Foreign Investment in Real Property Tax Act - Withholding

Withholding

Buyers of U.S. real property interests are required to withhold 10% of the full sales price on ANY purchase of a USRPI, subject to only four exceptions. Withholding is not required:

• By a purchaser for use as a residence for a price $300,000 or less, OR
• Where the purchaser receives a statement from the seller that the seller is a not a foreign person.
• Upon acquisition of an interest in a nonpublicly traded domestic corporation where the corporation provides the required affidavit.
• Upon acquisition of shares of a publicly traded corporation.

To the extent withholding is required, the amount of withholding may be reduced below 10% of the full price only upon certification by the IRS that a reduced amount applies. Such certification is permitted only if the seller applies to the IRS for reduced withholding by filing Form 8288-B no later than the closing date of the sale. The certification will specify the proper amount of withholding, subject to the stated closing price.

Penalties apply to a purchaser who fails to withhold, file Form 8288 with the IRS, or pay the required withholding within 20 days of the sale.