What Is Indonesia‘s International Financial Centre (IIFC)?

THE GOVERNMENT has officially enacted Law No. 6/2026, which serves as the legal basis for establishing Indonesia's International Financial Centre (IIFC). The initiative to establish the IIFC was inspired by the success of countries that already have international financial centres.

The government notes that countries with international financial centres are generally able to serve as capital intermediation hubs. This, in turn, has a positive impact on economic growth and job creation.

To this end, the Government has also established the IIFC to boost national economic competitiveness. The establishment of the IIFC is also intended to position Indonesia as an investment magnet and a global financial centre. So, what exactly is the IIFC?

Definition and Objectives of the IIFC

Pursuant to Article 1 number 1 of Law 6/2026, the IIFC refers to a jurisdiction with financial and administrative autonomy as well as a special legal regime that adopts, incorporates, implements and/or aligns with international principles and/or standards.

This area is not confined to a single location but may be established at a number of strategic sites within Indonesian territory. The establishment of the IIFC is conducted through the enactment of a government regulation based on a proposal from the Minister of Finance.

As an autonomous territory, the governance of the IIFC is under the command of the IIFC Governor and supervised by the IIFC Council. Behind its special status, there are 10 objectives for establishing the IIFC, comprising:

1. increasing Indonesia's competitiveness as an international financial centre to strengthen national economic sovereignty;
2. encouraging deepening and innovation in the financial sector;
3. attracting investments and entrepreneurs in the financial sector, both national and international;
4. facilitating real sector financing, national strategic projects, sustainable financing, climate finance, infrastructure financing and/or other financing;
5. strengthening the contribution of the financial sector to the national economy;
6. increasing the equitable distribution of economic opportunities, technology transfer, job creation and increasing the capacity of Indonesia's human resources;
7. facilitating and strengthening the contribution of the sharia finance sector, green economy, blue economy and industrial transformation to the national economy;
8. developing internationally competitive capital markets, financial technology, digital finance and financial market infrastructure;
9. attracting international financial institutions, investment funds, family offices, regional head offices, treasury centres and professional service providers; and
10. establishing the IIFC as a commercial dispute resolution centre with international standards.

Business Activities Within the IIFC

Designed as a financial centre, there are 3 categories of business activities that entrepreneurs may undertake within the IIFC. These encompass the financial sector, financial sector supporting services and other supporting business activities.

Within the financial sector, the business activities in question include: banking; insurance;
sharia finance; capital markets, derivative finance, and carbon exchanges; pension funds;
financing; venture capital; financial sector technology innovation; and guarantees.

There are also businesses in the fields of international commodity trading, bullion, trust, special purpose vehicles and financial holding companies.

In addition, the financial sector businesses in question also include the money market, foreign exchange market and their derivative transactions, family office wealth management institutions, investment management and other financial sector business activities.

Meanwhile, supporting business activities in the financial sector that may be carried out within the IIFC include professional services from: public accountants; appraisers; notaries; legal consultants; financial consultants; investment managers; tax consultants; actuaries; sharia financial services experts; and other supporting activities.

To support business activities within the IIFC, operators may also conduct business activities in other sectors, such as: transport; accommodation; healthcare; waste and effluent management; tourism; food and beverage; and other business activities determined by the IIFC Council.

Tax Facilities Granted within the IIFC

Law 6/2026 does not merely regulate the establishment of the IIFC. To attract investment, the Government has also set out tax incentives to support the operation of the IIFC. These incentives are granted to entrepreneurs, financial sector professionals, ad hoc judges and non-tax residents (subjek pajak luar negeri/SPLN in Indonesian) who fulfil the prescribed requirements.

These tax facilities encompass income tax facilities, value added tax (VAT) and/or sales tax on luxury goods (STLGs) facilities as well as customs facilities. The regulation of tax facilities also covers the tax treatment of inheritances. The following are a number of key points regarding the tax facilities provided for under Law 6/2026:

1. Income Tax Facilities. The details of the income tax-related facilities are set out in Article 49 of Law 6/2026. Pursuant to that article, income tax incentives are granted under several schemes:
   • The exclusion from the imposition of income tax on income sourced from outside Indonesia. This exclusion is granted to: (i) entrepreneurs; and (ii) professionals in the financial sector of foreign citizen (warga negara asing/WNA in Indonesian) status at the IIFC;
   • 100% corporate income tax reduction. This facility is granted to entrepreneurs in the financial sector, supporting services and other sectors. It is also granted to the IIFC Management Institution (Lembaga Pengelola/LP in Indonesian) and the IIFC Financial Services Supervisory Institution (Lembaga Pengawas Jasa Keuangan/LPJK in Indonesian);
   • Imposition of 0% final income tax. This facility is granted on income received by certain financial professionals and foreign national ad hoc judges at the IIFC Court;
   • Exclusion from tax resident (subjek pajak dalam negeri/SPDN in Indonesian) status. This facility is granted to foreign nationals holding a golden visa registered with a family office at the IIFC, provided they do not derive income from active business activities or employment within Indonesian territory.
   • Exemption from withholding tax/income tax collection. Non-tax residents are exempt from withholding tax on income from investment activities at the IIFC. The withholding tax/income tax collection exemption also applies to transactions involving the purchase of ultra-luxury residences at the IIFC.
2. VAT, STLGs and Customs Facilities
   • VAT Not Collected: This facility is granted, among others, for imports as well as supplies of strategic taxable goods and taxable services (barang dan jasa kena pajak/BKP/JKP in Indonesian). The objects covered include new buildings (landed houses, flats, office premises, shopping centres, warehouses) and construction services for public facilities and infrastructure.
   • STLGs Exemption: This facility is granted on supplies of the luxurious residence group to individuals, corporations or agencies working or residing at the IIFC.
   • Import Duty Exemption: Law 6/2026 also grants an import duty exemption on imports of goods used in the construction and development of IIFC infrastructure.
3. Abolition of Inheritance Tax
   Law 6/2026 explicitly affirms that inheritance tax shall not be applied within the IIFC. This provision applies, provided that the assets are registered with a family office at the IIFC and the testator holds foreign national status registered with the family office.

Other Special Provisions at the IIFC

In addition to tax facilities, Law 6/2026 also sets out other special facilities in the areas of immigration, employment, permits, residency, golden visas, residence permits and other facilities for entrepreneurs, professionals or other parties at the IIFC.

Law 6/2026 also governs the specificities of the IIFC. These specificities include, among others, the use of the English language, the laws and regulations applicable at the IIFC, business activities and permits for entrepreneurs and the use of foreign currency.

With a view to providing alternative dispute resolution, Law 6/2026 also provides for the establishment of an IIFC Arbitration Institution. This institution is authorised to conduct arbitration, mediation, conciliation, expert determination and other forms of alternative dispute resolution based on agreement between the parties.

Further, Law 6/2026 establishes the IIFC Court as a specialised court within the general judicial system. The IIFC Court is granted specific jurisdiction to examine, adjudicate and decide cases at the IIFC, operating under the Supreme Court (Mahkamah Agung/MA in Indonesian).

In essence, the establishment of the IIFC is expected to make a positive contribution to strengthening the national economy. This is achieved through the development of an internationally competitive financial centre. (rig)