Federal Withholding Tax
Foreign Investment in Real Property Tax Act ("FIRPTA")
The disposition of a U.S. real property interest by a foreign person (the transferor) is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding. FIRPTA authorized the United States to tax foreign persons on dispositions of U.S. real property interests. A disposition means “disposition” for any purpose of the Internal Revenue Code. This includes but is not limited to a sale or exchange, liquidation, redemption, gift, transfers, etc. Persons purchasing U.S. real property interests (transferees) from foreign persons, certain purchasers' agents, and settlement officers are required to withhold up to 15 percent of the amount realized on the disposition (special rules for foreign corporations).* In most cases, the transferee/buyer is the withholding agent. If you are the transferee/buyer you must find out if the transferor is a foreign person. If the transferor is a foreign person and you fail to withhold, you may be held liable for the tax. For cases in which a U.S. business entity such as a corporation or partnership disposes of a U.S. real property interest, the business entity itself  is the withholding agent.

*Note— The terms used by the IRS can be confusing. "Transferor" refers to the SELLER of property, while the "Transferee" refers to the BUYER of property.
Rates of Withholding

The transferee ("Buyer") must deduct and withhold a tax up to 15% of the total amount realized by the foreign person on the disposition.*  The amount realized is the sum of (1) The cash paid, or to be paid (principal only), (2) the fair market value of other property transferred, or to be transferred, and (3) the amount of any liability assumed by the transferee or to which the property is subject immediately before and after the transfer.  The amount realized is generally the amount paid for the property.  If the property transferred was owned jointly by U.S. and foreign persons, the amount realized is allocated between the transferors based on the capital contribution of each transferor.

Questions? Speak with a Real Estate Lawyer
CHRIS PAHL
Attorney at Law
Georgia Title & Escrow Co LLC
3575 Piedmont Road
Building 15, Piedmont Center
Suite 120
Atlanta, GA 30305
678.448.4148 Tel


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