The Foreign Investment in Real Property Tax Act (FIRPTA) requires buyers of U.S. real property interests from foreign sellers to withhold a portion of the purchase price and remit it to the Internal Revenue Service (IRS). This ensures that foreign sellers pay any applicable taxes on gains from U.S. property sales.
What Is FIRPTA Withholding?
Under FIRPTA, buyers must withhold 15% of the purchase price when acquiring U.S. real property from a foreign seller. The withheld amount is credited toward the seller’s potential tax obligations when they file a U.S. tax return.
Who Is Considered a Foreign Person?
FIRPTA applies only when the seller is classified as a foreign person, which includes:
- Nonresident aliens
- Foreign corporations that have not elected to be treated as domestic corporations
- Foreign partnerships, trusts, or
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