Indonesia Passes Financial Center Law With 0% Tax for Golden Visa Holders in the Zone

On Tuesday, Indonesia’s House of Representatives unanimously adopted legislation establishing the Indonesia International Financial Center (PFII), a special jurisdiction that offers a 100% reduction in corporate income tax for businesses operating within it, a full exemption from personal income tax for foreign financial-sector professionals, and non-resident tax status for foreigners holding golden visas linked to the zone.

The incentives extend beyond income tax. Overseas investors receiving dividends or other investment returns from the hub may also be exempted from Indonesian withholding tax.

The law further exempts transactions from value-added tax, luxury goods sales tax, and import duties, and authorizes the government to introduce additional incentives by regulation.

Lawmakers moved the bill through the legislative process at striking speed. The working committee was formed on July 2, held its deliberations between July 8 and 16, and produced a final text comprising 10 chapters and 73 articles for Tuesday’s plenary vote, at which all factions approved it by acclamation.

A Ring-Fenced Offshore Enclave

To protect the domestic economy, the law prohibits businesses operating in the zone from raising funds from the Indonesian public or dealing with domestic consumers outside the enclave.

Permitted activities include banking, insurance, pension services, capital markets, bullion, family offices, and professional services such as accounting, legal advice, and financial consulting.

The center will enjoy financial and administrative autonomy under a council headed by a governor and will have its own special court and arbitration body.

Finance Minister Purbaya Yudhi Sadewa told lawmakers that the PFII is intended to complement, not replace, Indonesia’s domestic financial system, and to attract long-term foreign capital so as to reduce the country’s exposure to sudden outflows.

The physical location of the center remains undecided. Bali’s Kura Kura Special Economic Zone has been mentioned as a candidate since President Prabowo Subianto first raised the idea in April, although the government has not yet confirmed a site.

“As If It Were So Easy”

When Jakarta floated the idea earlier this year of a tax-free haven in Bali, Philippe May, head of EC Holdings and a long-time participant in Asian markets, dismissed the proposal as unenforceable. In his view, without internal borders, nothing prevents participants from registering in the zone while living elsewhere in the archipelago.

He says that criticism applies equally to the 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 weak. “Doesn’t sound very solid. Indonesia has no internal borders. How to check where they live?” he told IMI.

He is equally skeptical of 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,” he said.

His overall assessment was blunt: “Looks like they are desperate.”

A Swiss Model Instead

Rather than a ring-fenced enclave, May argues that Indonesia would benefit 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 suggested, adding that provinces could also be permitted to waive certain taxes altogether.

Switzerland’s cantonal competition has made low-tax jurisdictions such as Zug magnets for companies and wealthy individuals without any need for physical ring-fencing.

On May’s logic, allowing Indonesian provinces to set their own direct tax rates would achieve organically what the PFII seeks to impose by decree.

Indonesia’s Golden Visa So Far

The zone’s tax incentives build on a golden visa program that has produced strong headline figures since its launch in July 2024.

As of May 18, 2026, the program had generated Rp 52.1 trillion, or approximately US$3 billion, through 1,274 permits issued, although corporate investors account for 97.7% of that capital.

Individual investors qualify by placing US$350,000 in government bonds, bank deposits, or shares in public companies for a five-year permit, or US$700,000 for a ten-year permit.

The visa confers neither permanent residence nor a path to citizenship, a limitation May and others have criticized since the program began.

Whether the new law alters that calculus for individual applicants now depends on details Indonesia has yet to disclose. Foremost among them is the precise location of the zone.

The law does not designate a site. Instead, the Finance Minister will propose locations to the President, and the final designation will be made by government regulation. Two or three sites in Bali are under consideration, and additional locations may be added. The full text has not yet been published, and no launch timetable has been announced.

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