Profit in financial statements is not necessarily the amount that is taxable. Commercial reports are prepared following accounting standards, while taxes are calculated according to the Income Tax Law (UU Pajak Penghasilan). The bridge between them is called fiscal correction, which can only go in two directions: positive or negative.
One benchmark: where fiscal profit moves
A positive correction increases the fiscal net income, thus the income tax payable also increases. A negative correction decreases it. The terms "positive" and "negative" have no relation to good or bad. What is measured is only the direction of the figures.
The questions that need to be asked for each item are also just two. Is this expense deductible according to the Income Tax Law? Is this income indeed taxed at the general rate, or has it been settled through another route?
Items that are often corrected, and their articles
| Item in commercial report | Correction direction | Basis (Income Tax Law as amended by the HPP Law) |
|---|---|---|
| Expenses for the personal interests of shareholders, partners, or members | Positive | Article 9 paragraph (1) letter b |
| Profit distribution, including dividends, recorded as expenses | Positive | Article 9 paragraph (1) letter a |
| Interest penalties, fines, and tax increases | Positive | Article 9 paragraph (1) letter k |
| Income tax that has been recorded as an expense | Positive | Article 6 paragraph (1) letter a number 9 (which can only be tax other than income tax) |
| Deposit interest, land or building rent, construction services | Negative | Article 4 paragraph (2), already subject to final income tax |
| Dividends from domestic companies received by domestic entities | Negative | Article 4 paragraph (3), not a taxable object |
| Fiscal depreciation greater than commercial depreciation | Negative | Article 6 paragraph (1) letter b and Article 11 |
Taxes other than income tax, such as property tax (PBB) and stamp duty, can still be expensed as long as they relate to the business. So do not include them in the corrections with income tax.
Permanent differences and temporary differences
Some corrections never revert. Tax penalties corrected this year will not become expenses in any year. That is a permanent difference.
Others are just a matter of timing. For example: a machine costing Rp400 million falls into group I with a fiscal useful life of 4 years, so its fiscal depreciation is Rp100 million per year. Commercially, the company estimates its lifespan at 5 years, thus Rp80 million per year.
- Years 1 to 4: fiscal expense is Rp20 million higher, a negative correction of Rp20 million per year, totaling Rp80 million.
- Year 5: fiscal depreciation is exhausted, while commercial books still charge Rp80 million. A positive correction of Rp80 million.
Over five years, the total is zero. That is a temporary difference. If your working papers do not record the temporary difference balance per asset, the correction in the fifth year can easily be overlooked.
Natura has moved columns
Many old lists still place natura expenses, such as employee lunches or uniforms, in the positive correction column. It used to be that way. Since the HPP Law, Article 6 paragraph (1) letter n includes reimbursements or benefits in the form of natura and perks as deductible expenses, as long as they are for obtaining, collecting, and maintaining income.
The implementing regulation is PMK 66 of 2023, effective July 1, 2023, and revokes PMK 167/PMK.03/2018. On the employee side, natura is now subject to income tax, except for certain types and limits. For example, food and beverages at the workplace for all employees are exempt without value limits. Checklists that have not been updated will add unnecessary positive corrections, resulting in higher income tax payable than necessary.
Brief calculation example
A corporation records a commercial profit before tax of Rp1,000 million.
| Item | Correction | Amount |
|---|---|---|
| Commercial profit | Rp1,000 million | |
| Interest on late payment penalties | Positive | + Rp15 million |
| Shareholder family vacation paid by the company | Positive | + Rp40 million |
| Deposit interest (already subject to final income tax) | Negative | − Rp30 million |
| Dividends from domestic PT | Negative | − Rp50 million |
| Difference in machine depreciation in the first year | Negative | − Rp20 million |
| Employee lunch and uniforms Rp60 million | Not corrected | Rp0 |
| Fiscal net income | Rp955 million |
The corporate income tax rate is applied to that final figure, after deducting any loss compensation from the previous year if applicable. Not to the commercial profit.
If you prefer to see the explanation directly, there is a clip. An overview of the SPT corporate attachment where this correction is recorded can be found in the SPT 1771 article.
Sources
- Directorate General of Taxes, Copy of Law Number 7 of 2021 on Harmonization of Tax Regulations (Article 4 paragraph (2) and (3), Article 6 paragraph (1), Article 9 paragraph (1) of the Income Tax Law)
- Directorate General of Taxes, Types and Limits of Natura/Benefits Exempt from Income Tax Objects, press release July 5, 2023
- Legal Information Network of the Ministry of Finance, PMK 66 of 2023 on the Treatment of Income Tax on Reimbursements or Benefits in the Form of Natura and/or Perks, status Effective
- DDTCNews, Can Tax Penalties Be Deducted from Gross Income? Here Are the Regulations, August 31, 2026
- DDTCNews, What Are Permanent Differences and Temporary Differences in Fiscal Reconciliation?, November 26, 2025