FIRPTA/US Capital Gains Tax
FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT
The IRS requires that any non-resident who sells an interest in US real property is subject to a FIRPTA Withholding tax. FIRPTA applies to what it defines as a U.S. real property interest, which includes: interests in land, and in Buildings Commercial or residential. This tax is 15% of the gross contract sales price (i.e. $30,000 on a property with a sales price of $200,000). This Withholding tax is required to be forwarded to the IRS, by the Closing Agent, within 20 days of the date of closing, unless the seller appoints a tax firm to file an application for early release of the funds.
We can file form 8288B with accompanying paperwork, which will ensure that the Closing Agents only hold the 15% until the IRS confirms our calculations and issues a release letter, usually within 90 days. Our firm has excellent contacts within the IRS at Ogden, Utah allowing us to expedite the process and reach a successful conclusion.
In recent times the IRS have experienced major delays in processing 8288b applications (due to Covid and high volume of house sales) and therefore in many cases we are advising that the funds are sent into the IRS, and we claim back the withholding via the US Tax Filing. You still need to contact us however as we have a role in the process of sending in the withholding.
The FIRPTA process whether holding the funds or sending them in to the IRS is a time sensitive matter and we need as much notice as possible. So as soon as you have a buyer, please contact us with realtor and title company information.