Indonesia Enacts PFII Financial Center Law: 0% Taxes for Golden Visa Holders in a Special Zone

Indonesia’s legislature unanimously approved, during Tuesday’s session, the creation of Indonesia International Financial Center (PFII) — a special jurisdiction offering tax and customs incentives for companies and foreign professionals. The cornerstone of the regime is reducing corporate income tax on profits to 0% for businesses operating within the zone, alongside a full exemption from income tax for foreign professionals in the financial sector. In addition, foreign nationals holding a Golden Visa will receive a special tax status linked to the zone’s framework.

The benefits extend beyond income taxes. Overseas investors receiving dividends or other investment-related payments from the financial hub may be exempt from withholding tax in Indonesia.

On top of that, the law provides for the abolition of VAT, luxury sales tax, and import duties. The government is also allowed to broaden the incentive package later through separate regulations.

The bill was reviewed under an accelerated track: a working group began its work on 2 July, discussions took place between 8 and 16 July, and a final draft was then prepared consisting of 10 chapters and 73 articles. During the plenary vote the same day, all factions supported the law unanimously.

An Isolated Offshore Enclave: How the Country’s Economy Will Be Protected

To minimize risks to the domestic market, the law introduces a restriction: companies operating within PFII will not be allowed to raise funding from the Indonesian public or conduct transactions with domestic consumers outside the zone.

Permitted activities cover a broad range of financial services: banking operations, insurance, pension services, capital market activities, trading in precious metals, family offices, as well as professional services such as accounting, legal advisory, and financial consulting.

The financial center will be granted financial and administrative autonomy. Oversight will be handled by a board led by the governor, and the zone will also have its own special court and an arbitration body.

Indonesia’s Minister of Finance Purbaya Yudhi Sadewa emphasized that PFII is not intended to replace the domestic financial system, but to complement it. In the ministry’s view, in the long run, capital inflows should reduce the country’s vulnerability to sudden capital outflows.

Where exactly the center will be located remains unclear. Kura Kura (Kura Kura) Special Economic Zone in Bali has been mentioned as a candidate: the idea was first discussed by President Prabowo Subianto back in April, but there has been no official confirmation of the location yet.

Criticism of the Idea: “As if It Were That Simple”

Earlier, when Indonesian authorities discussed a tax-advantaged “island” in Bali in the form of a tax-free hub, EC Holdings head Philip May — who has worked for years with Asian markets — said the scheme would be difficult to implement in practice. In his view, without “internal borders,” participants could register a business in the zone and effectively live anywhere across the archipelago.

As he points out, this criticism also applies to the new law. He considers the exemption for wealthy foreigners — “as long as the visa is valid and only if they reside in a specific location” — not convincing enough: “Indonesia has no internal borders. How do you verify where they live?”

May also doubts Indonesia’s ambition to compete with major financial centers such as Hong Kong and Singapore. His assessment is blunt: “It looks like they’re acting in desperation.”

An Alternative: A “Swiss Model” Instead of a Physically Isolated Zone

Rather than the idea of a “fenced-off” enclave, May proposes a more systemic approach — Swiss-style tax federalism. According to him, Indonesia could benefit more from a model in which the federal level receives, for instance, part of indirect taxes, while provinces compete by setting direct tax rates. Provinces could also be allowed to partially opt out of certain taxes according to their own policy choices.

Switzerland’s experience with cantonal competition has turned low-tax jurisdictions, such as Zug, into a magnet for companies and affluent private clients — without the need to create physically isolated “ring-fenced” zones.

From May’s perspective, if Indonesian regions were given the authority to regulate direct tax rates independently, it could produce an effect similar to what PFII is trying to achieve through legislation and regulations.

Golden Visa in Indonesia: What We Know So Far

PFII’s tax advantages build on the existing Golden Visa program, which since its launch in July 2024 has shown notable figures in news coverage.

As of 18 May 2026, the program has attracted Rp 52.1 trillion (about USD 3 billion) through 1,274 issued permits. At the same time, corporate investors account for 97.7% of the capital attracted.

Private investor criteria are also in place: Golden Visa eligibility is available to applicants with at least USD 350,000 in assets in the form of government bonds, bank deposits, or shares in public companies for five years; or USD 700,000 for ten years.

Importantly, the Golden Visa does not grant permanent residency and does not provide a direct path to citizenship. This limitation has been a point of criticism by May and other experts since the program began.

Whether this logic changes for private applicants under the new law depends on details Indonesia has not yet disclosed. The key question is: where exactly the zone will be located.

The law text does not specify a particular location. It is expected that the finance minister will propose sites to the president, and the final decision will be made through government regulation. Currently, two or three locations in Bali are being considered, and the list may expand. The full document has not been published yet, and no start dates for the regime have been announced.

Indonesia is strengthening its investment appeal: the new Indonesia International Financial Center (PFII) regime offers tax and customs incentives, including 0% corporate income tax within the zone and a special tax status for Golden Visa holders. If you’re exploring an investment-based residence/citizenship path alongside financial benefits, Digital Nomad can help you evaluate eligibility and build a clear plan. Learn more at https://digital-nomad.gr/en/goldenvisa.

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