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Understanding FIRPTA:
Buying and Selling

Real Property in theU.S.as a Non-US Citizen/Resident

There are no general restrictions on foreign investment in the United States, unless that investment is in one of a few specific industries such as Radio and Broadcast Television, COMSAT, the Aviation sector, or Energy. The influx of capital is considered a welcome addition, and therefore there is very little legislation to navigate when purchasing U.S. real property as a foreign entity. Under U.S. federal law the only major restrictions to real property purchases by foreign entities impact buyers from countries with which the U.S. is at war, or who are subject to U.S. travel and trade restriction.

State law regarding such purchases varies considerably and also changes frequently, thus it is important to check state and local laws to ensure that a desired acquisition in a particular state is feasible. Some states limit foreign ownership of real property and have restrictions and reporting requirements which affect such purchases by foreigners. Some states limit the acreage a foreign entity can buy, or limit the purchase and control of a type of land such as agricultural or grazing lands. Generally, buying U.S. real property is a simple process for a foreign entity. The sale of this property at some future time is when problems can arise if the seller is not aware of the applicable law.

 Selling Real Property - FIRPTA Basics

The Foreign Investment in Real Property Tax Act ("FIRPTA") is a speed-bump in the otherwise smooth ride of buying and selling U.S. real property. FIRPTA was enacted in an effort to curtail lost capital gain tax revenue from the sale of real property by foreign individuals, and entities.

FIRPTA requires a withholding tax apply at the time of sale. This tax withholds 15% of the GROSS sale price, (10% prior to February 16, 2016) which means that 15% is withheld even if you sell the property at a loss! In order to recover any portion of the 15% that exceeds the amount actually owed under capital gains tax, you must wait until the end of the year and file a US Income Tax return for a refund.  Unfortunately, in operation, it can delay property sales as well as withhold tax that is not owed. Simply knowing about FIRPTA in anticipation of any sale can help alleviate what can otherwise be a massive problem. 

 In order to sell your US property you will need to complete IRS form W-7 to obtain an IRS Individual Taxpayer Identification Number (ITIN).

 When should I apply for an ITIN?

You should complete Form W-7 as soon as you are ready to file your federal income tax return, since you need to attach the return to your application.

If you meet one of the exceptions to the tax filing requirement, submit Form W-7, along with the documents that prove your identity and foreign status. You are also required to include supplemental documents to substantiate your qualification for the exception, as soon as possible after you determine that you are covered by that exception.

Where can I get help with my ITIN application?

You can call the IRS toll-free at 1-800-829-1040 if you are in the United States. If you are outside the United States, call 267-941-1000 (not a toll-free number) for information and help in completing your Form W-7 and your tax return or to check on the status of your application six weeks after submitting Form W-7.

To read the new FIRPTA instructions, effective as of February 2016, please go to https://www.irs.gov/pub/irs-pdf/i8288.pdf

Assistance is also available at selected IRS Taxpayer Assistance Centers in the United States to provide in-person help with ITIN applications on an appointment basis only. You may also use the services of an IRS-authorized Acceptance Agent.

In Lee County the Taxpayer Assistance Center now operates by appointment only and is located at 4210 Metro Parkway, Ft. Myers, FL 33916.

Office Information: 239-938-7601.

Make Appointment: 844-545-5640

Monday-Friday - 8:30 a.m.- 4:30 p.m.

https://www.irs.gov/uac/contact-my-local-office-in-florida 

IRS Authorized Acceptance Agents

Optionally there are companies that specialize in helping guide foreign sellers through the entire FIRPTA process. Helping them obtain their ITIN, IRS Withholding Certificate and preparing their Income Tax Return. Generally using one of these services means you will be refunded your 15% withholding tax within about 90 days. Depending on the value of your property fees can be substantial but many firms will, if possible, reduce their standard fees on lower priced properties.

Visit FIRPTA Solutions, https://firptasolutions.com

and 1031 Exchange Connection,http://www.1031connection.com/exchange_fort_myers/firpta_fort_myers.html

Contact us and we'll be glad to provide you with all the necessary information on selling your US property. 

The Buyer's Agent Team of Southwest Florida gets a great deal of our business from referrals by our satisfied International buyers, so don’t hesitate, let us get started helping you today!

 

 


Consider an exclusive buyer-broker who will represent only you, not the sellers. Nonexclusive real-estate agents tend to show you their own listings first, since they won't have to share the commission if they represent both the buyer and the seller. Then they'll probably show you their firm's listings, since they stand to gain from those sales as well. It can help to search online first and target some homes that might be right for you, no matter who has the listing.!


The last thing you want to do is walk into an open house and start blabbing how much you can afford to the agent who has listed the house. That agent owes his or her allegiance to the seller and only the seller. If you're negotiating with a pro, you ought to have a pro in your corner, too.  Get an advocate on your side.  It's commonplace now for buyers to sign up their own agents to represent their interests in a deal. Look for a buyer's broker who will represent you and only you.