NON-US CITIZENS SELLING US-BASED PROPERTY
MOST COMMON FORMS ON FIRPTA TAX
- Form 8288
- Form 8288A [ With Federal Tax Withholding]
- Form 8288A [If Exemptions Claimed]
Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding. FIRPTA authorized the United States to tax foreign persons on dispositions of U.S. real property interests.
A disposition means “disposition” for any purpose of the Internal Revenue Code. This includes but is not limited
- To a sale or exchange, Liquidation, Redemption, gift, transfer, etc.
Persons purchasing U.S. real property interests (transferees) from foreign persons [For example British National or any other foreign country other than American passports], certain purchasers’ agents, and settlement officers are required to withhold Federal FIRPTA TAXES at 15% (10% for dispositions before February 17, 2016) of the amount realized on the disposition (special rules for foreign corporations).
Who is the Withholding Agent and who’s responsibility is it to ensure FIRPTA tax compliance is taken care of?
In most cases, the buyer (transferee) is the withholding agent. The transferee must find out if the transferor is a foreign person [i.e. Non-United States Resident]. If a transferor is a foreign person and the transferee fails to withhold, the transferee may be held liable for the tax. For cases in which a U.S. business entity such as a corporation or partnership disposes of a U.S. real property interest, the business entity itself is the withholding agent.
For more information on FIRPTA
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