ALERT: FIRPTA-New 15%
What is FIRPTA?? It stands for the foreign investment in real property tax act of 1980.
Under current federal law, if a foreign person sells US real property, the buyer is obligated to withhold 10% of the gross sales price and remit this to the lRS.
However, pursuant to the Protecting Americans from Tax Hikes Act of 2015, which became law on December 18, 2015 (the “PATH Act”) the required 10% withholding will increase to 15% for all closings occurring on or after February 17, 2016, except those wherein the sales price is greater than $300,000 and does not exceed $1,000,000 and the buyer acquires the property for use as a residence. Under the circumstance, a reduced withholding of 10% will apply.
Sales Price $300,000 or less and
the buyer acquires as residence
Sales Price more than $300,000 but not
more than $1,000,000 and the buyer
acquires as residence
All transactions – Any Sales Price
and the buyer NOT acquiring as residence
In short, if a foreign person is selling a US real property interest, the following parameters apply UNLESS THERE IS AN EXCEPTION FROM WITHOLDING:
No withholding is required under the following circumstances:
• Buyer acquires for use a residence and sales price not more than $300,000.
• Seller provides Non-Foreign Affidavit
• Seller provides a Withholding Certificate from the IRS which excuses the withholding
• The amount realized by the seller is zero
• The property is acquired by the United States or a political subdivision thereof
For more information on foreign investment tax laws you can contact us and we will provide you with a list of CPAs and tax attorneys.