On 21 July 2026, the House of Representatives of the Republic of Indonesia officially enacted the Indonesia International Financial Center Law (“IIFC Law“) during a plenary session. The enactment of this legislation marks a strategic initiative by the Government to strengthen Indonesia’s competitiveness in attracting investment and to position the country as an emerging international financial hub.
The IIFC Law establishes the Indonesia International Financial Center (“IIFC“), a designated financial district intended to serve as a hub for financial services activities. The IIFC is designed to facilitate a wide range of financial activities, including investment, insurance, aircraft and ship financing, leasing, and other financial services that form part of Indonesia’s long-term vision for developing a world-class financial center. In addition to providing various business incentives, the Law establishes a comprehensive legal framework aimed at ensuring legal certainty for businesses operating within the IIFC.
As the primary legal framework governing the IIFC, the IIFC Law regulates key aspects of its establishment and operation, including institutional arrangements, licensing and business activities, governance, the rights and obligations of business actors, and dispute resolution mechanisms. These provisions are contained in 10 (ten) chapters and 73 (seventy three) articles, forming the legal foundation for the operation of the IIFC.
Key Provisions of IIFC Law
| Chapter | Scope of Regulation |
|
Chapter I: The General Provisions |
Establishing the Definition, scope, and principles governing the operation of IIFC |
| Chapter II : Establishment, status, and the objectives of IIFC |
Governing the establishment of IIFC, legal status, and the purpose of its establishment |
|
Chapter III: The Business activities at IIFC |
The regulation of types of businesses and economic activities in the IIFC financial sector, which includes: – Banking; – Insurance; – Sharia finance; – Capital market, derivative finance, and carbon exchange; – Pension fund; – Financing; – Venture Capital; – Financial sector technology innovation (fintech); – Guarantee; – International commodity trading or exchange; – Bullion; – Trust fund managers; – Trust fund management; – Financial instrument management; – Conglomerate holding company; – Foreign exchange market; and – Family wealth management services (family offices).
Regarding ancillary business activities within the financial sector, these include: – Public accountants; – Appraisal services; – Notaries; – Finance consultant; and – Legal consultant. |
|
Chapter IV : The institutional structure of IIFC |
Regulates the institutional framework of IIFC, including the division of authority, the establishment of managing and supervisory bodies, accountability mechanisms, as well as the delegation of technical arrangements to be further regulated through a presidential regulation. |
|
Chapter V : The arbitration institution of IIFC |
Regulates the establishment and authority of an arbitration institution as one of the dispute resolution mechanisms within IIFC. |
|
Chapter VI : The IIFC Court |
Regulates the status and standing of the IIFC Court as a special court mechanism, its authority to adjudicate cases within IIFC, the applicable procedural law, as well as the funding of the court sourced from the IIFC Management institution. |
|
Chapter VII : The government support |
Regulates the technical support provided by the central government and regional government in supporting the operation of IIFC. |
|
Chapter VIII : Tax facilities and other special facilities. |
Regulates the provision of various tax facilities and other special facilities in the operation of IIFC. This regulation covers incentives in the areas of Income Tax (PPh), Value Added Tax (VAT) and/or Luxury Goods Sales Tax (LGST/PPnBM), as well as customs, including the requirements and parties eligible to receive such facilities. In addition, this chapter also regulates the tax treatment of inheritance and IIFC’s initial capital funding, taxpayers’ administrative rights and obligations, the imposition of sanctions for misuse of facilities, as well as the provision of special facilities for business operators, experts, and other parties conducting activities within IIFC. |
|
Chapter IX : The distinctive of IIFC |
Regulates various special provisions such as the use of language, licensing mechanisms, the use of foreign currency, and the conduct of financial transactions. |
| Chapter X : Closing provision |
Regulates closing provisions including exceptions to prevailing laws and regulations, mandates for the formulations of implementing regulations, as well as provisions concerning the entry into force of the IIFC Law. |
The scope of the principal regulatory matters under the IIFC Law as outlined above demonstrates that the IIFC Law is designed not merely as a legal foundation for the establishment of IIFC, but also as a framework for building a comprehensive financial ecosystem. In explaining the policy direction of the IIFC Law, The Minister of Finance Purbaya Yudha Sadewa stated that the implementation of IIFC rests on 3 (three) main pillars, namely:
- Expending access to global capital and investment as a source of long-term financing;
- Building a financial services ecosystem supported by technology, cybersecurity, and internationally standardized governance; and
- Enhancing human resource competitiveness through job creation, technology transfer, and capacity building for talent in the financial sector.
Implications of the IIFC Law for Business Operators and the Financial Services Sector
The IIFC Law expands the space for various actors in the financial services sector, ranging from banking, capital markets, insurance, financing, and pension finds, to venture capital companies, financial technology providers, and supporting professions such as public accountants, notaries, legal consultants, and financial consultants to participate in the IIFC ecosystem.
Nevertheless, business operators are considered to need to closely monitor developments in implementing regulations that will govern various technical aspects, including the operational location of IIFC, the forms of incentives to be provided, as well as its institutional structure and governance. This is because the clarity of such provisions will be a critical factor in providing legal certainty, as well as serving as a basis for investment decisions and business strategies related to operations within the IIFC area.
Challenges in Implementing the IIFC Law
Behind the various opportunities offered to business operators, the IIFC Law is, on the other hand, not without a number of legal and governance issues that require attention. These legal issues relate not only to the effectiveness of IIFC’s operation, but also to harmonization with the legal and institutional regimes already in effect in Indonesia.
One issues that may potentially arise is the division of authority between IIFC and institutions that have thus far held regulatory, supervisory, and financial system stability functions, such as the Otoritas Jasa Keuangan (OJK), Bank Indonesia, Lembaga Penjamin Simpanan (LPS), and national court. In this context, clarity is needed regarding the boundaries of authority of each institution to prevent overlap in the supervision of financial institutions, the handling of systemic risk, and dispute resolution. In addition, the extremely broad authority of the IIFC Council, together with the mechanism for the appointment of officials by the President, raises concerns regarding independence, conflicts of interest, and regulatory capture, should these not be accompanied by adequate oversight mechanisms.
Beyond institutional aspects, one systemic reform under the IIFC Law that warrants particular attention is the establishment of a special IIFC judicial system that adopts common law principles, with rulings that are final in nature. This has the potential to raise questions regarding the division of jurisdiction between the IIFC judicial system and the national judicial system, as well as to narrow the scope of legal remedies available to disputing parties.
Conclusion
The enactment of the IIFC Law represents a strategic step by the government in building a legal framework for the establishment of an international financial center in Indonesia. Through its provisions on institutional structure, business activities, dispute resolution mechanisms, and various facilities supporting financial services activities, the IIFC Law serves as the foundation for developing a more competitive and globally oriented financial ecosystem.
At the same time, the effectiveness of the IIFC Law’s implementation will heavily depend on the clarity of its implementing regulations and the consistency of their application. Business operators in the financial services sector should therefore closely monitor further regulatory developments, including the division of authority among regulators, institutional governance, and the harmonization of the IIFC legal regime with the national legal system. Clarity on these aspects will be a critical factor in creating legal certainty, while also providing a foundation for investment decisions and business activities within the IIFC area.
As the PFII framework continues to develop, businesses and financial institutions need to understand not only the opportunities it presents, but also the legal and regulatory implications that come with it. MNL Law Firm is committed to assisting businesses in navigating these developments by providing legal insights and solutions tailored to their respective business needs. For further inquiries or legal assistance relating to financial law, financial sector regulations, and other legal matters arising from the development of the PFII, please contact MNL Law Firm. Our team is ready to provide legal advice and support tailored to your business needs.
https://gankapital.com/article/indonesia-international-financial-center-pfii/
Author : Arcefrida Imanuella,S.H.
Editor: Robby Simamora, S.H.,M.H.