Jurisdiction - Indonesia
Indonesia – Export Duty Imposed On Processed Metal Minerals.

21 January, 2014



The Minister of Finance has issued Regulation No. 6/PMK.011/2014, which imposes tax on the export of five mineral concentrates: copper, zinc, manganese, iron and lead. This tax reflects the Government’s policy to discourage sales of impure minerals, as an implementation of Law No. 4 of 2009 on Mineral and Coal Mining, which requires processing and purification of minerals.


 Indonesia is implementing the mandate of the current Mining Law, under which miners are obliged to purify mineral ores. The implementation of this obligation was deferred until January 2014. That time window has now expired, the mineral export restriction is currently in force and export of raw mineral ores is not permitted.


There are currently 19 minerals on the restriction. We anticipate more to be listed since ESDM does not allow the export of any mineral unless its purification standard is already listed. There are differing refinement standards along the lines of mineral categories. Stones must be cut and/or polished, non-metal minerals processed, and metals purified.


With respect to metals, two refinement standards apply: “purified” and “processed”. Processed means refining the metals into concentrates, generally of 15% to 49% purity whereas purified means further refining the concentrates into single elements, generally to 99% purity.


Of the 11 metal minerals currently on the list, six (nickel, bauxite, tin, gold, silver and chromium) may only be exported in their purified form, smelted to 99% purity (i.e. purified). The remaining five (copper, zinc, manganese, iron and lead) may be exported as concentrates (around 15% to 62% purity) (i.e. processed), but subject to export duties initially set at 20-25% and incrementally increasing to 60%, before being completely banned. Additionally, export of concentrate is permitted only for three years, ending 11 January 2017. After which date these minerals must be purified to around 99% to obtain export clearance.


How Does This Duty Fit Into The Overall Framework?


A miner may not sell any minerals abroad unless the Ministry of Trade (MoT) clears them for export. In turn, the MoT will only issue the export clearance if the miner obtains recommendation to export from the ESDM (ESDM Export Recommendation), pays all applicable government levies, e.g. the export duties on these minerals.


What Is The Applicable Duty And How Are They Imposed?


Tariff structure for metal concentrate exports
No Metal description and purity level Export tariff amount(% of MoF stipulated price)
2014 2015 2016
12 Jan-30 Jun 1 Jul-31 Dec 1 Jan -30 Jun 1 Jul-31 Dec 1 Jan-30 Jun 1 Jul to 31 Dec
1 Copper Concentrate
(Cu content ≥ 15%)
25% 25% 35% 40% 50% 60%
2 Iron Concentrate
(hematite, magnetite, pyrite)
(Fe content ≥ 62%)
20% 20% 30% 40% 50% 60%
Iron Concentrate
(gutite/laterite) (Fe content ≥51% and Al203+SiO2 ≥10%)
20% 20% 30% 40% 50% 60%
3 Manganese Concentrate
(Mn content ≥49% )
20% 20% 30% 40% 50% 60%
4 Lead Concentrate (Pb content ≥49%) 20% 20% 30% 40% 50% 60%
5 Zinc Concentrate (Zn content ≥ 52%) 20% 20% 30% 40% 50% 60%
6 Ilmenite Concentrate*
(in sand form Fe content ≥58% and in pellet form ≥56%)
20% 20% 30% 40% 50% 60%
Other Titanium Concentrate*
(in sand form Fe Content ≥58% and in pellet form  ≥56%)
20% 20% 30% 40% 50% 60%
*Ilmenite and titanium are grouped under iron under ESDM 1/2014


 What Is The Purification Standard Based On?


The purification standard is based on Annex I of ESDM 1/2014. As discussed, there are two categories of refinement levels: processed (concentrates) and purified (single elements).


 On What Condition Is The Duty Imposed?


As currently regulated, the duties are imposed on the export of copper, iron, manganese, lead and zinc concentrates of purity level between the thresholds of processed and purified. Copper concentrate of between 15% to 98%, for example, will be taxed. Export below processed level is not permitted. Export at purified level is tax-exempt.


 What Is The Government Justification For These Standards?


 In one word, compromise. The mining law mandates all minerals to be refined, without stipulating further standards or conditions. The Government is using this technical loophole to differentiate the purification standards, taking into account the low domestic refining capability as well as value add-ons resulting from refining the minerals.


What Is The Base Price And Who Decides It?


 The Ministry of Trade (MoT), after coordinating with the ESDM team, decides the base price, and periodically (typically monthly) issues a list known as the Export Base Price for Minerals (Harga Patokan Ekspor for Mining Products (“HPE”)). The HPE applies as the base price upon which the payable duties are calculated.


The MoT has wide discretion in deciding the HPE. It will use as guidance four price indices, which are the highest average price at/in: (i) international bourses; (ii) FOB; (iii) domestic price (iv); importing country. In addition, the MoT will also factor in domestic needs, environmental sustainability, domestic price stability and competitiveness level of the exported ore.


Should We Expect Further Changes To The Regulatory Regime?


One should plan for amendments to the regulations. ESDM 1/2014 stipulates that minerals currently not listed may not be exported until such time ESDM defines the purification standards. In view of this, we anticipate ESDM to issue subsequent refinement standard for minerals and amalgams currently not listed. We also anticipate that the MoF will impose corresponding export duties, to mirror that ESDM standard.


 Separately, the Government’s previous attempt to restrict export of unprocessed mineral in 2012 was eventually overturned before the Supreme Court. The ESDM minister subsequently issued a series of amendments to comply with the ruling. The Indonesian Mining Association has stated that it will challenge the restriction, citing hardship and possible mass layoffs. We anticipate the Government to revise the regulation, either to comply with any subsequent ruling or to soften the blow for small domestic miners.


Clyde & Co


For further information, please contact:


Michael Horn, Partner, Clyde & Co

[email protected]


Tax Law Firms in Indonesia

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