US FIRPTA Withholding Amounts Change Jan 30, 2016 7:37:18 GMT 4
Post by conflict on Jan 30, 2016 7:37:18 GMT 4
On December 18, 2015, President Obama signed into law the Protecting
Americans from Tax Hikes Act of 2015 (PATH Act) as part of the
Consolidated Appropriations Act, 2016. The new PATH Act reforms the
Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). Changes
to FIRPTA include increased withholding generally and a new residential
withholding threshold. These and other PATH Act changes are predicted to
encourage increased foreign investment in United States commercial real
FIRPTA is a tax law that requires foreign persons to pay United
States income tax on gains made from selling United States real estate.
The duty is on the purchaser of the foreign person’s real estate to
withhold a portion of the sale price and report the sale to the IRS. The
reforms of the PATH Act changed required withholding amounts.
Withholding is not required for residential transfers with a purchase
price of less than three hundred thousand dollars ($300,000.00). Ten
percent (10%) of the purchase price must be withheld for residential
transactions between three hundred thousand dollars ($300,000.00) and
one million dollars ($1,000,000.00). Fifteen percent (15%) of the
purchase price must be withheld for all other nonexempt real estate
sales. The new withholding amounts will begin to take effect February
Other portions of FIRPTA are unaffected by the PATH Act changes. For
example, exemptions to FIRPTA withholding including furnishing a
nonforeign affidavit, qualifying statement, regularly traded stock, and
wash sales were not altered and foreign sellers are still able to obtain
a refund of excess amounts withheld upon request.
The withholding amount change will be incorporated in updated FAR/BAR
contracts beginning next month so the increase to fifteen percent (15%)
will not be easily forgotten.
Burr & Forman LLP