Buying property in Bali as a US citizen: FBAR, Form 8938 and the IRS

Can a US citizen own property in Bali?

Not as freehold. The Basic Agrarian Law of 1960 keeps Hak Milik, Indonesia's full freehold title, for its own citizens and makes no exception for any nationality. An American buys through the same three doors as a Briton or an Australian: a registered leasehold, Hak Pakai (a right-to-use title) once you hold a residence permit, or a foreign-owned company (PT PMA) holding a right to build (HGB).

Leasehold is where most buyers land. Roughly 90% of the properties we list are leasehold, and the typical base term is 27 years (median, our count, September 2026). Hak Pakai covers only Bali houses priced from Rp 5 bn, under Ministerial Decree 1241/2022. We compare the three routes in our guide to whether foreigners can buy property in Bali.

No US law stops you from buying abroad. The mistake to avoid is putting land in an Indonesian friend's name. Article 26(2) of the same 1960 law voids any nominee deal, and the money you paid can't be reclaimed.

FBAR and Form 8938: what goes on them and what doesn't

The villa itself usually stays off both forms. The IRS says directly held foreign real estate isn't a specified foreign financial asset for Form 8938, and FBAR only covers financial accounts. A leasehold or Hak Pakai registered in your own name is real estate.

The bank account is a different matter. Most owners open an Indonesian account for deposits, utility bills or the management company's payouts. You file FinCEN Form 114, the FBAR, once your foreign accounts together pass 10,000 in US currency at any point in the year. That's about Rp 179 million at Bank Indonesia's JISDOR rate of Rp 17,898 on September 24, 2026. The deadline is April 15, extended automatically to October 15.

Form 8938 starts higher and depends on where you live. A single filer living in the US reports above 50,000 at year-end or 75,000 at any time, both in US currency. Abroad, the same filer's thresholds are 200,000 and 300,000. Shares in a foreign company do count, so a PT PMA that owns the villa goes on Form 8938 even though the villa on its own wouldn't.

Source: IRS, Basic questions and answers on Form 8938 and Form 8938 Instructions; FinCEN, penalty inflation adjustment, January 17, 2025; Bittner v. United States, February 28, 2023; Bank Indonesia JISDOR, September 24, 2026

Rental income: the 20% Indonesia keeps and the credit you claim

Indonesia taxes your rent first. As a non-resident owner you lose 20% of gross rent to withholding tax (PPh 26) under the Income Tax Law's Article 26, with nothing deducted for management, staff or repairs. The US–Indonesia treaty, signed July 11, 1988 and in force since December 30, 1990, allows it: Article 6 gives the first right to tax real property income to the country where the property sits.

The IRS then taxes the same rent on a net basis. You report it on Schedule E, deduct operating costs and depreciate the building under the alternative depreciation system (ADS). For a foreign residential rental placed in service after 2017, that's 30 years straight line, with no bonus depreciation. The foreign earned income exclusion won't shelter any of it, because rent isn't earned income.

Form 1116 credits the Indonesian tax against your US tax on that income, in the passive category. Here's the catch. Indonesia taxes gross rent while the US taxes net rent after depreciation, so the Indonesian bill often exceeds the US tax it can offset. Unused credit carries back one year and forward ten, but only against other passive foreign income.

Our guide to rental income tax in Indonesia covers the rest of the Indonesian side, including the 10% regional tax that guests pay on nightly stays.

Source: Income Tax Law, Article 26; US–Indonesia income tax treaty, Article 6; IRS Publication 946; IRS Instructions for Form 1116, 2025; IRS Publication 54, December 2025

Selling: no 1031 exchange, and Section 121 only for a real home

You can't roll a US rental into a Bali villa tax-free. Section 1031(h) of the Internal Revenue Code says real property in the US and real property abroad aren't like-kind, and the rule works in both directions. A swap from one foreign property into another does qualify, which matters if you later trade up within Bali.

Section 121 can apply wherever the house is, as long as it's your main home. Live in it two of the five years before the sale and you can exclude gain up to 250,000 in US currency, or 500,000 for a married couple filing jointly. At the September 24 rate that's about Rp 4.47 bn and Rp 8.95 bn. A holiday villa rented to guests most of the year won't pass the test.

Indonesia collects its share at the notary. On a titled property the seller owes a final 2.5% of the price under PP 34/2016, while a leasehold assignment is often taxed as lease income instead. For the IRS, your gain is measured in US currency, so a weaker rupiah between purchase and sale cuts it. Our guide to selling a Bali villa runs through the exit costs.

Source: IRC Section 1031(h); IRS Fact Sheet FS-2008-18; IRS Publication 523, 2025; PP 34/2016

When the villa sits inside a PT PMA

Some buyers hold through their own Indonesian company, usually to run a licensed rental business or to hold a right to build. For a US shareholder that means more forms, not just Indonesian bookkeeping. Owning 10% or more typically brings Form 5471, and missing it costs 10,000 in US currency per company per year, about Rp 179 million.

Profit that leaves the company is taxed twice in Indonesia. The PT PMA pays 22% corporate tax on profit, then dividends to an individual US shareholder carry 15% withholding under the treaty. The lower 10% rate is only for a US company holding at least 25% of the shares. Read our PT PMA guide before you set one up, and have a US adviser check the controlled foreign corporation rules.

Source: IRS Instructions for Form 5471, December 2025; US–Indonesia treaty and 1996 protocol, Article 10; PwC tax summaries for Indonesia, reviewed June 2026

Paying for the villa and bringing rent home

Contracts and payments inside Indonesia run in rupiah under Bank Indonesia Regulation 17/3/PBI/2015. In practice you wire from your US bank to the developer's or the notary's Indonesian account, one transfer per stage of the payment schedule. Each wire takes one to five working days. Customs wants a declaration for Rp 100 million or more in cash, so don't carry it.

Money flows out freely under Indonesia's open foreign exchange regime (Law 24/1999), though banks ask for documents on larger transfers. Keep every PPh 26 withholding slip, because Form 1116 needs proof of the foreign tax paid. Both directions are covered step by step on our page about sending money to Indonesia.

Visiting, staying longer and tax residency

Americans made 274,610 trips to Bali in 2025, the seventh-largest group of foreign visitors, BPS Bali reported on February 2, 2026. Most come in on a visa on arrival or an e-VOA, which costs Rp 500,000 for 30 days and can be extended once for 30 more. Bali adds a Rp 150,000 levy per visit, paid online through Love Bali.

Stay beyond 183 days within 12 months and Indonesia can treat you as a tax resident, taxing worldwide income at 5–35%. The US keeps taxing you as a citizen under the treaty's saving clause in Article 28(3), so you'd file in both countries. Plan that before you apply for a long-stay visa, because the day count starts on arrival. Our tax residency guide shows where the line sits.

Where to start looking

Decide first how you'll use the villa. Nightly rentals point to Canggu, Pererenan or Uluwatu, where guest demand runs deepest, and longer personal stays point to Ubud or Sanur. Compare them in our area guides, then open the catalog, where each listing shows the lease term and a net yield estimate. In our model a well-run villa nets 6–10% a year before US tax.