FIRPTA stands for Foreign Investment in Real Property Tax Act. It applies to any sale by a foreign national person, corporation or entity of a real property located in the USA, its territories or the U.S. Virgin Islands. FIRPTA requires the Buyer to withhold 15% (with certain exceptions) and remit it to the IRS within 20 days. Then it is the responsibility of the foreign seller to apply to the IRS for a refund. Also, to obtain an IRS individual taxpayer identification number (ITIN) or employer identification number (EIN) in the process.
As an alternative to remitting within 20 days the foreign seller can apply to the IRS for a reduced withholding, requesting to retain all or part of the anticipated refund at closing and have it released by the title or closing agent.
So FIRPTA is actually not a tax, it is a withholding. It is on the full sale amount. The tax is the amount a property seller pays on capital gains or income from the property. FIRPTA offers multiple exemptions. By example, if a property subject to 15% FIRPTA sells for $1million, the FIRPTA withholding is $150,000. If the adjusted cost basis including deductible improvements is $900,000, then the IRS tax is $30,000 and the foreign seller is entitled to a $120,000 tax refund.
FIRPTA Refunds (FIRPTArefunds.com) specializes in all things FIRPTA. Lowest prices, fastest service and refunds.
댓글