FIRPTA Exemptions for Foreign National Real Estate Investors
Foreign nationals are able to purchase real estate in the U.S. for personal use — either in their own names or the name of a corporation or LLC — without any involvement by a U.S. governmental agency. However, when it comes to selling U.S. property, foreign nationals or entities must adhere to certain rules under the Foreign Investment in Real Property Act (“FIRPTA”).
Under FIRPTA, funds received from the sale of U.S. property by a foreign national are subject to an IRS withholding. The buyer or buyer’s closing agent must withhold 10% of the sale price to pay as a withholding to the IRS. However, there are some exceptions from the FIRPTA withholding, including:
The buyer purchases the property for use as a personal residence and the sale price is less than $300,000.The purchaser or a family member is required to live in the home for at least 50% of the time during the first two years after the transfer date.
If the seller obtains a qualifying statement from the IRS that he or she is either:
- Exempt from the tax;
- Entitled to a reduced withholding amount;
- Has adequate funds to pay the tax; or
- Has arranged with the IRS to pay the tax.
If the seller certifies that he or she is not a foreign national and provides the buyer with a U.S. taxpayer identification number.
If the property sold belongs to a U.S. corporate entity. There may be other withholding taxes due however upon distribution if the shareholder is a foreign entity or foreign national.
The IRS may grant the seller a withholding certificate that excuses or reduces the withholding. This can only be obtained if the tax withholding amount exceeds the actual capital gain tax liability.
The attorneys at Jurado & Farshchian, P.L. combine their knowledge and experience in the South Florida real estate market with a commitment to personalized, detail-oriented legal services. Contact one of our experienced Florida real estate attorneys at (305) 921-0440, or email us at This email address is being protected from spambots. You need JavaScript enabled to view it..
Originally published at jflawfirm.com
