Foreign investment in real property act, also known as FIRPTA, is a tax law that imposes United States tax law for any real estate transaction done by a person who does not hold United States citizenship. The main purpose of FIRPTA is to keep in check foreign persons who own real estate property necessary tax documentation regarding the sale or transfer of U.S. property. The Internal Revenue Service administers FIRPTA tax on real estate in Florida and other states of the U.S.
Many investors invest in real estate in the United States and buy and sell real estate property. When an individual buys property from a foreign owner, this tax is imposed on the foreigner who sells the property. The rate of withholding is generally 15% of the revenue generated. For example, if a foreign individual has a real estate property in Florida that they bought at $500000 and decides to sell at $600000, the total FIRPTA withholding amount will be $90000. The U.S. government will consider this amount as a taxable amount. One can contact FIRPTA tax help experts in Florida to understand the process in detail.
History of FIRPTA tax
Introduced in the year 1980 by congress, FIRPTA was introduced to establish equity of tax treatment in U.S real estate property between foreign and domestic investors. There have been several reforms after the introduction of the FIRPTA tax; however, the core concept and implementation of the tax remain the same.
The Need for FIRPTA
Before the introduction of the FIRPTA act, the United States had to suffer a heavy loss on the capital gain tax by foreign individuals in the real estate sector. FIRPTA was introduced to mitigate this loss. Before 1980, the people who were not American citizens were left out of paying any taxes. It allowed many foreign investors to sell and buy properties on U.S soil and generate revenue without worrying about the taxes. Due to this, the United States government introduced the Foreign investment in real property act. Under this act, any foreign individual who buys and sells real estate property on U.S soil has to pay 10%- 15% of the withholding tax price. It helped the government deal with the heavy loss they were facing due to foreign investors buying and selling the country’s real estate property. Nowadays, FIRPTA real estate tax in Florida and other states of the country has become compulsory for any foreign investors who do real estate business on U.S soil.
Foreign investment in real property act is a technical term, and its complexities may be hard for people to understand completely without investing a decent amount of time. However, it has a huge significance for the people who wants to buy or sell properties. One can easily find FIRPTA tax help experts in Florida and other parts of the U.S. They are well versed with the term and can help and guide individuals through the process regarding FIRPTA taxes, Withholding certificates, and much more.