By: Amanda Wilson
The Foreign Investment in Real Property Tax Act (FIRPTA) subjects foreign sellers to U.S. tax when they sell their interest in real property located in the U.S., including interests in companies that predominately hold real estate. To accomplish this, the purchasers generally are required to withhold 10% of the gross sales price when the seller is foreign. Legislation that was passed at the end of last year (the PATH Act) increases this withholding rate from 10% to 15% effective as of February 16, 2016. If you are purchasing a U.S. real estate interest from a foreign seller, make sure you are aware of this change and adequately withhold. If you fail to do so, you may find yourself liable for the extra withholding.