You have probably noticed that the market is hot with both foreign buyers and sellers at this time. So I wanted to give you a brief overview/refresher on what FIRPTA is and how it relates to you as a Realtor and your clients. If you have questions on the details, please let us know.
FIRPTA, the Foreign Investment in Real Property Tax Act, provides that if the Seller of real property is a foreign person, the Buyer must withhold a tax equal to 10% of the gross purchase price, unless an exemption applies. A foreign person is a nonresident alien individual; a foreign corporation not treated as a domestic corporation; or a foreign partnership, trust or estate. A resident alien is not considered a foreign person under FIRPTA.
There are quite a few exemptions to the FIRPTA requirements. The most common exemption is when the seller furnishes a non-foreign affidavit stating under penalty of perjury that the seller is not a foreign person. Another common exemption involves the transfer of a property acquired for use as the buyer’s residence (or used more as a residence than investment) and the purchase price does not exceed $300,000. Additionally, sometimes a seller may obtain a “qualifying statement” from the IRS stating that no withholding is required.
It is important to note that a real estate broker or agent for either party can be held liable for the tax that should have been withheld (up to the amount of compensation received), if the broker or agent has actual knowledge that the non-foreign affidavit is false and fails to notify the buyer and the IRS.
If you need assistance with a foreign buyer or seller, please contact my office. We have a great deal of experience in this area and are here to help you and your clients.
Bryant Title & Escrow 