Revised P2SK Law Establishes Legal Basis for Indonesia International Financial Centre

The government has officially provided a legal basis for the establishment of the Indonesia International Financial Centre through Law Number 4 of 2026 (UU 4/2026), which amends Law Number 4 of 2023 concerning Financial Sector Development and Strengthening (P2SK). According to Article 248A paragraph (1) of UU 4/2026, the formation of the Indonesia financial centre is intended to realise the national vision for sustainable economic growth and to encourage deepening and diversification of the national economy through effective contributions to the national financial sector. Article 248A paragraph (2) of UU 4/2026 stipulates that the Indonesia financial centre is a territory possessing financial and administrative independence as well as certain legal particularities that adopt, incorporate, apply, and/or adapt to international principles and/or standards. Furthermore, the Indonesia financial centre will be managed by a special council named the Indonesia International Financial Centre Council. To support the achievement of these objectives, the government is also preparing special tax treatment and facilities for business actors operating within the Indonesia financial centre area. “In order to achieve the objectives of the Indonesia International Financial Centre, business activities within the Indonesia International Financial Centre shall be subject to special tax treatment, and shall be granted special tax facilities and other special facilities,” reads Article 248A paragraph (6) of UU 4/2026. Further regulations regarding the administration of the Indonesia financial centre area will be stipulated in a separate law. This derivative law must be enacted no later than three months after UU 4/2026 is promulgated. During the Press Conference on the Results of the Second Periodic KSSK Meeting of 2026 held last May, the government announced it was preparing the establishment of a Financial Centre Special Economic Zone (KEK) in Bali as part of a strategy to deepen the domestic financial market while attracting global investment flows in a more integrated manner. At the press conference, Purbaya Yudhi Sadewa, Minister of Finance of the Republic of Indonesia, explained that the KEK Financial Centre in Bali would be built on an area of approximately 100 hectares. To provide legal certainty and enhance the confidence of international investors, the government also plans to implement a special legal regime based on common law within the area. Additionally, the government is preparing a number of strategic fiscal incentives, including tax exemption facilities for foreign investments entering and placed within the KEK Financial Centre Bali area. Currently, Indonesia has a financial centre located in the Nusantara Capital City (IKN). This financial centre has offered limited tax incentives specifically for taxpayers making investments. Referring to Minister of Finance Regulation Number 28 of 2024 (PMK 28/2024), the government provides a 25-year tax holiday facility. A 100% tax holiday is granted for banking, insurance, and sharia finance in the IKN financial centre. Meanwhile, an 85% tax holiday facility is provided for the capital market, commodity exchanges, pension funds, financing, venture capital, fintech, guarantees, bullion, trusts, SPVs, financial holding companies, financial market infrastructure, money and foreign exchange markets, payment system service providers, and other financial services. The government also provides a 10-year withholding tax exemption facility specifically for investors who are foreign tax subjects (SPLN).