What is PFII? Understanding the International Financial Center Being Drafted by the DPR and Government

The Indonesian government and the House of Representatives (DPR) are currently collaborating on a draft bill to establish the Indonesia International Financial Center (IIFC). This legislation is intended to serve as the foundation for creating a new financial ecosystem in Indonesia.

The IIFC is envisioned as an internationally standardized financial center designed to attract investment, bolster the national financial sector, enhance Indonesia's global competitiveness, and act as a catalyst for deepening the domestic financial market. To achieve these goals, the government is preparing a range of facilities to entice investors.

These incentives include streamlined processes for immigration, employment, residency, and licensing, alongside tax benefits. Notably, the government has proposed the establishment of a special IIFC court to provide legal certainty for international business actors. This court would have the authority to examine, adjudicate, and rule on disputes related to business activities within the IIFC and international commercial disputes connected to the zone.

Chairman of DPR Commission XI, Mukhamad Misbakhun, revealed that the government is proposing a 0% income tax incentive for businesses operating within the IIFC, potentially lasting up to 50 years. Misbakhun personally advocates for the incentive to be permanent but finds the 50-year period acceptable given future projections.

This policy is expected to draw back Indonesian investors who currently utilize special purpose vehicles (SPVs) in various overseas jurisdictions. The IIFC zone is also designed to be an enclave with unique appeal to investors, offering a broader range of investment options beyond securities portfolios, including assets in the capital market and real sectors. Beyond tax incentives, the government is preparing other conveniences such as legal certainty and simpler oversight governance, without compromising prudence.