Indonesia has taken a significant step toward strengthening its position in regional finance after Parliament approved legislation establishing the Indonesia International Financial Center, known as the PFII.
The law, passed by the House of Representatives on July 21, 2026, creates a specialized financial zone designed to attract international capital, financial institutions, and globally mobile professionals. It introduces dedicated governance, licensing, tax incentives, dispute-resolution mechanisms, and immigration provisions while operating alongside Indonesia’s existing domestic financial system.
Finance Minister Purbaya Yudhi Sadewa, who represented the government during the legislative process, said the PFII is intended to attract global capital, broaden Indonesia’s sources of development financing, and increase the financial sector’s contribution to the national economy.
Although the legislation establishes the central framework, further regulations will determine many of the operational details, including licensing procedures, eligibility requirements, governance, and the implementation of available incentives.
A Financial Center Focused on Attracting Global Capital
The PFII is primarily intended to bring new international capital and financial activity into Indonesia, rather than simply move funds already circulating within the country’s domestic financial system.
The government expects the center to attract international banks, investment managers, insurers, family offices, financial-technology companies, capital-market businesses, commodity-market participants, and professional firms supporting cross-border financial activity.
Activities provided for under the framework include banking, insurance, Islamic finance, capital-market services, venture capital, asset and trust management, bullion and commodity trading, foreign exchange, money-market transactions, financial technology, and other financial and supporting services.
Legal advisers, accountants, notaries, appraisers, consultants, and other qualified professionals may also provide services within the center, subject to the applicable licensing rules.
The PFII will not operate solely for overseas markets. It is also intended to expand access to financing for Indonesia’s real economy, infrastructure, national strategic projects, sustainable development, and climate-related investment.
Kura Kura Bali Designated as the Permanent Site
The Indonesian government has designated the Kura Kura Bali Special Economic Zone as the permanent home of the PFII. Coordinating Minister for Economic Affairs Airlangga Hartarto and Investment Minister Rosan Roeslani confirmed the location following Parliament’s approval of the legislation.
Development of the permanent center is expected to take approximately two to three years. During that period, the government plans to begin PFII operations from the Danareksa building in Jakarta, with the permanent center subsequently operating from Kura Kura Bali.
Further regulations are still required to establish the center’s governance, licensing procedures, eligibility requirements, and operational arrangements.
The Law Provides Significant Tax Incentives
The PFII legislation includes substantial tax incentives intended to make the center competitive with established financial hubs elsewhere in Asia and the Middle East.
The law provides for a 100% reduction in corporate income tax for qualifying businesses conducting approved financial, supporting, or other activities within the PFII. Reports indicate that the relief may be available for periods extending up to 50 years, although the duration and qualifying conditions will depend on further regulations.
Certain foreign experts working in the financial-services sector may also qualify for a 100% income-tax reduction.
The framework additionally provides relief from withholding or collection on qualifying PFII investment income received by nonresident taxpayers. Other provisions cover VAT treatment for specified strategic goods and services, luxury-goods tax relief in defined circumstances, and customs facilities.
These incentives are not automatically available to every person or company connected with the center. Eligibility, duration, compliance requirements, and the scope of each benefit will be determined under the law and its implementing rules.
Indonesia has also said that the PFII will remain subject to international tax standards, including the 15% Global Minimum Tax where applicable.
What the PFII Law Means for Golden Visa Holders
The law has attracted particular attention because of its tax treatment of foreign nationals receiving Golden Visa facilities within the PFII.
Indonesia’s wider Golden Visa system provides long-term residence to qualifying foreign investors, company executives, high-value individuals, and certain professionals.
Under the PFII law, foreign nationals who receive Golden Visa facilities through the financial-center framework are excluded from classification as Indonesian domestic tax subjects for the period in which their Golden Visas remain valid.
This provision has generated headlines describing the PFII as offering “0% tax” to Golden Visa holders. That description requires important qualifications.
The exemption is not a universal tax benefit for every person holding an Indonesian Golden Visa. It applies specifically to foreign nationals receiving Golden Visa facilities within the PFII framework.
Exclusion from domestic tax-subject status also does not necessarily eliminate every possible Indonesian tax liability. Indonesian-source income, transactions outside the protected framework, withholding obligations, and other taxable activities may remain subject to Indonesian law.
The implementing rules will therefore be critical in determining who qualifies, how the exemption interacts with other Indonesian tax provisions, and which income and activities remain taxable.
Dedicated Governance and Dispute Resolution
The PFII framework extends beyond tax and immigration incentives.
The law establishes a dedicated governing structure responsible for managing and developing the financial center, alongside specialized supervision and coordination with Indonesia’s existing financial authorities.
It also provides for dedicated arbitration arrangements and a specialized court for disputes connected with activities in the PFII.
These mechanisms are intended to provide greater certainty and more specialized handling of complex international financial and commercial disputes.
The framework also permits the use of foreign currencies for qualifying PFII activities, subject to the applicable rules.
Indonesia Estimates Up to US$27.7 Billion in Investment
The Ministry of Finance has preliminarily estimated that the PFII could attract between IDR300 trillion and IDR500 trillion, approximately US$16.6 billion to US$27.7 billion.
Officials have emphasized that this is an initial estimate rather than a committed investment figure. The eventual amount will depend on whether the PFII can compete effectively with established centers such as Singapore and Dubai.
Potential investment could include foreign banks opening branches, international companies establishing operations, asset managers administering capital from the zone, and investors using the PFII as a base for activities in Indonesia and the wider region.
The center is also expected to support longer-term financing for infrastructure, national strategic projects, climate finance, and other parts of the real economy.
Implementation Will Determine Its Competitiveness
Parliamentary approval gives the PFII a legal foundation, but investors still need clarity on how the center will work in practice.
Further rules are expected to address licensing, qualification for incentives, governance, supervision, compliance, dispute-resolution procedures, and the relationship between the PFII and Indonesia’s wider legal and tax system.
Indonesia will also need to demonstrate predictable regulation, effective supervision, credible dispute resolution, and strong protections against money laundering and other financial crime.
Tax incentives may attract initial interest, but international banks, family offices, and investment managers will also assess the consistency of the rules and the credibility of the institutions administering them.
A New Link Between Residence, Capital, and Financial Services
The PFII is not being positioned as a conventional business district or tax-incentive zone.
By combining specialized financial regulation, long-term tax benefits, foreign-currency facilities, dedicated dispute resolution, and Golden Visa provisions, Indonesia is attempting to create a broader ecosystem for international capital and globally mobile financial professionals.
The framework could become an important part of Indonesia’s investment strategy, but its commercial value will depend on the regulations and institutions now being developed.
For Golden Visa applicants and international investors, the central question is therefore not simply whether the PFII offers “zero tax.” It is who will qualify, which income and activities will receive favorable treatment, and how consistently the new framework will be implemented.
