Indonesia’s House of Representatives on Tuesday unanimously passed a law establishing the Indonesia International Financial Center (PFII), a special jurisdiction offering a 100% reduction in corporate income tax for businesses operating within it, a full personal income tax exemption for foreign financial-sector professionals, and non-resident tax status for foreigners holding golden visas tied to the zone.
The incentives extend beyond income tax: overseas investors earning dividends or other investment returns from the hub can be exempted from Indonesian withholding tax.
The law also waives value-added tax, luxury-goods sales tax, and import duties, and permits the government to add further incentives by regulation.
Lawmakers fast-tracked the legislation at remarkable speed. The working committee formed on July 2, conducted its deliberations between July 8 and 16, and delivered a final text of 10 chapters and 73 articles for Tuesday’s plenary vote, where all factions approved it by acclamation.
A Ring-Fenced Offshore Enclave
To shield the domestic economy, the law bars businesses inside the zone from raising funds from the Indonesian public or transacting with domestic consumers outside it.
Permitted activities include banking, insurance, pension services, capital markets, bullion, family offices, and professional services such as accounting, legal counsel, and financial consulting.
The center will enjoy financial and administrative autonomy under a council led by a governor, complete with its own special court and arbitration body.
Finance Minister Purbaya Yudhi Sadewa told lawmakers the PFII will complement rather than replace the domestic financial system, drawing long-term foreign capital to reduce Indonesia’s exposure to sudden outflows.
Where the center will physically sit remains open. Bali’s Kura Kura Special Economic Zone has been floated as a candidate since President Prabowo Subianto first raised the idea in April, though the government has not confirmed a location yet.
“As If It Were So Easy”
When Jakarta floated a tax-free haven in Bali earlier this year, Philippe May, who heads EC Holdings and has spent decades working in Asian markets, dismissed the plan as unpoliceable: with no internal borders, nothing stops participants from registering in the zone and living anywhere in the archipelago.
That critique, he confirms, also applies to this new law. A tax exemption for wealthy foreigners “only as long as their visa is valid and only if they live in a certain area” strikes him as flimsy. “Doesn’t sound very solid. Indonesia has no internal borders. How to check where they live?” he tells IMI.
Nor does he buy the broader ambition: “Indonesia wants to compete with Hong Kong and Singapore. Just like that. As if it were so easy. They try to reach for the stars.”
His overall verdict: “Looks like they are desperate.”
A Swiss Model Instead
Rather than a ring-fenced enclave, May argues Indonesia would gain more from structural tax federalism. “What would really help Indonesia is a Swiss model, where the federal government gets certain taxes, for example indirect taxes, and the provinces compete and get direct taxes,” he suggests, adding that provinces could also be allowed to forgo certain taxes altogether.
Switzerland’s cantonal competition has made low-tax jurisdictions like Zug magnets for companies and wealthy individuals without any need for physical ring-fencing.
Under May’s logic, letting Indonesian provinces set their own direct tax rates would achieve organically what the PFII attempts by decree.
Indonesia’s Golden Visa So Far
The zone’s tax perks land atop a golden visa program that has posted strong headline numbers since its July 2024 launch.
As of May 18, 2026, the program had generated Rp 52.1 trillion (approximately US$3 billion) through 1,274 permits issued, though corporate investors account for 97.7% of that capital.
Individual investors qualify with US$350,000 in government bonds, bank deposits, or public company shares for a five-year permit, or US$700,000 for ten years.
The visa grants neither permanent residency nor a path to citizenship, a limitation May and others have criticized since the program’s inception.
Whether the new law changes that calculus for individual applicants now depends on details Indonesia has yet to supply. Chief among them is where the zone will actually be.
The law does not fix a location. Instead, the Finance Minister will propose sites to the President, with the final designation made by government regulation; two or three sites in Bali are under consideration, and more could be added. The full text has yet to be published, and no launch timeline exists.
