JAKARTA (Bloomberg): Indonesia is planning sweeping tax incentives for a proposed international financial centre, including an effective 0% income tax rate for some businesses and foreign finance experts.
The bill to create the Indonesia International Financial Center, discussed Monday at a public hearing between lawmakers and legal and economic experts, would offer a 100% corporate income tax reduction for businesses operating in the zone, along with a full income tax break for foreign financial-sector experts.
Foreigners holding so-called Golden Visas in the zone may not be treated as domestic tax residents, while overseas investors earning dividends or other investment returns from the hub could be exempt from Indonesian withholding or collection tax. The bill also allows value-added tax to be waived, exempts luxury-goods sales tax and import duties, and permits additional tax incentives to be set by government regulation.
The bill would ring-fence the financial hub from Indonesia’s domestic market by barring businesses inside the zone from raising public funds or transacting with domestic consumers outside it.
The hub’s financing would draw on both public and private sources, including cash, state-owned assets, assets held by state-owned enterprises, business entities, the investment management arm of sovereign wealth fund Danantara, or other lawful channels.
Lawmakers and the government are deliberating the proposal and aim to pass it into law in the coming weeks. Bali is among the areas under consideration for the hub’s location.
The financial-center plan is the latest effort by President Prabowo Subianto to draw in capital for an increasingly ambitious state-led economic agenda in Southeast Asia’s largest economy. Prabowo has pledged to lift economic growth toward 8% - a mark not seen in Indonesia in decades - while rolling out national programs that require fresh sources of financing beyond the state budget.
The push would put Indonesia in competition for mobile capital, wealth managers and financial firms with established hubs such as Singapore and Hong Kong, as well as Dubai. Those centers appeal to investors not just through tax perks, but through transport and connectivity infrastructure, as well as regulatory predictability, specialized legal systems and investor trust - areas Indonesia will need to improve amid deteriorating investor confidence in recent months.
Fund managers and ratings analysts have grown more wary of Indonesia’s policy direction under Prabowo, citing greater uncertainty, a more centralized decision-making process and signs that economic management is becoming more interventionist. That backdrop risks complicating the government’s pitch that the country can become a trusted international financial hub.
Under the bill, the proposed zone would:
During the hearing, academics largely advised that the financial center’s establishment should be supported by a clear institutional framework, as well as strong and integrated oversight and risk management.
The government also needs to ensure the readiness of professional talent and human resources, as well as the financial and legal infrastructure, to support cross-border business activities that can compete with existing global hubs, they said. -- ©2026 Bloomberg L.P.
