Foreign Investment in Real Property Tax Act

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Foreign Investment in Real Property Tax Act (FIRPTA)

A federal law designed to assist in the collection of income taxes when foreign owners and investors sell real property or shares in entities that own real property.

Purchasers are required to withhold 10 percent of the sales price unless either of the following occurs:

1. The IRS is asked to calculate the exact taxes that would be due, in which case that amount will be withheld.

2. The purchaser will use the property as a residence and the selling price is less than $300,000.

Purchasers must report the withholding on IRS Form 8288 or 8288-A and must report and pay over the money within 20 days after purchase. If purchasers do not withhold, they may be liable for the taxes themselves.Almost all real estate closings today require the seller's signature on what's called the FIRPTA affidavit, stating that the seller is not a foreign person. (For more information, see Publication 515,“Withholding of Tax on Nonresident Aliens and Foreign Entities,”available at the IRS Web site,www.irs.gov.)

References in periodicals archive ?
Other key changes include, among other modifications, an enhanced FIRPTA exemption for holders of small interests in publicly traded REITs; a new exception for certain qualified foreign shareholders of REITs; elimination of the FIRPTA "cleansing rule" for REITs; and an increase in the rate of withholding now required under FIRPTA.
In summary, although foreign investors should have very strong incentives to avoid FIRPTA tax on their U.
The CBRE report also notes that the potential FIRPTA changes could also increase clarity and transparency for investors by replacing the varying sets of tax regulations, exemptions and withholding requirements currently in place for foreign and domestic investors with a single, clearly defined tax scheme.
While the financial impact of the FIRPTA tax falls solely on the foreign seller, the US purchaser bears the burden of withholding, reporting and remitting the tax obligation.
12) However, the NRA will be subject to FIRPTA tax withholding on the sale, which will require that the buyer withhold 15 percent of the amount of the sales price.
Pending legislation would increase a foreign investor's ownership stake in a publicly traded Real Estate Investment Trust (REIT) without being subjected to FIRPTA from 5% to 10%.
He advises clients on a variety of international tax issues, including cross-border acquisitions and restructurings, FIRPTA, subpart F, foreign tax credits, sourcing of income, and U.
The purpose of FIRPTA is to impose an income tax on the gains made by foreign persons upon disposition of real property situated in the United States.
real property interests under FIRPTA on the waiver of certain treaty benefits).
real estate awaiting better real estate fundamentals and relief from FIRPTA regulations," said James A.
Jewett has been a featured panelist at numerous real estate, investment and tax conferences, where she has discussed fund strategies, REIT and FIRPTA rule changes, liquidating assets and complying with regulatory updates and developments.
com)-- The Knowledge Group/The Knowledge Congress Live Webcast Series, the leading producer of regulatory focused webcasts, announced today that it has scheduled a live webcast entitled: Significant Changes to the REITs and FIRPTA Rules in 2016 and Beyond.