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Exemptions to or no FIRPTA Withholding

Exemptions to or no FIRPTA Withholding

There are certain situations where FIRPTA withholding is not required. 

  • Buyers of property where the sale price is $300,000 or less and buyer is an individual who certifies to occupy 50% or more of time in each of the 2 years following the closing.

  • Buyers of property where the sale price is $300,001 up to and including $1,000,000 where  the buyer is an individual who certifies to occupy 50% or more of time in each of the 2 years following the closing. In this case the FIRPTA withholding is 10% in that range and not the standard 15%.

  • Green Card Test: You are a resident, for U.S. federal tax purposes, if you are a Lawful Permanent Resident of the United States. If you have been given the privilege, according to the immigration laws, of residing permanently in the United States as an immigrant. You generally have this status if the U.S. Citizenship and Immigration Services (USCIS) issued you an alien registration card, Form I-551, also known as a "green card."

  • Substantial Presence Test: A complex formula that determines if a Foreign Person is considered a US Person for the calendar year of a purchase in order to be exempt from paying the FIRPTA withholding. It is a counting days process.

    • Days do not count if Foreign Person is in USA representing a foreign government, a teacher, student (J, Q, F, M visas) or professional athlete in a charity event.

    • Count 31 days during year of sale AND 183 days during the year of sale and the preceding 2 years, ONLY counting all days during sale year; 1/3 days during 1st preceding year; 1/6th days during 2nd preceding year.

  • Foreign person or entity whose only US business activity is trading stocks, securities, or commodities (including hedging transactions) through a US resident broker or agent.

  • Foreign persons or entities collecting certain types of US source interest income which meet the statutory exemptions from FIRPTA withholding and tax (obligations payable 183 days or less from date of original issue, bank deposit interest and portfolio interest).

  • Property disposed of is an interest in a domestic corporation of which any class of their stock is regularly traded on an established securities market.

  • Does not include certain dispositions of substantial amounts of non-publicly traded interests in publicly traded corporations.​

  • Seller/transferor furnishes US taxpayer identification and furnishes non-foreign affidavit.

  • Non-publicly traded domestic US corporation  that furnishes an affidavit that the interest is not a US real property interest. To qualify:

  • During last 5 years (or less if held by present owner) the corporation was not a USRPHC.​

  • Certification required, dated not more than 30 days before the transfer date.

  • Seller/transferor provides a Qualifying Statement  from the Secretary of the Treasury that they are exempt .

  • Receipt of a withholding certificate from the IRS that excuses the withholding.

  • Written notice requirement that no gain or loss on transfer is required because of a non-recognition provision in the IRS code or a US tax treaty. Must be submitted to the IRS under same time requirements of FIRPTA withholding.

  • The amounts that Seller/transferor receive amount to $0

  • Option to purchase that are granted or lapsed.

  • Dispositions of interests in publicly traded partnerships or trusts.

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