Tax Requirements on Foreign Persons Selling or Exchanging Real Estate in the United States

A foreign person that sells or exchanges a U.S. real property interest is subject to a required withholding under the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). A U.S. real property interest includes sales of interests in parcels of real property. This provision is subject to certain exceptions.

The required withholding is 15% of the gross sales price unless the buyer is acquiring the property as a personal residence and the sale price is between $300,001 and $1 million in which case the withholding will only be 10%. This amount must be remitted to the IRS within 20 days after the date of transfer.

Additionally, Treasury Decision 9082 (effective November 4, 2003) requires all foreign sellers of U.S. real property to have a Taxpayer Identification Number (TIN) to pay the required withholding or to request a reduced tax withholding. Individuals who do not qualify for Social Security Numbers (SSN) may – by filing form W-7 – obtain Individual Taxpayer Identification Numbers (ITINs) to meet the requirement to supply a TIN.