FIRPTA Buyer Questionnaire

IRS regulations require all Buyers and foreign Sellers of U.S. real property interests to provide their names, addresses, and U.S. tax identification numbers on FIRPTA related tax returns. 

General Info About FIRPTA:

  • FIRPTA stands for the Foreign Investment in Real Property Tax Act.

  • If a seller is not able to provide a sworn statement that they are not foreign, and no exceptions apply, the tax code requires buyer’s to withhold up to 15% of the gross sales price if the seller is a nonresident alien, foreign corporation, foreign partnership, foreign trust, or foreign estate, and remit it to the IRS upon closing.

  • Foreign sellers would then file a US income tax return to claim back any portion considered an overpayment.

  • Under certain conditions, the withholding can be reduced to 10% or even zero. If a withholding certificate is not applied for, all funds must be submitted to the IRS within 20 days of the closing, or the buyer could face late penalties.

  • IRS regulations require all Buyers and foreign Sellers of U.S. real property interests to provide their names, addresses, and U.S. tax identification numbers on FIRPTA related tax returns, withholding certificates, and notices of non-recognition when disposing of a U.S. real property interest. While it’s not necessary for a foreign seller to have their U.S. Tax ID number prior to closing, every possible effort should be made to apply for a tax ID number, if any party does not have one.

Exceptions:

  • No withholding is required if the purchase price is $300,000 or less AND the Buyer has definite plans to reside in the property 50% of the total occupied days during each of the first two 12-month periods following the date of transfer. This exception cannot apply to vacant land.

  • Buyers with that same intent to reside who purchases a property between $300,001 and $999,999, the 15% can be reduced to 10%. This exception cannot apply to vacant land.

  • Unfortunately, if the purchase price is $1,000,000 or more, 15% is required, regardless of the Buyer’s intentions.

  • Another exception to the FIRPTA withholding requirement is when a Withholding Certificate is applied for (and received) prior to closing. It’s a rare occasion, but if it happens, Buyers are only required to withhold the amount shown on the certificate.

  • There are several other exceptions that may apply to the sale of real property. See https://www.irs.gov/individuals/international-taxpayers/exceptions-from-firpta-withholding for more details.