Current as at 5 August 2026.
Article and chapter references below are drawn from press and professional reporting of the enacted law. The promulgated official text had not been retrieved when this article was prepared, so numbering may differ.
On 21 July 2026 the Dewan Perwakilan Rakyat (DPR, the House of Representatives) passed the law establishing the Pusat Finansial Internasional Indonesia (PFII, the Indonesia International Financial Centre). The statute runs to ten chapters and seventy-three articles. It creates a ring-fenced zone with its own tax regime and its own judicial forum. Firms inside the zone transact in foreign currency and resolve disputes before a court applying common law rather than Indonesian civil law. The government has named Bali as the location for the Indonesia International Financial Centre. Implementing regulations that set the operative detail were not yet published when this article was prepared.
Most reporting has emphasised a reported income tax exemption of up to fifty years, with a zero rate for qualifying foreign investors. That headline is conditional. The exemption attaches to income sourced from the zone and to persons who meet criteria the Ministry of Finance has still to define. A large multinational group remains subject to the OECD fifteen percent global minimum tax.
For a foreign founder or investor in Bali, the value of the PFII depends on detail that does not yet exist in published form. The sections that follow set out how the law was passed, what it establishes, what the tax incentives require, where the centre will be located, how it will be governed, and the criticisms a careful reader should weigh before acting.
How the law was passed
The PFII law implements Article 248A of Law 4 of 2026, which amended the Financial Sector Development and Strengthening Law (Undang-Undang Pengembangan dan Penguatan Sektor Keuangan, UU P2SK). Article 248A required the PFII legislation to be completed within three months. The DPR moved the bill from working session to enacted law in roughly nineteen days, and every parliamentary faction approved it. Finance Minister Purbaya Yudhi Sadewa presented the bill for the government, the DPR Chair Puan Maharani led the plenary session, and the working committee was chaired by Mohammad Hekal, Deputy Chair of Commission XI. The compressed timetable is a consequence of the three-month deadline in Article 248A, and several of the criticisms set out below concern the speed of passage.
The government has stated three objectives for the centre. One is access to global capital for long-term development and for priority-sector financing. Alongside that, the law aims to establish an internationally standardised financial-services ecosystem, supported by technology and cybersecurity provisions. Human-capital development is the third aim, pursued through employment, technology transfer, and the training of financial-sector talent. Finance Minister Purbaya has described the PFII as a catalyst for deepening the national financial sector and for financing priority projects.
What the PFII law establishes
The law defines the Indonesia International Financial Centre as a designated area with its own institutions, tax rules, currency arrangements, and judicial forum. Chapter III lists the business activities permitted inside the zone:
- banking
- insurance
- pension services
- capital markets
- bullion trading
- family offices
- professional services, including accountancy, legal counsel, tax advice, and financial consulting
As reported, transactions within the zone are conducted in foreign currency, and operators are restricted from raising funds from the Indonesian public outside the zone. The stated aim is to attract global capital rather than recirculate money already inside Indonesia, a point Hekal made in the parliamentary record. The law also provides for central and regional government support for the centre.
Government estimates put potential inflows at IDR 300 trillion to 500 trillion, approximately USD 17 billion to 28 billion at the August 2026 exchange rate, described by officials as preliminary and dependent on execution against established hubs. For scale, government commentary has set that estimate against Singapore and Dubai, cited as managing assets in the order of SGD 5 trillion (around USD 3.7 trillion) and USD 800 billion, which frames the Indonesian figure as modest beside established centres.
The tax incentives, and their limits
Chapter VIII contains the centre’s tax facilities. Reporting of the enacted text describes them as follows.
| Facility | Treatment as reported |
|---|---|
| Income tax (Pajak Penghasilan, PPh) | Exemption of up to fifty years for core financial activity and for foreign investment inside the zone, limited to income derived from the PFII and to qualifying business operators, expert personnel, and foreign taxpayers |
| Value-added tax (Pajak Pertambahan Nilai, PPN) and luxury-goods sales tax | Relief on qualifying activity |
| Customs | Facilities on specified goods |
| Inheritance tax | Stated not to apply within the zone |
| Withholding tax | Relief for non-resident investors on qualifying dividends and investment returns |
The exact percentage reductions and the qualifying tests are reserved for regulations issued by the Ministry of Finance, and those regulations were not published when this article was prepared.
Incentives of this kind usually require substance in the zone, meaning staff, premises, and expenditure, so a name-plate presence is unlikely to qualify. Meeting that test is something to plan for deliberately, and the owner’s home-country rules examine it too.
The inheritance-tax line deserves a caution. Indonesia levies no general inheritance or estate tax, so a carve-out inside the zone removes little against that baseline, and its practical effect will depend on how the regulations treat existing death-transfer charges, such as the land-transfer duty. For a family planning across generations, succession usually turns on the vehicle and the family’s residence, which the zone does not by itself resolve.
Two qualifications apply to every figure. The first qualification concerns scale, because Indonesia has confirmed that the PFII remains subject to the OECD fifteen percent global minimum tax under the Pillar Two rules. Indonesia adopted the global anti-base-erosion rules domestically through Minister of Finance Regulation 136 of 2024, which includes a domestic minimum top-up tax. A multinational group with consolidated annual revenue at or above EUR 750 million can therefore face a top-up to an effective fifteen percent, even where the PFII grants a domestic exemption. A smaller operator below that threshold, including many family offices, would fall outside the Pillar Two top-up. Whether such an operator can take the fuller benefit depends on the PFII qualifying tests, which are not yet defined, and on the owner’s home-country tax. The second qualification concerns time, because the fifty-year figure is a maximum described in reporting of the statute, not a rate confirmed in a published regulation, so a client decision taken on the strength of the headline relies on secondary information.
The Golden Visa and non-resident tax status
The personal tax benefit is tied to Indonesia’s Golden Visa. A foreign national who obtains a Golden Visa facility through the zone is, on the reported terms and during the validity of the visa, excluded from classification as an Indonesian domestic tax subject. The reported individual thresholds are set out below.
| Individual investment | Permit term |
|---|---|
| USD 350,000 | Five years |
| USD 700,000 | Ten years |
Qualifying investments include government bonds, bank deposits, or shares in a public company. Routes for corporate applicants and for larger individual investments exist above these thresholds, and were not detailed in the sources reviewed. Non-resident status does not remove every Indonesian tax. Indonesian-source income and certain withholding obligations can remain, and the exemption depends on the visa staying valid and on the holder meeting the residence condition the law attaches.
Non-resident classification depends on the holder meeting the residence condition the law attaches in substance, so a holder who continues to reside in Indonesia would not qualify, whatever the visa records. How the authorities verify residence is a point the implementing regulations are expected to set. A client must meet the condition in substance, not only in form.
Who the tax benefit helps
The non-resident status is built for a non-resident investor, and it helps a founder who lives in Bali far less. An individual present in Indonesia over 183 days in a twelve-month period, or resident with the intention to stay, is an Indonesian tax resident taxed on worldwide income, and the exemption for a new resident’s foreign-source income is narrow and time-limited. A principal whose home is in Bali does not become a non-resident by obtaining a Golden Visa, so the personal carve-out is of greater use to a non-resident investor deploying capital from abroad than to the resident owner on the ground.
Indonesia is not the only tax to weigh. Many countries tax their residents on worldwide income, and controlled-foreign-company rules can attribute a low-taxed subsidiary’s profits to the owner whether or not they are distributed. A United States citizen is taxed on worldwide income wherever resident, and the GILTI rules reach a controlled foreign company. A fifty-year Indonesian exemption delivers only what survives the owner’s home regime, so the zone rate is the start of the analysis, not the end of it.
Indonesia’s Golden Visa and its non-resident treatment exist independently of the PFII, so at the personal level the zone adds little beyond the existing programme. The PFII’s distinct value is at the entity level, in the income tax facility for activity sourced from the zone.
Where the centre will be located
The government has named Bali as the location. The Coordinating Minister for Economic Affairs, Airlangga Hartarto, has stated that the centre will be established in a dedicated Special Economic Zone (Kawasan Ekonomi Khusus, KEK), separate from the existing Sanur health zone. The Kura Kura Bali Special Economic Zone is the reported leading candidate. Early operations are expected from the Danareksa building in Jakarta, with full development in Bali expected across a two-to-three-year period. The specific site is designated by the President through a government regulation, and that designation had not been issued when this article was prepared. Bali as the general location is the government’s stated and repeated position.
The province is named, the specific Special Economic Zone is not yet fixed by regulation, and the Finance Minister has said the site is not yet decided.
Governance and the common-law court
Each PFII zone has its own institutions, set out below. Reporting of the statute states that the President appoints the Governor without a fit-and-proper test, and that the Council comprises the Governor, the head of the Management Agency, the head of the supervisory agency, and up to four community representatives.
| Body | Role as reported |
|---|---|
| Council, led by a Governor | Governing authority over the zone |
| Management Agency | Operational management of the zone |
| Financial Services Supervisory Agency (Lembaga Pengawas Jasa Keuangan, LPJK) | Supervises financial activity inside the zone, a function performed nationally by the Otoritas Jasa Keuangan (OJK, the Financial Services Authority) |
| PFII court | Adjudicates disputes arising in the zone |
| Arbitration institution | Alternative dispute resolution for zone disputes |
The OJK has supported a separate in-zone supervisor, and has asked for the coordination between the two to be regulated firmly. It named the following coordination requirements:
- alignment of regulatory and supervisory policy
- exchange of data and information
- coordination of licensing
- oversight of institutions operating across the zone boundary
- consumer protection
- a lead-supervisor mechanism for financial conglomerates
The court is the largest departure from Indonesian practice. The PFII court has exclusive authority over cases arising in the zone, including business activity, contracts, tax, and insolvency. It is designed on the model of the Dubai International Financial Centre (DIFC), applying common law, with proceedings available in a foreign language. Reporting describes a two-tier structure, first instance and appeal, with panels of three to five judges and at least one Supreme Court justice on each tier. The appeal decision is described as final and binding, with no cassation to the Supreme Court, so a first-instance decision is appealable within the zone, and the appeal decision then closes the case.
Legal academics have identified a constitutional tension between a self-contained court whose appeal decision is final, with no recourse to the Supreme Court, and the ordinary Indonesian cassation structure. The enforceability of a PFII judgment before the ordinary courts, and the boundary between zone jurisdiction and national jurisdiction, are not settled by the statute.
Separation from the domestic economy
Four features together separate the zone from the onshore system:
- the foreign-currency requirement,
- the restriction on raising funds from the Indonesian public,
- a supervisor distinct from the national regulator, and
- a court distinct from the ordinary judiciary.
The policy logic is to attract external capital without disturbing domestic monetary control, and to keep the centre from competing directly with onshore banks. Domestic monetary control is the mandate of Bank Indonesia, the central bank, and the foreign-currency requirement separates in-zone transactions from the rupiah and the onshore payment system. The same enclave design informs a domestic criticism that the PFII risks becoming a state within a state, a phrase used in Indonesian commentary on the speed and the autonomy of the arrangement.
The risks and criticisms
The government’s case has its critics. Several concerns appear across independent commentary.
The anti-money-laundering concern most often attached to this plan belongs to a different statute. Reporting and critics describe Article 50A of the Financial Sector Development and Strengthening Law (UU P2SK) as extending, to purchasers of two Danantara-issued instruments, the Patriot Bond and the Merah Putih Bond, protection from criminal and civil proceedings, and as providing that transaction data cannot be used for tax assessment or as court evidence. The meaning and validity of that provision are contested, and it has been challenged before the Constitutional Court. Danantara has been reported as a funder of the PFII, which is the connection critics draw. The provision is part of UU P2SK, not of the PFII law, which contains tax reporting obligations and sanctions for misuse of its facilities rather than a blanket immunity.
We do not advise structuring to rely on it, and any published statement should attribute the point to UU P2SK, not to the PFII law.
Other criticisms concern the location and the design. Economists have argued that Bali lacks the workforce depth, the industrial base, and the university-to-corporate links of Jakarta, and that building-height and land-use rules constrain the vertical development typical of financial hubs. Commentators have raised the risk of an enclave that benefits a narrow group through South Bali property speculation rather than broad economic gain. Others have questioned whether a zone offering minimal tax and limited information exchange resembles a functioning financial centre or a tax haven, and have warned of exposure to the standards of the Financial Action Task Force (FATF). These criticisms do not establish that the plan will fail. They identify where the implementing regulations will be judged.
What this changes for foreign founders and investors
For a founder or investor already in Bali, the PFII introduces a lawful, on-record option for cross-border financial and family-office activity. The honest comparison is not with the unlawful nominee arrangements some foreigners still attempt onshore, which Article 33 of the Investment Law declares null and void. It is with the options it competes with: an onshore PT PMA for domestic-source activity, and an established hub such as Singapore, Hong Kong, or the DIFC for international activity, each operational today while the PFII is not. Our companion article compares those options in detail. Where the substance of an activity is domestic, the zone does not apply, and presenting a domestic business as a PFII operator would fail on the source condition the tax benefit requires. The correct posture now is preparation, not commitment. The rates, the qualifying tests, the coordination protocol, and the site are all pending.
A founder who structures around a fifty-year exemption today builds on a figure drawn from reporting rather than from a published regulation. We advise clients to prepare and to monitor, and to decide once the implementing regulations and the promulgated text are available.
How TraceWorthy helps
Our team are Indonesian lawyers, accountants, tax specialists, and compliance professionals, working alongside our founder, Tracy Wilkinson, who qualified in Australia and built the team to a standard set against international practice. We work on the ground in Indonesia and across borders. We negotiate cross-border deals, advise on cross-border tax, and draft cross-border agreements, and we model the tax at the owner’s Indonesian residence and in the owner’s home country, because that is where a low headline rate is often clawed back.
For a client considering the PFII:
- we read the promulgated law and each implementing regulation as it issues, and
- we test whether a specific activity qualifies for the zone or belongs in a conventional structure;
- we model the tax position, including whether the OECD fifteen percent global minimum tax applies to the group; and
- we assess the Golden Visa route and the residence condition against the client’s own circumstances.
Where a physical presence at Kura Kura Bali or another site is proposed, we run comprehensive land due diligence ourselves, including zoning and land-use verification through the Informasi Tata Ruang (ITR, spatial-use information), utility access, land access rights, and boundary survey where required, because a notary’s due diligence does not extend that far.
We also keep the client’s registrations and filings current as the regime develops.
Speak with our team before you commit capital to the PFII, because the value of the centre depends on regulations that are still to be written, and getting the structure right at the outset is usually far less costly than restructuring later.
This article is general information current as at 5 August 2026. The PFII law was recently enacted, its implementing regulations are pending, and several figures in this article are drawn from reporting of the statute rather than from a promulgated official text, so they may change. This article is not legal, tax, or financial advice, and it does not create an advisory relationship or reach any conclusion on a particular reader’s position. Obtain advice for your own situation before you act.
Frequently Asked Questions
What is the Pusat Finansial Internasional Indonesia (PFII)?
The PFII is an international financial centre established by a law passed on 21 July 2026. It is a ring-fenced zone with its own tax regime and a specialised court applying common law. Firms inside the zone transact in foreign currency. The government has named Bali as the location. Implementing regulations that set the operative detail were pending when this article was prepared.
Where will the PFII be located?
The government has named Bali. The Kura Kura Bali Special Economic Zone is the reported leading candidate, with early operations expected from the Danareksa building in Jakarta. The specific site is designated by the President through a government regulation, which had not been issued when this article was prepared.
Is the PFII operating now?
Not fully. The law is enacted, and early operations are expected from Jakarta, while full development in Bali is expected across a two-to-three-year period. The rates, qualifying tests, coordination arrangements, and site are set by implementing regulations that were pending when this article was prepared.
When will the PFII rules be finalised?
The government targeted the implementing regulations for completion before 16 August 2026, contingent on process. Those regulations set the tax rates, the qualifying tests, the supervisory coordination, and the specific site. Until they are published, the operative detail cannot be stated with certainty. This article was prepared on 5 August 2026, before that target date.
What tax incentives does the PFII offer?
Reporting of the enacted law describes an income tax exemption of up to fifty years for qualifying financial activity and foreign investment inside the zone, together with relief from value-added tax and luxury-goods sales tax and customs facilities on specified goods. The exact reductions and the qualifying conditions are reserved for Ministry of Finance regulations. A multinational group at or above EUR 750 million in consolidated revenue remains subject to the OECD fifteen percent global minimum tax. The benefit applies to income sourced from the zone.
Does the fifteen percent global minimum tax cancel the PFII tax break?
Not for every business. Indonesia has confirmed that the PFII remains subject to the OECD fifteen percent global minimum tax under the Pillar Two rules. A multinational group with consolidated annual revenue at or above EUR 750 million can face a top-up to an effective fifteen percent, even where the PFII grants a domestic exemption. A smaller operator below that threshold, including many family offices, is outside Pillar Two and can take the fuller benefit.
Does the PFII Golden Visa remove Indonesian tax?
No. A Golden Visa obtained through the zone excludes the holder from Indonesian domestic tax-subject classification during the validity of the visa. Indonesian-source income and certain withholding obligations can remain. The exemption also depends on meeting the conditions the law and its implementing regulations attach.
Can an Indonesian domestic business use the PFII to lower its tax?
No. The tax benefit attaches to income sourced from the zone, and operators cannot raise funds from the Indonesian public outside it. Presenting a domestic business as a PFII operator would fail on the source condition the benefit requires. A business whose substance is domestic remains under the ordinary Indonesian tax regime.
Which court hears a dispute inside the PFII?
A specialised PFII court, designed on the model of the Dubai International Financial Centre and applying common law rather than Indonesian civil law. Reporting describes a two-tier structure of first instance and appeal, with panels of three to five judges and at least one Supreme Court justice. The enforceability of a PFII judgment before the ordinary Indonesian courts is not yet settled by the statute.
Would a PFII court judgment or arbitration award be enforceable abroad?
An arbitral award and a court judgment are treated differently. An arbitral award from the zone’s arbitration institution would generally be enforceable in other states that are parties to the 1958 New York Convention, to which Indonesia is a party through Presidential Decree 34 of 1981, with enforcement in Indonesia governed by Law 30 of 1999. A judgment of the PFII court is different, because there is no equivalent multilateral treaty for the cross-border enforcement of court judgments, so its recognition would depend on the law of each foreign country. Enforcement of a PFII judgment before the ordinary Indonesian courts is also not yet settled by the statute.
Can a company employ foreign staff in the PFII?
The Golden Visa relates to investors and their tax status, not to employees. Employing a foreign worker in Indonesia requires the company to obtain an approved foreign worker plan, a Rencana Penggunaan Tenaga Kerja Asing (RPTKA), and each worker to obtain a limited stay permit, an Izin Tinggal Terbatas (ITAS), evidenced by the card known as a KITAS. Whether the PFII eases these requirements for zone employers is set by implementing regulations that were pending when this article was prepared.