Tax Implication of Service Concession Arrangements for Independent Power Producer (IPP)

Abstract

This research aims to analyze the implementation and impact of taxation in the application of service concession rights according to ISAK 16 on private power generation companies in Indonesia as known as Independent Power Producers (IPP). We understand today's green energy issue arises, Financial close or funding for the fossil energy sectors may not be obtained. Consequently, cancellation of Power Purchase Agreement (PPA) might occur accordingly. Therefore, IPP should consider conducting an impairment assessment for the capitalized pre-construction cost made, referring to PSAK 48: Impairment. This study uses a qualitative method with interview analysis techniques. Interviews were conducted with parties who have experience and expertise related to the implementation of accounting and taxation for power plant concessions. The result of the study is expected to contribute DJP (Indonesian Tax Authority) and IPP company in identifying the gap between the implementation of ISAK 16 & PSAK 48 and the application of taxation, which specifically in recognizing service revenues, recognition of fixed asset and depreciation, also impairment of capitalized assets, which to date, there is no special tax treatment regulates both service concession and Asset impairment from Tax point of view. The research period is based on current tax practices.