 The Foreign Investment in Real Property Tax Act of 1980 (FIRPTA)
The act in simple terms is a United States tax law that imposes income tax on foreign persons disposing of United States real property interests.
This Foreign Investment Tax is imposed at regular tax rates for the type of taxpayer on the amount of gain considered recognized.
The Foreign Investment act requires the withholding of tax on payment for the property. Withholding may be reduced from the standard 10% to an amount that will cover the tax liability, upon application in advance of sale to the Internal Revenue Service.
Foreign Investment in Real Property Tax Act (FIRPTA) overrides most non recognition provisions as well as those remaining tax treaties that provide exemption from tax for such gains.
The Foreign Investment in Real Property Tax Act is seen as a barrier to foreign investor interest as it subjects foreign buyers to both their domestic and U.S. taxes when they sell their investment, unless their home country has a taxation treaty with the United States. The Foreign Investment in Real Property Tax Act opponents argue that the act unfairly penalizes foreign investors of real estate. Such double taxation does not apply if they buy U.S. stocks or bonds! |
