Nominee arrangements have been a fixture of foreign property investment in Bali for over a decade. Foreigners have used them to register freehold land in an Indonesian’s name while retaining control through side agreements, treating it as a workaround to the rule that reserves freehold ownership for Indonesian citizens.
The practice was legally questionable from the start, but enforcement was inconsistent enough that the structures became common.
That has changed.
Recent regulatory shifts have made nominee land arrangements significantly more dangerous, with criminal exposure now applying to foreign investors and the nominees.
This article covers what nominee arrangements are, where the law and recent enforcement stand, and legal alternatives.
What Is a Nominee Arrangement?
A nominee arrangement is a setup where a local person is registered as the legal owner of shares or land, but the actual control and economic benefit sits with a foreigner.
The Indonesian party appears on the official records. However, the foreigner controls the asset through private side agreements: a loan agreement covering how the nominee acquired the shares, an indemnity, a pledge of shares back to the foreign investor, and a power of attorney over key decisions.
In Indonesia, the most common application has been in property: an Indonesian citizen is registered as the owner of freehold land (Hak Milik) at the National Land Agency (BPN).
Foreign investors have used these arrangements for years as a workaround for ownership restrictions, and the freehold land prohibition. While these are often presented in different ways, the underlying setup is the same: a foreigner controls an asset they can’t legally own.
Are Nominee Land Arrangements Legal in Indonesia?
Indonesian law has long treated nominee land arrangements as void, and recent regulatory changes have made them criminally exposed in Bali specifically.
Article 26(2) of the Basic Agrarian Law (UU 5/1960) is the relevant national-level provision. It treats any arrangement that effectively transfers control of land to a foreigner as null and void from the outset. The registered owner under the land certificate is the legal owner. Side agreements that contradict this position are not enforceable.
What’s changed recently is the enforcement environment.
Bali Perda 4/2026, signed by Governor Wayan Koster on 24 February 2026, criminalized nominee land arrangements specifically. The regulation applies to:
- The foreign investor who is the de facto owner
- The Indonesian nominee who holds the registered title
- Any intermediary or facilitator who helped set up the structure
Practically, it means that a failed nominee arrangement can cost you your investment and your freedom because of civil voidability and criminal liability.
Enforcement has been active since 2025. The Bingin Beach demolitions in July 2025 removed 48 structures that had been operating for years, demonstrating that the government is willing to act against established setups. Indonesian prosecutors have also started treating nominee land disputes as potential fraud cases, with documented foreign investor losses in the USD 100,000 to USD 500,000 range.
Why Nominee Structures Fail in Practice
Beyond the legal position, nominee arrangements fail for structural reasons that no side agreement can fix.
The nominee holds legal title, and Indonesian courts follow the official records. Loan agreements and pledges of shares give you a contract claim against the nominee at best, not ownership of the asset. If the nominee dies, their heirs inherit the property under Indonesian succession law, and negotiating with multiple heirs after a death is a common path to total loss.
In addition to that, the asset is also exposed to the nominee’s personal circumstances. For instance, banks can seize it as collateral for the nominee’s debts. A determined nominee can also legally sell the asset to a third party, and your side agreement is unenforceable against a bona fide purchaser.
None of these failure modes are theoretical. They show up in Bali property disputes regularly, particularly in inheritance situations where the original nominee passes away and the foreigner is left negotiating with relatives who may have no relationship to the original arrangement.
Legal Alternatives to a Nominee Land Arrangements
Foreigners have several legitimate ways to hold property in Bali. None of them require a nominee, and each gives you full legal protection and recourse. We cover these in detail in our guide to buying property in Bali as a foreigner, but here’s a summary of how each option works.
Hak Pakai (Right to Use)
Hak Pakai is a registered land title that lets a foreign individual hold property in their own name on an official certificate issued by the National Land Agency (BPN). Under Government Regulation 18 of 2021, it’s valid for up to 80 years total, structured as a 30-year initial term followed by a 20-year extension and a 30-year renewal.
Hak Pakai works well for:
- Personal residence (villa, house, apartment)
- Long-term residents who hold a KITAS or KITAP (residency is required to hold Hak Pakai)
- Foreigners who want a registered title rather than a contractual interest
The land is held directly in your own name, not through an intermediary. You can sell, transfer (within Hak Pakai eligibility rules), and even mortgage the property as collateral for a loan.
Hak Sewa (Leasehold)
Hak Sewa is a long-term lease arrangement between the foreign individual and the Indonesian landowner directly. Standard terms are 25 to 30 years initially, often pre-negotiated for extensions up to 70 years.
Leasehold works well for:
- Foreigners who don’t need permanent ownership
- Properties where the underlying landowner wants to retain freehold title
- Shorter time horizons or testing a location before committing to longer-term structures
The contract is between you and the landowner, no intermediary involved.
PT PMA with Hak Guna Bangunan (HGB)
For foreigners holding property commercially (rental villas, businesses, multi-property portfolios), the cleanest structure is a PT PMA holding HGB title. HGB (Right to Build) gives the PT PMA the right to build and own structures on the land for up to 80 years.
PT PMA + HGB works well for:
- Villa rental businesses
- Multi-property portfolios
- Commercial property holding
- Foreigners who want to combine property ownership with a legitimate business operation
Under BKPM Regulation 5/2025, the PT PMA minimum paid-up capital is IDR 2.5 billion (~USD 150,000), with a total investment plan above IDR 10 billion. This is meaningful upfront capital but it gives you a fully legal commercial property structure with proper title, full legal recourse, and the ability to operate a registered business.
Investor KITAS for Long-Term Residence
If you want to live in Bali long-term while holding property, an Investor KITAS sponsored by your own PT PMA gives you legal residency tied to your business. It’s renewable annually with a path to KITAP (permanent stay) after several years of continuous residency.
The combination of PT PMA + HGB + Investor KITAS gives you legitimate ownership, legitimate residence, and full legal recourse. While it costs more upfront than a nominee arrangement, it solves the underlying problem without the legal exposure that now sits on top of nominee structures in Bali.
However, do keep in mind that you are only allowed to work for your own company on an Investor KITAS with severe consequences for non-compliance.
How Emerhub Can Help
Emerhub’s team in Indonesia helps foreign investors set up and operate through structures that hold up legally. Our team handles PT PMA incorporation, property structuring through HGB or leasehold, or outsourced operational support like EOR and IOR for companies that aren’t ready to set up an entity yet.
If you’re already in a nominee arrangement, we can help you understand your exposure and work out a transition path. Transitioning is more involved than starting fresh, but for most situations there’s a workable route that doesn’t wait for enforcement to find you first.
Get in touch with our local consultants to talk through your situation.
Frequently asked questions
Personal trust doesn’t change the legal position. The nominee still holds legal title, and Indonesian law sides with the registered owner in any dispute. If they pass away, their heirs inherit the land, regardless of your relationship with the original nominee. Family arrangements also tend to involve longer time horizons, which increases the likelihood of inheritance events affecting the structure.
The nominee holds legal title to the land, controls the certificate, and is the registered party for all dealings with the BPN and any future buyers. If they refuse to sign transfer documents, claim the property as their own, or simply become unresponsive, your enforcement options are limited. You can sue under your side agreements, but recovery is uncertain and slow. Your claim to the land itself is void from the start under Article 26(2) of the Basic Agrarian Law.
Perda 4/2026 is a provincial regulation that applies only in Bali. The national-level prohibition on nominee land arrangements (Article 26(2) of the Basic Agrarian Law) applies everywhere in Indonesia. What Bali has done is add criminal sanctions on top of the national civil voidability framework. Other Indonesian provinces could enact similar regulations as regional governments are trending toward stricter enforcement.
