Exposing the 1 Legal Mistake That Could Cost You Everything: The Truth About Using a Nominee in Bali and Lombok

Introduction: The Quiet Risk of a Nominee in Bali and Lombok

Over the past decade, Bali, Lombok, and Sumbawa have become prime targets for foreign investors seeking beachfront property, private villas, or boutique businesses. The tropical promise of paradise has drawn entrepreneurs, retirees, and dreamers alike. But with growing interest comes a hard legal truth: Indonesia strictly limits direct foreign ownership of land.

That’s why many foreigners turn to a nominee in Bali and Lombok—an arrangement where an Indonesian citizen holds assets on behalf of a foreign investor. On paper, it looks like a convenient workaround. Locally, it’s often brushed off as “common practice.” In reality, however, it’s a legal grey zone that can quickly turn into a nightmare.

Using a nominee in Bali and Lombok may seem like a shortcut to ownership, but it often lacks enforceable protection, leaving foreigners vulnerable to disputes, fraud, or even asset loss. This article sheds light on the legal landscape, risks, and real alternatives—so you can invest smartly, and sleep peacefully under the palm trees.

What Is a Nominee in Bali and Lombok?

A nominee in Bali and Lombok refers to an Indonesian citizen who holds legal ownership of an asset—such as land or company shares—on behalf of a foreign national. This arrangement is often used by foreigners seeking to bypass restrictions on direct ownership under Indonesian law, especially in sectors like property or business formation.

The most common use of a nominee in Bali and Lombok involves land purchases. Since foreigners cannot legally hold freehold titles (Sertifikat Hak Milik or SHM), they might “buy” a property under a local’s name, with private agreements (often unofficial) outlining the foreigner’s rights. Similarly, for company setups, a nominee may hold majority shares in a locally-registered business while the foreign investor funds and operates it.

There are both formal and informal nominee structures. A formal structure might include legal documentation—such as loan agreements, powers of attorney, or declarations of trust. But in practice, these are rarely enforceable under Indonesian law. Informal arrangements are even riskier, often based solely on verbal trust or loosely drafted contracts.

Regardless of structure, using a nominee in Bali and Lombok carries significant legal and financial risks. These arrangements are not protected by Indonesian courts and can be challenged or reversed, especially in cases of dispute, inheritance, or government scrutiny. Understanding the true nature and consequences of a nominee agreement is crucial before committing to one.

Why Foreigners Use Nominee Structures in Bali and Lombok

Many foreigners who dream of owning a villa, beachfront land, or a local business are quickly confronted with a harsh legal reality: Indonesia’s Agrarian Law (Undang-Undang Pokok Agraria) does not allow foreign nationals to hold freehold titles (Sertifikat Hak Milik or SHM). This is a foundational principle of the country’s land sovereignty laws. In essence, only Indonesian citizens can fully own land.

This restriction has led many to explore the use of a nominee in Bali and Lombok. Under such an arrangement, the property is purchased using the name of an Indonesian citizen—often a friend, staff member, or business associate—while the foreign investor provides the funds and receives a set of unofficial documents to control or claim future ownership.

One of the biggest drivers behind this method is the widespread misconception that “everyone does it, so it must be fine.” In reality, the use of a nominee in Bali and Lombok is not legal nor protected by courts. Indonesian law does not recognize private agreements that contradict the registered legal ownership.

Unfortunately, some local agents or notaries still promote these structures to foreigners as a normal and safe solution. Their reasoning may sound logical at first—“You can use a power of attorney,” or “We’ve done this many times without issues.” But these verbal assurances offer no legal protection. If the nominee decides to sell the property, claim full rights, or passes away, the foreigner has little legal recourse.

This reliance on a nominee in Bali and Lombok persists because the legal alternatives—such as Hak Pakai, Hak Guna Bangunan (HGB), or setting up a PT PMA—require more time, cost, and compliance. Still, the risks of taking a shortcut often outweigh the upfront savings.

Understanding these motivations is the first step toward making smarter, safer investment decisions.

The Legal Grey Area — and Why It’s Getting Riskier in 2025

Using a nominee in Bali and Lombok has always existed in a legal grey area—but recent developments in 2025 have made this shortcut riskier than ever. In response to growing concerns over foreign control of Indonesian assets, the government has tightened its regulations to close nominee-related loopholes.

Peraturan Pemerintah (Government Regulations) issued in late 2024 emphasize stricter monitoring of land ownership structures and the true beneficiaries behind them. These rules are tied closely with Indonesia’s ongoing anti-corruption and anti-money laundering initiatives, especially under the coordination of PPATK (Financial Transaction Reports and Analysis Center).

If a foreigner is found using a nominee in Bali and Lombok to control land or a business without proper licenses—such as through a fake shareholder agreement or backdated power of attorney—they now risk asset seizure or even criminal charges. Indonesian courts no longer turn a blind eye to these arrangements.

Newer digital systems like Coretax and OSS RBA (Online Single Submission Risk-Based Approach) are helping authorities track suspicious setups. With everything from tax filings to company ownership data now integrated, it’s easier for enforcement bodies to identify foreign involvement that doesn’t match legal documentation.

Recent legal precedents have already shown that when a dispute arises—especially in cases of death, divorce, or fraud—the foreign investor loses. Contracts built around a nominee in Bali and Lombok are often deemed invalid, because the true owner (the foreigner) was never legally entitled to hold that asset in the first place.

In 2025, this legal grey area is fading. Foreigners relying on nominee structures are no longer operating in the shadows—they’re standing in direct conflict with updated national policy. The consequences are no longer hypothetical—they’re being enforced.

Real Dangers of Using a Nominee in Bali and Lombok

The practice of using a nominee in Bali and Lombok might seem like a shortcut to property or business ownership—but it comes with very real and serious dangers that many foreigners fail to anticipate.

First and foremost, if you use a nominee in Bali and Lombok, you do not legally own the asset. On paper—and in the eyes of Indonesian law—the property or company belongs entirely to the Indonesian nominee. That means you have no legal claim if a dispute arises. You can’t go to court and say, “It was actually my land,” because the law recognizes only the registered certificate or deed.

One of the most common risks? The nominee sells the property without your consent. Since their name is on the land certificate or the company’s notarial deed, they can legally transfer or mortgage the asset—even if you paid for it. If they disappear or face financial problems, your asset could be used as collateral without your knowledge.

Then there’s the issue of death or family disputes. If the nominee passes away, their heirs become the legal owners. Unless there's a solid legal structure in place (which is often missing in nominee deals), the family can legally claim the property, and you’re left with nothing.

Another growing concern in 2025 is tax and audit exposure. The Indonesian Directorate General of Taxes (DJP) is increasing audits of nominee-held assets. If a nominee in Bali and Lombok receives income (e.g., from renting a villa) and doesn’t report it, the foreigner behind the scenes may face investigations. Tax evasion or misreporting under a nominee setup can trigger fines, frozen assets, or even blacklisting.

What starts as a “quick solution” often ends in stress, loss, and costly legal battles. The risks of using a nominee in Bali and Lombok are no longer theoretical—they’re being realized in courtrooms and tax offices across Indonesia.

Safer Alternatives for Foreigners

Instead of relying on the uncertain and risky path of a nominee in Bali and Lombok, foreign investors and property seekers have legal alternatives that provide both control and protection.

The most structured option is to set up a PT PMA (foreign-owned company). This entity can legally acquire land under a Hak Guna Bangunan (HGB) title—perfect for villas, commercial buildings, and resorts. While you don’t own the land outright, your PT PMA does, and you retain full control through legal company ownership. It’s the safest way to structure investments and property development, avoiding all the issues tied to a nominee in Bali and Lombok.

For residential purposes, Hak Pakai (Right to Use) is a government-recognized title available to foreigners who hold a KITAS or KITAP. This title is valid for up to 80 years with proper renewals and can be registered in your own name—no nominee needed.

Alternatively, long-term lease agreements (Hak Sewa) provide a flexible, lower-risk solution for those who want to use land or property without buying it. These contracts are valid for up to 25–30 years and are renewable.

Regardless of the option, legal due diligence is key. Work with licensed notaries and legal advisors to verify land titles, seller rights, and zoning compliance.

Avoiding a nominee in Bali and Lombok is not only safer—it’s smarter, legal, and sustainable for long-term peace of mind.

What to Do If You Already Have a Nominee in Bali and Lombok

If you already have a nominee in Bali and Lombok, don’t panic—but don’t delay either. While your arrangement may seem stable now, legal risks and uncertainties can surface suddenly. Acting proactively can help you avoid major losses or complications later.

The first step is to consult a qualified notary and corporate lawyer—preferably one with experience dealing with foreign ownership structures and Indonesian agrarian law. A legal professional can review your nominee agreement to determine whether it complies with the current regulations and identify your exposure.

In many cases, it’s possible to restructure your current nominee arrangement into something safer and legal. This might involve transferring the property into a PT PMA structure—if your intent is business or rental—or converting it into a long-term lease agreement (Hak Sewa) if you're using it personally.

It’s also important to audit all your documentation, especially tax reports and land certificates. If income has been generated through the property (e.g., rentals or villa bookings), you need to ensure taxes have been filed accurately and under the correct name. Misfiling under a nominee in Bali and Lombok can trigger back taxes and fines.

If restructuring isn’t possible immediately, you can still create a legal safeguard, such as drafting a trustee agreement or exit plan, while you transition.

The key message? Using a nominee in Bali and Lombok is risky—but not irreversible. With proper legal and tax guidance, you can protect your investment and move toward full compliance with Indonesian law.

Conclusion: Legality Is the New Luxury

In today’s evolving regulatory landscape, relying on a nominee in Bali and Lombok is no longer a clever shortcut—it’s a liability. While nominee agreements may have once seemed like a practical workaround, recent legal enforcement, rising audits, and the risks of dispute make them increasingly dangerous for foreign investors.

The modern foreign business owner values security, transparency, and sustainability. “Clean and legal” isn’t just about compliance—it’s about peace of mind, protecting your hard-earned assets, and building a foundation that can grow without fear of legal collapse.

Choosing the legal route—through a PT PMA, Hak Pakai, or a properly structured lease—isn’t just safer; it signals professionalism and long-term vision. A legally sound structure also helps you access local financing, investor partnerships, and scalable operations.

Working with compliance-minded advisors is no longer optional. It’s the smartest investment you can make before signing anything in paradise. If you’re already entangled with a nominee in Bali and Lombok, the time to act is now. Restructuring and cleaning up your affairs today can save you from financial and legal trouble tomorrow.

Remember: in Indonesia's competitive landscape, legality is the new luxury—and it’s the only way to truly thrive with confidence.

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