Hi everyone:
Don't Forget FIRPTA in the Territories!
It's easy to assume that FIRPTA (Foreign Investment in Real Property Tax Act) only applies to real estate transactions in the mainland US. However, FIRPTA's reach extends to all US territories, including Guam, Puerto Rico, the US Virgin Islands, the Northern Mariana Islands, and American Samoa.
If you're a title company handling a real estate transaction in any of these territories where the seller might be a foreign person (non-US citizen or resident), you should inform the buyer, seller, and their agents that FIRPTA compliance may apply to the transaction.
Providing tax advice on a complex area of tax law like FIRPTA is well outside the scope of a settlement agent's responsibilities. Advise them to seek guidance from a competent, qualified tax professional experienced with FIRPTA transactions to determine the necessary steps for compliance.
Key Takeaways:
- Guam and other US territories are considered part of the "United States" for FIRPTA purposes.
- Even corporations organized within a US territory (like Guam) are treated as foreign corporations under FIRPTA.
- The buyer is responsible for withholding a percentage of the sales proceeds (typically 15%) and remitting it to the IRS.
Failing to comply with FIRPTA can result in penalties for both the buyer and seller, as well as their realtors. So, educate yourself and your clients on the requirements to ensure smooth and compliant transactions in US territories.
Have questions about FIRPTA? Let me know!
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Mary Enzi CAA
Tax Solutions – FIRPTA Consulting
[email protected]+1 (281) 578-1040
Katy TX
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