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Q：
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Who is considered a “foreign person” for U.S. tax purpose?
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A：
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Generally, a foreign person includes Non-U.S. citizens who are not U.S. tax residents; Foreign corporations; Foreign partnerships; Foreign trusts; and Other entities organized outside the United States. In general, foreign persons are subject to U.S. taxation only on certain U.S.-source income.
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Q：
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How can a foreign person own U.S. real estate?
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A：
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Direct Ownership as a Foreign Person. The foreign individual or foreign entity directly purchases and holds the property. This is generally the simplest ownership structure. However, upon disposition of the property, FIRPTA withholding rules may apply, resulting in a portion of the sales proceeds being withheld until the appropriate tax return is filed.
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Indirect Ownership Through a U.S. Entity. A foreign investor may establish a U.S. entity to acquire and hold U.S. real estate. This structure often provides greater flexibility in tax reporting and ownership management. LLCs are particularly popular among foreign investors.
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Q：
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Who is responsible for withholding FIRPTA tax?
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A：
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The purchaser (buyer) is generally responsible for withholding and remitting FIRPTA tax. If you are the seller, you generally do not perform the withholding. If you are the buyer, you must determine whether the seller is a foreign person. If the seller is a foreign person, you may be required to withhold tax and remit it to the IRS.
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Q：
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How much FIRPTA tax must be withheld?
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A：
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For property that is not a personal residence, 15% of the greater of the sales price; or the fair market value.
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For personal Residence Acquisitions that purchase price of $300,000 or less, No FIRPTA withholding is generally required if the property qualifies as the buyer's personal residence; purchase price over $300,000 but not exceeding $1 million, generally subject to 10% withholding; purchase price exceeding $1 million, generally subject to 15% withholding.
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FAQ
