What is FIRPTA
Foreign Investment in Real Property Tax Act
All funds deposited for escrow must be via wire transfer. International (out-of-USA) transfers are executed through SWIFT (Society for Worldwide Interbank Financial Telecommunication), and there is an additional charge for this type of transfer. Typically this charge is deducted from the wired funds and varies from bank to bank. The charge is usually a flat rate and does not exceed $50, so it is a good idea to wire an additional $50 when wiring from outside the USA.
IRS Withholding
When a foreign owner gets ready to sell, they could be subject to a 10% (of the sales price) withholding unless the transaction is exempt from FIRPTA.
FIRPTA Withholding Exemptions
- Most common: sales price is not more than $300,000, the foreign buyer (or a member of their family) must have plans to reside at the property for at least 50% of the number of days the property is used by any person during each of the first two 12-month periods after the sale.
- Seller to provide a certificate showing they are not a foreign seller
- Seller receives a withholding certificate from the IRS excusing withholding
Applicable Forms
- Application for IRS individual taxpayer identification number: Form W-7
- Application for withholding certificate for Dispositions by Foreign Persons of Real Property Interests: Form 8288-B and Instructions
This article is courtesy of First American Title Insurance Company.
Source: http://www.azsearchforhomes.com/buying-arizona-home-foreign-buyer/5891
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