Withholding Tax Refunds for Non-US Person Real Estate Sales, For This Year and Prior Years
By Michael Brooks, Domestic & International Real Estate Closing Tax Service (DIRECTS) NON-US SELLER REAL ESTATE TAX WITHHOLDING FIPRTA US law requires that the transferee (buyer) on a sale or disposition of a United States Real Property Interest withhold a percentage (typically 15%) of the total amount realized (the sales price) at the time of disposition (closing of sale). This is the law known as “FIRPTA”- the Foreign Investment in Real Property Tax Act. So when a foreign party sells US real estate, the buyer (via the escrow company or settlement agent in most states), must withhold a significant amount of the sales price, and (probably) send it into the IRS. The withholding tax is not an actual tax due. It is better thought of as a security deposit which the IRS requires the foreign seller to submit to ensure the foreign seller will pay the tax. Who Counts as a Foreign Party? Foreign parties, who are subject to withholding, include the following: a nonresident alien (a