Indonesia’s House of Representatives unanimously approved a law on 23 April 2026 establishing the Indonesia International Financial Center (PFII), a special jurisdiction that offers a suite of tax exemptions for businesses and foreign financial‑sector professionals who operate within the zone.
The legislation provides:
- Corporate income tax: 0 % rate for companies located in the PFII.
- Personal income tax: Full exemption for foreign professionals working in the financial sector.
- Non‑resident tax status: Granted to foreigners holding a golden‑visa linked to the zone.
- Withholding tax: Dividends and other investment returns earned by overseas investors are exempt from Indonesian withholding tax.
- Other taxes: Value‑added tax, luxury‑goods sales tax and import duties are waived, with the possibility of additional incentives added by regulation.
Structure and Governance
- The PFII will be governed by a council led by a governor and will have its own special court and arbitration body, granting it financial and administrative autonomy.
- Businesses inside the zone are prohibited from raising funds from the Indonesian public or transacting with domestic consumers outside the zone, effectively ring‑fencing the enclave.
- Permitted activities include banking, insurance, pension services, capital markets, bullion trading, family offices, and professional services such as accounting, legal counsel, and financial consulting.
Finance Minister Purbaya Yudhi Sadewa emphasized that the PFII is intended to complement, not replace, Indonesia’s domestic financial system and to attract long‑term foreign capital, reducing the country’s exposure to sudden capital outflows.
Location Uncertain
The law does not specify a physical site. The Finance Minister will propose locations to the President, with final designation made by government regulation. Potential sites include two or three locations within Bali’s Kura Kura Special Economic Zone, but no official decision or launch timeline has been announced.
Golden Visa Context
The PFII’s tax benefits are layered on Indonesia’s golden‑visa program, launched in July 2024. As of 18 May 2026:
- Permits issued: 1,274, generating roughly Rp 52.1 trillion (≈ US$3 billion) in investment, with corporate investors contributing 97.7 % of the capital.
- Individual investor thresholds: US$350,000 in government bonds, bank deposits, or public‑company shares for a five‑year visa; US$700,000 for a ten‑year visa.
- The visa does not provide permanent residency or a pathway to citizenship, a point that has drawn criticism from observers.
Whether the new PFII law will alter the benefits for individual golden‑visa holders remains unclear pending further regulatory details.
Criticism and Alternative Proposals
- Implementation concerns: Analysts note Indonesia’s lack of internal borders makes enforcement of residency‑based tax exemptions difficult.
- Comparative ambition: Some critics argue that aiming to rival Hong Kong and Singapore through a tax‑free enclave is unrealistic without robust enforcement mechanisms.
- Alternative model: A suggestion has been made to adopt a “Swiss model” of tax federalism, allowing provinces to compete for direct taxes while the federal government retains indirect taxes, potentially achieving low‑tax attraction without a physically ring‑fenced zone.
The PFII law was fast‑tracked: the working committee was formed on 2 July 2026, deliberated between 8–16 July, and the final text—10 chapters and 73 articles—was approved by acclamation in the plenary on 23 April 2026. The full text has yet to be published.
Source article: www.imidaily.com
