2017 FOREIGN INVESTOR U.S. TAX CONCERNS

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1 2017 FOREIGN INVESTOR U.S. TAX CONCERNS ONE BEACH DRIVE SE, SUITE 220 FACSIMILE OTHER LOCATIONS ST. PETERSBURG, FLORIDA SARASOTA & MIAMI TELEPHONE: (727) MIAMI (786)

2 FIRPTA? What is FIRPTA? Applies when Seller is a Foreign Person (see next page for definition of foreign person). 15% of Gross Sales Price required to be withheld at closing from ALL sales of real US property by Foreign Persons. The Buyer is the Statutory withholding agent for FIRPTA not the title company. Who is a Foreign Person? A US person has a valid greencard, or has a US passport, or Passes the Substantial Presence Test IE, lives & works here in the US A Foreign Person Can have Social security number Can have US Visa Can be a Single Member LLCs 2

3 TAX ID NUMBERS IMPORTANT NEW INFORMATION ITINs (Individual Tax Identification Numbers) as of 12/31/2016, ITINs will expire and must be renewed every few years. Anyone filing a US tax return (such as a foreign seller) is required to have a tax ID number. 3 Ways to get ITIN: Certified Copy of Passport from issuing Agency in the Home Country. Send Original Passport to IRS Certified Acceptance Agents NEW!! Renewals: Note that some ITINs are being de-activated each year, and most will expire if not used in the last 3 years. 3

4 Withholding Exceptions Residency Exception: Reduced Withholding from the 15% Withholding to 0% or 10% If sales price is $1 Million or less, the Buyer can elect to sign Intent to Reside. Intent to Reside is a commitment that the Buyer is making that he will live in the property for more time than it will be rented during the next 24 months. If the sales price is $300,000 or less, withholding is not required (0%). If the sales price is greater than $300,000, but not more than $1 million, 10% must be withheld on the full gross sales price. This is considered to be a reduced rate of withholding. A 1099S is prepared for the seller as a foreign person can NEVER have a principle residence in the US. Regardless of Sales Price, the Seller may apply for a Withholding Certificate from the IRS. A Withholding Certificate takes days to process with the IRS (exception for Short Sales)» The Withholding Certificate MUST be finalized and postmarked with the IRS on/by the closing date.» All parties must have, or apply, for tax numbers» When IRS sends back Withholding Certificate Letter, the funds are released to seller pursuant to the IRS instructions. 4

5 Estate & Gift Tax Issues The IRS treats the closing agent as the statutory executor in a real estate sale since the funds flow through the closing agents escrow account. Joint ownership does NOT automatically cut decedent s US estate in half. A transfer from a person to a corporation will (in most cases) be taxable and could still be subject to estate taxation. It is also subject to FIRPTA. A Quit Claim could be seen as a gift and may also subject to FIRPTA.» Beneficiaries may be unable to access sale proceeds for up to 18 months. 5

6 The Company Roberge Poskus a only certified public accounting firm in Florida that practices exclusively in the international tax area. The company is dedicated to servicing the special needs of foreign nationals investing in the United States and U.S. Citizens residing abroad. We have offices in Sarasota, St. Petersburg, Miami and even the Boston Massachusetts area. Our firm represents clients from all over the world and the U.S. in structuring the acquisition, operating and disposition of various types of business and real estate entities. We assist retirees purchasing a vacation home, multi-nationals immigrating to the United States, and a myriad of entities and structures in-between. We counsel U.S. individuals planning overseas business ventures. A significant portion of our practice involves providing tax advice to foreign persons for minimizing U.S. income and inheritance taxes. Susan Poskus heads a team of CPAs and staff that has more than 70 years of cumulative international tax experience. Susan s work experience spans the globe with assignments in Europe, the Middle East, and Asia dealing with international executives and international corporate personnel on cross border tax issues and transactions. Please don t hesitate to check out our website or follow us on Facebook! 6