Tax Planning on Marriage : A Simple Perspective

Written by : Fatikha Faradina, a Directorate General of Taxes officer

Marriage is a blissful blessing!

That’s what Indonesian people’s belief through generation for generation but it seems that this belief is slowly fading away in this current generation. There is shifting perspectives on marriage occurs in young age groups. Recently, the Indonesia Central Bureau of Statistics (BPS) 2024 published a report that notes that the marriage rate in Indonesia continues to decline for these last ten years at least. The number of marriages in 2021 was 1,742,049, then in 2022 it fell to 1,705,348, and in 2023 it fell again to 1,577,255. Meanwhile, in 2024, the reported marriage rate in Indonesia will continue to decline. Even though it has not yet reached a crucial point that could threaten the sustainability of nation’s population, this phenomenon is odd for Indonesia because marriage rate declining trend mostly happening in other country such as Japan, Singapore, and South Korea. Indonesia seems to jump on the bandwagon.

Marriage shouldn’t be viewed as something skeptical or even a burden, in the other hand, marriage actually has sacred value. As a nation that believes in the Almighty God as stated in principle 1 of Pancasila, all 7 official religions in Indonesia agreed that marriage has a very important position. It not only to unite two people, but also to perfect religious teachings. Form taxation perspective, marriage brings something to the table. What are the tax benefits of marriage?

A couple's financial status might change significantly after marriage, particularly in terms of how and how much they pay in taxes. There may be substantial tax advantages to marriage, depending on the situation. The primary financial advantage of filing as a married couple, for many taxpayers, is simplicity: they may submit a joint tax return and, in certain cases, claim additional deductions. Maximizing tax benefits of marriage requires an advanced planning.

For instant, taxpayers who are married given additional Non-Taxable Income in the amount of IDR 4,500,000. Indonesia’s tax policy offers two main tax-filing options for married couples which are married filing jointly or married filing separately as regulated in Law Number 7 Year 2021 regarding Tax Regulations Harmonization Law (UU HPP).  

Originally, there are for type of taxation status related to a couple’s taxation policy.

First, KK status means husband and wife do not wish to exercise rights and fulfill tax obligations separately. In exercising her rights and fulfilling her tax obligations, the wife uses the NPWP of her husband or head of the family.

Second, HB status means that husband and wife's income is taxed separately because husband and wife live separately based on a judge's decision.

Third, PH status means that husband and wife's income is taxed separately because it is desired in writing by the husband and wife based on an agreement on the separation of assets and income.

Fourth, MT status means that husband and wife's income is taxed separately because it is desired by the wife who chooses to exercise her own taxation rights and obligations.

Based on this explanation, KK (Head of Family) status means that the income of all family members will be combined into one unit. Likewise, reporting on assets and liabilities only needs to be reported in 1 SPT. Simply put, it generally takes less time and effort to file one tax return than it does to file two returns. Further, when two individuals get married and decide to file jointly as KK status, their standard deductions combine, and their married filing jointly standard deduction increases. Here is a simple calculation as stated in number 3 article 7 paragraph 1 Law No. 7 Year 2021 about Tax Regulations Harmonization Law.  

Mr John Doe has a wife with dependents of 4 (four) children. If his wife earn income from one employer and Income Tax has been deducted, the job has nothing to do with husband's business or other family members, the size Non-Taxable Income given to Mr John Doe is IDR 72,000,000.00 {Rp 54.000,000.00 + Rp 4,500,000.00 + (3 x Rp 4,500.0O0.00)), while for his wife, at the time withholding Income Tax by her employer is given Non-Taxable Income of Rp. 54,000,000.00 (fifty four million rupiah). If the wife's income must be combined with husband's income, the amount of Non-Taxable Income given to Mr John Doe is amounting to Rp. 126,000,000.00 (Rp72.000.000,00 + Rp54.000.000,00).

Simply put, the wife's NPWP merges with the husband's NPWP will make the husband's SPT have “nihil’ status. The wife is free from the obligation to report taxes because because the obligation is only attached to the husband for the sake of both parties. If the husband and wife both work as employees, then the option of merging the NPWP (choosing KK status) will be more profitable for both parties. It’s like killing two birds with one stone. So, yes, marriage brings blessing in disguise.

*)This article is the author's personal opinion and does not reflect the attitude of the agency where the author works.

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