PFII Offers 50-Year Tax Holiday, One of the World's Longest

The Indonesia International Financial Centre (PFII) Bill was officially passed by the House of Representatives (DPR) on Tuesday (21/7/2026).

The PFII Bill was approved during the DPR’s 26th Plenary Session of the Fifth Session of the 2025-2026 legislative year.

The PFII Bill contains several facilities that will be granted to foreign companies wishing to place their funds in the PFII, one of which is tax facilities.

In the post-passage draft of the PFII Bill, Article 48 paragraph 2 states that the tax facilities provided cover income tax (PPh), value added tax (VAT), luxury goods sales tax (PPnBM), and customs facilities.

For income tax specifically, the PFII will provide a 0% rate for 50 years.

Under Article 49 of the PFII Bill, the 0% rate for 50 years is granted in the form of exemptions on income sourced from outside Indonesia, corporate income tax reductions, a final income tax rate of 0%, exemption as a domestic taxpayer, and relief from income tax withholding and/or collection.

This indicates that the tax facilities at the PFII constitute a tax holiday, subject to certain conditions. The tax holiday facility at the PFII is currently the longest of its kind.

Under Articles 50 and 51, the facility in the form of a 100% corporate income tax reduction is granted to businesses operating in the PFII in the financial sector, the sector supporting finance, and other sectors.

The 100% corporate income tax reduction is not limited to financial sector companies; it is also granted to the PFII Management Institution (LP) and the PFII Financial Services Supervisory Institution (LPJK) on their operational activities in the PFII.

However, the corporate income tax reduction facility remains subject to international tax agreements, including the Global Minimum Tax (GMT) framework.

Mukhamad Misbakhun, Chair of DPR Commission XI, said the tax facilities at the PFII, including the corporate income tax reduction, would still refer to the GMT agreement.

“The law already stipulates that investors are granted tax exemption for 50 years. But of course we are aware of changes in the international tax landscape, and we follow all of that,” Misbakhun told CNBC Indonesia on Thursday (23/7/2026).

“The mechanism already exists; we just need to see whether the companies investing in the PFII fall within the scope of the global minimum tax or not. If they do not, it means they can still enjoy tax exemption for 50 years,” Misbakhun asserted.

The GMT is a global agreement that has been implemented in more than 60 countries. Indonesia is on that list, having applied the GMT since 1 January 2025, alongside Singapore, Malaysia, Hong Kong and the UAE.

At the PFII, the GMT rules will also apply to covered Multinational Enterprises (MNEs), namely multinationals with a global turnover of at least €750 million.

The scheme for MNE groups operates through the Qualified Domestic Minimum Top-up Tax (QDMTT) imposed by the country of the subsidiary, the Income Inclusion Rule (IIR) imposed by the country of the parent company, and the Undertaxed Payment Rule (UTPR) imposed by other countries of the group’s members.

The application will not result in additional taxes if the business is an individual and not part of an MNE with a global turnover below €750 million. It also does not apply if the PFII business has an effective tax rate above 15% after being consolidated with other subsidiaries outside the PFII in Indonesia.

“In addition to the tax holiday, investors, businesses and experts there are also granted various other facilities, such as exemption from income tax collection for SPLN (offshore loan interest), as well as various VAT and luxury goods sales tax facilities,” he explained.