Fiscal Correction

Fiscal Correction adjusts commercial financial statements to fiscal financial statements per the Income Tax Law, due to differences in income and expense recognition between accounting standards and tax regulations. Governed by Articles 4-9 of the Income Tax Law. Two types: Positive Correction (increases taxable income) - e.g., non-deductible expenses like entertainment without a nominee list, unqualified donations; Negative Correction (decreases taxable income) - e.g., domestic subsidiary dividends excluded from taxable income.

This article is for education, not tax advice.

Example

PT ABC recorded Rp 500 million in entertainment expenses commercially without a nominee list. Positive fiscal correction = Rp 500 million (non-deductible). Taxable income increases by Rp 500 million; PPh Badan rises by Rp 110 million.

Source: Articles 4-9 UU PPh No. 36/2008