For tax calculation, the law specifies that a business must deduct from an actual expense and must follow the regulation. Normally, a business which is a juristic person decides to calculate the tax from its net profit or be deductable at a lump-sum instead of actual expense.
For juristic person, the calculation for net profit is as follows;
Net profit for juristic person = (tax income - tax expenses)
This calculation derives from an amended item of net profit in accounting;
1. Tax revenue is a statement which is not recorded as an income for accounting principle, but it an income note for taxation principle; for example, a company’s owner wants to take a loan from the company without any interest as the company is his own. Conversely, for tax law, there should be an interest for such loan as such money is the company’s income, and the interest payment should not be lower than what specifies in the law.
2. Exempt revenue is some income unit. For the accounting principle it is considered as an income. However, for taxation principle it is not considered as an income. As a result, profit for taxation is lower than profit for accounting; for example, in case a dividend income from a limited company is calculated as a semi-income or the total amount is exempted.
3. Expense of forbidden expenditure is an expense occurred from of a business operation of juristic person, and it is recorded as an expense in an accounting period which such statement takes place. For taxation, however, this is not considered as an expense for net profit calculation. A limitation of expense for net profit calculation for a company or registered ordinary partnership as specified in Revenue Code.
4. Expense deductible at a greater amount is an expense statement that taxation principle specifies to deduct as an expense in a greater amount than accounting principle. As a result, profit for taxation is lower than accounting i.e. the more the expense in accounting is deducted, the double the expense in taxation is deducted.