The Government together with the House of Representatives (DPR) officially passed the Bill on the Indonesia International Financial Center (IIFC Bill) on 21 July 2026.
The regulation represents a refinement of the initial draft that had previously been prepared in early July 2026. Compared to the initial draft, which consisted of 7 chapters and 53 articles, the passed IIFC Bill has been expanded to 10 chapters and 73 articles.
The expanded framework introduces a number of provisions concerning the governance of the IIFC, business activities, institutional authority, the judicial system, tax facilities, and other matters relevant to business operators within the IIFC.
This article outlines several key provisions of the IIFC Bill and their legal and regulatory implications.
What Is the Indonesia International Financial Center (IIFC)?
The Indonesia International Financial Center (IIFC) is an area designed to serve as a hub for international financial services activities in Indonesia.
The establishment of the IIFC is mandated under Article 248A of Law Number 4 of 2026 on the Development and Strengthening of the Financial Sector. The establishment of the IIFC is intended to support sustainable national economic activity and encourage diversification of the national economy.
The Government may designate one or more areas as IIFC areas, with distinctive features relating to financial independence and the adoption of international legal and financial standards.
The IIFC may also receive special treatment, including tax facilities and other facilities provided under the applicable legal framework.
The operation of the IIFC is carried out through the IIFC Council, which is responsible for managing, supervising, and ensuring that the objectives of the IIFC as an internationally standardized financial hub are achieved.
Various business sectors may operate within the IIFC, including financial-sector businesses and supporting activities, as well as nonfinancial sectors such as hospitality, tourism, and culinary services.
Companies operating within the IIFC may also establish various forms of business entities, including legal entities, Special Purpose Vehicles (SPVs), trusts, or other forms of legal entities that will be further regulated through IIFC Council Regulations.
What Are the Key Provisions of the IIFC Bill?
1. The IIFC Cannot Be Located Within a Special Economic Zone (SEZ)
One provision that distinguishes the current IIFC Bill from the initial draft concerns the location of the IIFC area.
Under the passed bill, an IIFC area cannot be located within a Special Economic Zone (SEZ). The initial draft had previously left open the possibility for an IIFC to be located within an SEZ.
This provision establishes a clearer distinction between the IIFC framework and the existing legal framework governing Special Economic Zones.
2. Broader Permitted Business Activities
The IIFC Bill provides a framework for various business activities in the financial and supporting sectors.
These include activities relating to:
- Banking;
- Insurance;
- Islamic finance;
- Family offices;
- Special Purpose Vehicles (SPVs);
- Investment management;
- Public accounting;
- Appraisal services;
- Notarial services; and
- Legal, financial, and tax consultancy services.
The bill also establishes several forms of business entities that may operate within the IIFC, including business entities, legal entities, SPVs, trusts, and other forms that may subsequently be regulated through IIFC Council Regulations.
This provision provides a legal framework for determining the types of activities and business structures that may be established within the IIFC.
3. Restrictions on Business Activities Within the IIFC
In addition to establishing permitted activities, Article 8 of the IIFC Bill sets out restrictions applicable to business operators within the IIFC.
The restricted activities include:
- Collecting public funds in Indonesia, whether in rupiah or foreign currency;
- Selling financial products to the public outside the IIFC without approval from the relevant authority;
- Opening rupiah accounts without complying with applicable provisions;
- Providing loans outside the IIFC within Indonesian territory, except in accordance with minimum lending provisions to be further regulated; and
- Other activities that may subsequently be determined through IIFC Council Regulations.
These provisions establish boundaries between activities that may be conducted within the IIFC and activities that remain subject to restrictions or specific regulatory approval.
Business operators within the IIFC will therefore need to consider not only whether a particular activity is permitted, but also whether additional approvals or restrictions apply based on the nature and location of the activity.
4. Administrative Sanctions for Violations
The IIFC Bill also establishes administrative sanctions for violations of the restrictions applicable to business activities within the IIFC.
The sanctions may include:
- Written warnings;
- Restriction or freezing of products, services, or business activities;
- Dismissal of management;
- Administrative fines;
- Revocation of business licenses or product licenses; and
- Other administrative sanctions that may subsequently be determined.
These provisions establish an enforcement framework for ensuring compliance with the regulatory requirements applicable within the IIFC.
5. Development of the Islamic Finance Ecosystem
The IIFC Bill places specific emphasis on the development of an internationally standardized Islamic finance ecosystem.
The framework is intended to strengthen the contribution of the national financial sector and support its international competitiveness.
The bill provides for the development of a comprehensive and innovative Islamic finance ecosystem in which international Islamic principles, rules, and standards may be applied and adopted within the IIFC.
The development of Islamic finance is therefore positioned as an integral component of the broader development of the IIFC as an international financial center.
6. Institutional Governance Structure of the IIFC
The IIFC Bill establishes several institutions with different functions and authorities in relation to the management, operation, and supervision of the IIFC.
IIFC Advisory Council
Authority to manage the IIFC is delegated to the IIFC Governor, who is appointed by and reports directly to the President.
To support the achievement of the objectives of the IIFC, an IIFC Advisory Council is established.
The Advisory Council consists of:
- A Minister, who also serves as chair;
- The Governor of Bank Indonesia;
- The Chair of the OJK Board of Commissioners;
- The Chair of the LPS Board of Commissioners; and
- The Head of PPATK.
The IIFC Advisory Council may provide policy recommendations to the IIFC Council concerning strategic IIFC policy.
These recommendations may cover financial-sector development, investment strengthening, fiscal risk mitigation, governance, and other policies of national significance.
IIFC Council
The IIFC Council has specific authority relating to the management of the IIFC.
Its authorities include granting investment permits, facilitating business activities, and providing special facilities to parties supporting IIFC financing in the preparation, construction, and development of the IIFC.
The IIFC Council is also authorized to:
- Establish strategic plans and policies;
- Issue implementing regulations and other special facilities within the IIFC;
- Supervise other IIFC institutions;
- Approve annual work plans and budgets of other IIFC institutions; and
- Receive accountability reports from other IIFC institutions.
In formulating strategic plans and policies, the IIFC Council is required to consider the social, economic, and environmental impacts that may arise for the Indonesian public.
IIFC Management Agency (LP PFII)
The IIFC Management Agency, or LP PFII, may carry out the day-to-day operational functions of the IIFC.
LP PFII is responsible for managing IIFC operations and regulating and supervising business activities in other sectors, including transportation, healthcare, tourism, food and beverage, and other business activities.
Its authorities include providing administrative, operational, and business services; developing and operating infrastructure, technology, and facilities; and collecting levies, fees, and charges from business operators within the IIFC in coordination with the relevant ministries, agencies, and bodies.
The initial capital of LP PFII may originate from special investment by BPI Danantara, state or regional assets, business entities, and other sources in accordance with applicable law.
LP PFII may manage its assets based on principles of good, accountable, and transparent governance, including obtaining loans and providing guarantees for operational purposes.
Management audits and financial accountability of LP PFII are carried out by a public accountant.
IIFC Financial Services Supervisory Agency (LPJK PFII)
LPJK PFII is established as an independent, transparent, and accountable institution under the supervision of the IIFC Council.
Its principal functions are to regulate and supervise financial-sector business activities and supporting businesses and to maintain financial system stability within the IIFC.
LPJK PFII is authorized to:
- Establish regulations;
- Supervise and examine business operators in the financial and supporting sectors;
- Issue and revoke business licenses or approvals;
- Impose administrative sanctions on business operators that violate applicable provisions; and
- Collect levies, fees, and charges for services provided.
LPJK PFII may also obtain information from business operators for the purpose of carrying out its functions.
Information obtained through this authority must generally be kept confidential, subject to exceptions including tax purposes and the implementation of binding international agreements to which the Government is a party.
7. The Court System Within the IIFC
The IIFC Bill introduces changes to the structure and jurisdiction of the IIFC Court.
Under the earlier framework, the IIFC Court was contemplated as a first and final instance court. The bill changes this structure into a special court within the general court system, consisting of a Court of First Instance and a Court of Appeal.
The jurisdiction of the IIFC Court is also broader under the bill.
It may cover:
- Bankruptcy and restructuring cases;
- Cases relating to business activities within the IIFC;
- Cases involving contracts executed within the IIFC;
- Cases relating to tax facilities within the IIFC;
- Cases involving the IIFC Council, LP PFII, or LPJK PFII; and
- Other civil cases arising within the IIFC area.
The IIFC Court would consist of a chief judge, deputy chief judge, judges, a registrar, a clerk, and a bailiff.
Judges serving on the IIFC Court would generally be required to have expertise in areas such as banking law, capital markets law, bankruptcy law, tax law, international commercial law, or other areas relevant to the objectives of the IIFC.
The bill also provides for ad hoc judges, including judges appointed for a fixed term or for specific cases.
Under certain conditions, an ad hoc judge may be appointed as Deputy Chief Judge of the IIFC Court. The bill also provides that, in certain circumstances, this position may be occupied by a foreign national registered with the IIFC Council.
The IIFC Court may establish its own procedural law and issue execution orders, provisional attachment orders, asset-freezing orders, and other temporary protective measures.
It may also cooperate with Indonesian and foreign courts concerning judicial assistance, evidence, bankruptcy matters, and dispute resolution.
8. Tax Incentives Within the IIFC
The IIFC Bill provides tax facilities in the form of Income Tax (PPh), Value Added Tax and/or Sales Tax on Luxury Goods (PPnBM), as well as customs facilities.
Financial and investment business activities conducted by foreign taxpayers may receive PPh facilities for up to 50 years.
Supporting sectors, nonfinancial sectors, LP PFII, and LPJK PFII may also receive PPh facilities, although for periods shorter than those applicable to certain financial and foreign investment activities.
The PPh facility applies to income originating from within the IIFC and to business operators, professionals, and foreign taxpayers who meet qualifications to be determined under the applicable regulations.
The PPnBM facility includes tax not collected on the supply of strategic taxable goods or services and the import of certain strategic taxable goods.
The bill also provides a luxury goods tax exemption specifically for the transfer of luxury residences.
Customs facilities include exemptions from import duties on goods imported for the construction and development of the IIFC.
Where a party receiving tax facilities is subsequently found not to satisfy the applicable requirements, sanctions may include revocation of the facility, payment of previously uncollected tax, and other sanctions under the applicable tax laws.
9. Inheritance Tax Exemption
The IIFC Bill introduces a provision concerning inheritance tax that was not previously regulated in the initial framework.
The proposed exemption applies where both the inherited assets and the testator, who must be a foreign national, are registered with a family office within the IIFC.
The provision therefore establishes a specific tax treatment for qualifying inheritance arrangements connected with family offices operating within the IIFC.
10. Operational Provisions
The IIFC operates with several distinctive features concerning its legal and operational framework.
English is established as the operating language for decisions, policies, contracts, and judicial proceedings within the IIFC.
The bill also provides that legal principles, jurisprudence, international commercial law, international financial center practices, and international standards of fairness and equity may be applied to activities within the IIFC.
At the same time, the IIFC and activities conducted within it remain subject to Indonesian law.
Certain exceptions may apply, including provisions of Indonesian civil and business law and other regulations, guidelines, and provisions established by the IIFC Council.
Conclusion
The IIFC Bill establishes a more comprehensive legal framework for the operation of the Indonesia International Financial Center, covering governance, permitted and restricted business activities, institutional supervision, dispute resolution, taxation, and operational matters.
Among the significant developments are the establishment of a two-tier IIFC Court, the division of institutional functions between the IIFC Council, LP PFII, and LPJK PFII, more detailed restrictions and administrative sanctions, and the introduction of various tax facilities.
The bill also provides a specific framework for business operators operating within the IIFC, including provisions concerning business structures, financial and nonfinancial activities, judicial proceedings, and the application of international legal principles and English as the operating language.
Although the framework provides greater clarity on the proposed structure and operation of the IIFC, a number of technical matters remain subject to further regulation through IIFC Council Regulations and other implementing regulations.
Business operators and other interested parties should therefore continue to monitor the development of these regulations and assess the applicable legal requirements before undertaking activities within the IIFC.
For further information or consultation, please contact:
Rifki Hermawan – Partner – rifki@cptp.law
Raditya Alif Fahreza – Paralegal
