Number and real date;
• 2. Name of contractor;
• 3. Taxpayer Code Number (NPWP);
• 4. Address;
• 5. Contract basis;
• 6. Contract area;
• 7. Customs and Excise Service Office overseeing the importing place of goods;
• 8. Tariff Post;
• 9. Description of Goods;
• 10. Quantity/Unit of Goods;
• 11. Estimated Price/Import Value;
• 12. Kind of activity (exploration or exploitation);
• 13. Executives of contractor.

(4)The application as described in paragraphs (1) and (2) shall be submitted jointly in 1 (one) RIB with the submission of application for the exemption from import duty as described in Regulation of the Minister of Finance No. 177/PMK.011/2007 concerning the Exemption of Goods for the Need of Upstream Petroleum and Natural Gas as well as Geothermal Business Activities.

Article 6

(1) After receiving the documents as described in Article 5, the Directorate General of Customs and Excise shall subsequently put seal "GOVERNMENT BORNE VAT EX PMK-178/PMK.011/2007" in all sheets of Customs Declaration of the Import and Tax Payment Form .

(2) Copy of RIB as described in Article 5 paragraphs (1) and (2) shall be conveyed to:

• 1. The Director General of Petroleum and Natural Gas, Ministry of Energy and Mineral Resources and Head of BP MIGAS, the case of the upstream petroleum and natural gas business; and
• 2. The Director General of Mineral, Coal and Geothermal, Ministry of Energy and Mineral Resources, in case of geothermal business.

(3) The Director General of Customs and Excise shall convey a list of the amount of government-borne tax every quarter to the Director General of Taxation in not later than the end of the following month after the quarter ends.

(4) The Director General of Taxation based on the document as described in paragraph (3) shall submit a request to the Director General of Budgetary Affairs to issue Nil Payment Order (SPM).

Article 7

Business communities cannot reimburse or charge the government value added tax as described in Article as cost.

Article 8

The Director General of Budgetary Affairs, Directorate General of Taxation, Director General of Customs and Excise and Director General of Treasury Affairs shall be instructed to implement the provisions in this regulation.

Article 9

This regulation shall apply as from January 1, 2008 to December 31, 2008.

For public cognizance, the regulation shall be published by placing it in State Gazette of the Republic of Indonesia.

Stipulated in Jakarta
On December 28, 2007
THE MINISTER OF FINANCE,
signed,
SRI MULYANI INDRAWATI