New UMKM Tax Rate Regulations: Husband and Wife Business Turnover Must Be Combined

Jakarta – The administration of President Prabowo Subianto has now clarified the enforcement of the 0.5% final income tax (PPh) rate for small and medium enterprises (UMKM) established by married couples. Under the new regulations, this preferential rate is available only if the combined turnover of both spouses’ businesses does not exceed IDR 4.8 billion in a single tax year.

These provisions are established in Government Regulation (PP) No. 20 of 2026, which amends PP 55/2022. PP 20/2026 came into force upon issuance on 22 April 2026.

Under Article 58 of PP 20/2026, the determination of IDR 4.8 billion as the maximum threshold for accessing the 0.5% final income tax rate for UMKM is no longer based solely on the spouse’s status of separate property or separate tax filing. It now also includes sole proprietorships established by both spouses.

“Determined based on the combined gross turnover of husband and wife together with all corporate taxpayers in the form of sole proprietorships established by husband and wife,” as stated in Article 58, Paragraph 3 of PP 20/2026.

Previously, under PP 55/2022, the determination of combined gross turnover was required only if spouses entered into a written property and income separation agreement or if the wife chose to exercise her own tax rights and obligations independently.

However, the maximum turnover threshold of IDR 4.8 billion now applies to all corporate taxpayers in the form of sole proprietorships established by husband and wife.

For clarification, the following is an example of how this applies, as outlined in the explanatory provisions of PP 20/2026:

Mr A earned income from freelance services as a notary in Tax Year 2026 with gross turnover of IDR 3,000,000,000 (three billion rupiah). Mr A also owns a sole proprietorship, AS, which earned income from light food manufacturing in Tax Year 2026 with gross turnover of IDR 1,000,000,000 (one billion rupiah).

Mrs Y, Mr A’s wife, earned income from a clothing boutique business in Tax Year 2026 with gross turnover of IDR 2,000,000,000 (two billion rupiah). Mrs Y also owns a sole proprietorship, YS, which earned income from a franchise restaurant business in Tax Year 2026 with gross turnover of IDR 500,000,000 (five hundred million rupiah).

For Tax Year 2027, sole proprietorships AS, Mrs Y, and sole proprietorship YS cannot be subject to final income tax under this Government Regulation because the total gross turnover from the business and freelance services income of Mr A and Mrs Y as a married couple, together with the sole proprietorships they established in Tax Year 2026, amounts to IDR 6,500,000,000 (six billion five hundred million rupiah), which exceeds IDR 4,800,000,000 (four billion eight hundred million rupiah).