Indonesia – Introducing International Financial Centre And Its Tax Aspects: General Overview.
Note: This article was prepared based on the latest available draft of the Bill on the Indonesian International Financial Centre downloaded on 15 July 2026. As the Bill has not been officially enacted, its provisions may be subject to change.
On 21 July 2026, the Indonesian House of Representatives approved the Bill on the Indonesian International Financial Centre (Pusat Finansial Internasional Indonesia or “PFII”) for enactment into law. Once enacted, the PFII law will provide the legal framework for establishing an international financial centre in Indonesia, with the broader objectives of deepening the domestic financial market, strengthening Indonesia’s competitiveness as a global financial hub, and attracting international financial institutions, investors and cross-border financial activities. It introduces a dedicated institutional and regulatory framework for the PFII, including provisions on its governance, permitted financial activities, investment and fiscal facilities, supervision, and dispute resolution.
Establishment and Governance of the PFII
The Government is authorized to establish one or more PFII within the territory of the Republic of Indonesia. This framework allows the Government to designate multiple PFII locations, taking into account the strategic and economic considerations relevant to the development of each centre.
Each PFII will be administered by a PFII Council, which consists of a Chairperson and members. The Chairperson of the PFII Council will be the Governor, while its members will comprise the head of the PFII Management Authority (Lembaga Pengelola PFII or “LP PFII”), the head of the PFII Financial Services Supervisory Authority (Lembaga Pengawas Jasa Keuangan PFII or “LPJK PFII”), and up to four independent members. This composition is intended to bring together the policy-making, management and supervisory functions required for the operation and development of the PFII, while also incorporating independent representation within its governance structure.
The PFII Council will be vested with specific authorities to support the establishment and operation of the PFII. These include the authority to grant investment approvals, provide business facilitation measures and extend special facilities to parties supporting the financing of the preparation, construction and development of the PFII. The Council may also exercise any other authorities assigned by the President, thereby allowing the Government to confer additional powers as may be required to facilitate the effective development and administration of the PFII.
Permitted Business Activities
The PFII framework permits a broad range of business activities, which are grouped into three principal categories: financial-sector activities, financial-sector supporting services and other-sector activities. Financial-sector activities include banking, insurance, Islamic finance, capital markets, financial derivatives and carbon exchanges, pension funds, financing, venture capital, financial-sector technology innovation, guarantees, international commodity trading, bullion, trusts, special purpose vehicles, financial holding companies, money and foreign exchange markets and related derivatives, family offices, as well as other financial activities. Supporting services may include public accounting, valuation, notarial, legal advisory and financial consulting services, together with other services that support the operation of the financial sector within the PFII.
Further details on the activities that may be conducted within the PFII will be prescribed under regulations issued by the PFII Council. In issuing such regulations, the PFII Council must coordinate with the Government and/or other relevant authorities. This mechanism gives the PFII Council flexibility to further define, expand or regulate the permissible activities within the PFII.
Restriction on Domestic Market Activities
The law also establishes restrictions intended to distinguish PFII activities from ordinary domestic financial-market activities. Financial-sector businesses operating within the PFII are generally prohibited from collecting funds from persons located elsewhere in Indonesia outside the PFII and from conducting transactions with the domestic market or with consumers or retail customers outside the PFII. An exception applies to funds raised from persons whose initial source of funds originated from the PFII. These restrictions suggest that the PFII is primarily intended to facilitate international, institutional and cross-border financial activities, rather than to operate as an alternative channel for serving Indonesia’s domestic retail market.
Legal Form of Business Operator
To carry out the permitted activities, business operators may establish various forms of business presence, including non-legal entity business actor, legal entity business actor, special purpose vehicles and/or trustees. Special purpose vehicles and trustees may be established as specialized entities for securitization transactions and/or the management of entrusted assets or funds. The availability of these structures is expected to support more sophisticated financing, investment-holding, asset-management and capital-market transactions within the PFII.
PFII Court and Alternative Dispute Resolution
The PFII framework also introduces a dedicated PFII Court as a special court established within Indonesia’s general court system. The PFII Court will have specific jurisdiction to examine, adjudicate and decide disputes arising from business activities conducted within the PFII, disputes relating to contracts that are wholly or partly performed or intended to be performed within the PFII, and disputes arising from the granting of tax facilities. Its jurisdiction will also extend to disputes relating to events or transactions occurring within, or carried out wholly or partly in, the PFII.
In addition to resolving commercial and regulatory disputes, the PFII Court will be authorized to determine legal questions concerning activities associated with the PFII. This includes matters relating to the jurisdiction, competence and authority of the PFII Court itself, as well as the interpretation of regulations issued by the PFII Council. This broad jurisdiction is intended to provide a specialized forum capable of addressing the legal and regulatory complexities arising from the operation of an international financial centre.
The PFII Court will act as a court of first and final instance. As a general rule, its judgments, orders and determinations will not be subject to appeal, cassation, judicial review or any other legal remedy before any court, tribunal, institution or authority. An exception applies to determinations concerning the refusal, recognition and enforcement of international arbitral awards, which remain subject to the specific regime prescribed under the law.
The law also provides for the establishment of a dedicated arbitration institution by the PFII Council as an alternative dispute resolution forum. The institution will be authorized to administer arbitration, mediation, conciliation, expert determination and other forms of alternative dispute resolution. Further provisions governing its establishment, procedures and authority will be stipulated in regulations issued by the PFII Council.
Tax and Other Special Facilities
To enhance the attractiveness and competitiveness of the PFII, business activities conducted within the PFII will be eligible for tax facilities and other special facilities. The available tax facilities may cover corporate and other forms of income tax, value-added tax and/or luxury-goods sales tax, as well as customs-related facilities.
Other special facilities may be granted in relation to immigration, employment, licensing, residency, golden visas and residence permits, as well as any other facilities considered necessary to support activities within the PFII. These facilities may be extended not only to business operators, but also to their employees, experts and other parties working within the PFII. This framework is intended to simplify the establishment and operation of businesses and facilitate the engagement of international professionals within the PFII.
Language, Applicable Law, and Currency
English will serve as the official language for regulations, decisions, policies, contracts, court proceedings, court judgments and other official documents within the PFII. The use of English across regulatory, contractual and judicial processes is intended to increase accessibility for international business operators and align the PFII’s operations with practices commonly adopted by international financial centres.
The PFII and all activities conducted within it will generally remain subject to Indonesian law. However, the PFII Council may designate certain provisions, rules, principles or requirements under Indonesian civil and business law that will not apply, following consultation with the Government. This framework gives the PFII Council a degree of regulatory flexibility to develop a legal regime specifically tailored to international financial and commercial activities, while retaining Indonesian law as its overarching legal foundation.
The laws and regulations applicable within the PFII may adopt, incorporate, apply or adapt principles of common law, equity, international commercial law, international financial-centre practices and internationally recognized standards. Where a particular matter is not expressly regulated under the PFII legal framework, the PFII Court may determine the matter by reference to those principles, provided that its decision remains consistent with the PFII law. This approach is intended to provide the PFII Court with sufficient flexibility to address complex or novel cross-border financial and commercial matters.
Business activities within the PFII may generally be conducted in foreign currencies. Rupiah may nevertheless be used for supporting operational transactions and ordinary day-to-day activities. The ability to transact in foreign currencies is expected to facilitate cross-border financing and investment activities and reduce currency-conversion constraints for international businesses operating within the PFII.
Conclusion
The PFII framework presents significant opportunities for financial institutions, investors, professional advisers and other service providers seeking to expand its operations in Indonesia. Its broad range of permitted activities, potential tax and immigration facilities, use of foreign currencies and English as an official language, as well as the availability of flexible legal structures, may offer a more internationally oriented platform for conducting financial and commercial activities. The ability of the PFII legal framework to incorporate common law, equity and international commercial principles may also provide greater flexibility for international market participants.
At the same time, prospective business operators should carefully assess the regulatory boundaries applicable to activities conducted within the PFII. In particular, restrictions on raising funds from the Indonesian public outside the PFII and conducting transactions with the domestic market or retail customers may affect the structuring of business models, customer arrangements and funding activities. Businesses should also consider the scope of the PFII Court’s jurisdiction and the finality of its decisions when negotiating contracts, selecting dispute resolution mechanisms and allocating legal and regulatory risks.
The practical impact of the PFII law will ultimately depend on the implementing regulations to be issued by the Government and the PFII Council, including regulations governing licensing, permitted activities, tax facilities, regulatory exemptions, supervision and dispute resolution procedures. Businesses considering participation in the PFII should therefore continue to monitor these developments and assess whether their proposed activities, corporate structures and contractual arrangements meet the applicable requirements to be imposed by the regulations.
For further information, please contact:
MetaLAW, Legal & Tax Consultant, Jakarta, Indonesia
general@metalaw.id
