FIRPTA Form Since the FIRPTA laws have been modified for foreign investors, local investors in the United States, on the other hand, are required to withhold 15% of the taxes instead of 10%. Those who are worried about tax withholding and wish to avoid it are more concerned now. These investors need not worry and they just need to file withholding certificates or forms to save their money. However, foreign investors should keep in mind that these certificates, or FIRPTA forms, will not entirely eradicate the requirement. These FIRPTA forms will save you a certain percentage of the owed amount, which can lower the burden on the foreigners.
Purpose of FIRPTA Form A withholding obligation on the buyer is generally imposed when a United States real estate property is acquired from a foreign investor. No matter if the buyers are corporations or an individual, the payment of the taxes is obligatory for everyone. To help corporations, individuals, estates and trusts save their money, they can use Form 8288 and Form 8288-A to cut down the tax withholding for dispositions by foreign persons in United States real estate property interests.
Filing a FIRPTA Form When and Where? A foreign investor is required to file Form 8288 to the IRS and transmit the tax withheld on the 20th day after the date of transfer. You should withhold the amount even if the application has been submitted to the IRS on the date of the transfer. However, you should not file the FIRPTA form until the 20th day, unless the IRS emails you the copy of the notice of denial or withholding certificate. You can file the FIRPTA Form 8288 with the amount withheld, along with the copies to Ogden Service Center P.O. Box 409191 Ogden, UT 84409.
Parties and Elements Involved in a Filing a FIRPTA Form There are certain parties involved in filing the FIRPTA form but before you explore the application process, you need to know about the people who are involved in the process. Transferee A transferee is the person or foreign investor who acquires the United States real estate property by gift, purchase, exchange or any other transfer. Transferor The transferor is the foreign person that disposes off a United States real estate property by exchange, sale, gift or any other disposition for the purpose of withholding. According to section 1445, a disregarded entity cannot be the transferor. In general, a disregarded entity is the one which is disregarded as a separate entity from its owner under the Regulations section of FIRPTA. Qualified Substitute A qualified substitute is the person who is responsible for closing the transaction. They can be any attorney or company. Withholding Substitute This is the person who acquires a United States real estate property from a foreign person.
Basically, they acquire the return from the transferee. Foreign Person A non-resident alien or an individual who does not have a valid identity under section 897 to be treated as a resident of the United States is considered as foreign person. They can either be trusts, estates, partnership firms, a corporation or any other legal entity. However, a resident alien cannot be termed as a foreign person. US Real Property Interest It consists of any property that is located in the United States or the US Virgin Islands. A real estate property in the United States does not include the following: If an interest is domestically controlled in an investment entity. If an interest in the Real Estate Investment Trust (REIT) is held by a qualified shareholder. If an interest in a corporation does not hold any United States real estate property interest. Amount Realized This is the amount of cash that will be paid or is to be paid. Basically, it is the fair market value of the other property to be transferred. Date of Transfer This is the date on which the liability is either assumed by the transferee or when the consideration is paid. Source: http://freedomtaxinternational.com/firpta-form/