Many clients and prospective clients contact us and ask common questions based on advice from their relatives or a “friend of a friend.” These blog entries will unlock the mysteries of real estate law in Florida.
QUESTION: I am or represent a Foreign National Seller of Real Estate in Florida, what is FIRPTA and how does it affect me?
The disposition of a US based real estate property by a foreign national (i.e. is not a US citizen nor possess a Green Card) is subject to the Foreign Investment in Real Property Tax Act of 1980 which is commonly known as FIRPTA. Simply, unless an exception applies, the closing agent is required to withhold 10% of the Purchase Price and send to the Internal Revenue Service within twenty days from the date of the Closing. For example, if the purchase price is $500,000, the Closing Agent is required to withhold $50,000. The responsibility to ensure the withholding is placed on the Buyer. Failure to do so will subject the Buyer to penalties and interest.
If an exception to FIRPTA applies, then there is no requirement to withhold 10% of the Purchase Price. A common exception to FIRPTA occurs when the purchase price is under $300,000 and the Buyer intends to occupy the Property for 50% of the time for the next 2 years. Another common exception is when the Seller provides a withholding certificate from the Internal Revenue Service which states that the transaction is not subject to withholding. It is always important to have an experienced Florida real estate attorney who has experience working with International Buyers and can properly structure these transactions.