FIRPTA (Foreign Investment in Real Property Tax) is a tax law passed in 1981 that requires buyers to withhold payments to sellers on U.S. real estate unless an exception applies. The duty is on the buyer (and not the settlement agent) to deduct and remit a portion of the sales price along with the appropriate forms. In some situations a buyer or seller can apply for a withholding certificate to reduce the withholding amount. Buyers can remit less than the statutory amount if provided a determination of the specific amount of tax owed by the seller. A settlement agent may, upon mutual instructions remit payment on behalf of the buyer, however the buyer remains responsible. Per the IRS regulations, the buyer or transferee is legally responsible for any withholding due.
Buyers are required to remit up to 15% of the Sales Price unless the transaction is exempt from FIRPTA withholding.
Common Exemptions:
Rates Of Withholding:
Source: Chicago Title
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