Most of you who deal with foreign national clients are already aware of the FIRPTA tax withholding, which is mandatory for any transaction involving the sale of property by foreign seller. The Foreign Investment in Real Property Tax Act of 1980, or FIRPTA, as it is commonly known, mandated that 10% of the purchase price be withheld for this tax.
Recently, Congress passed the Protecting Americans from Tax Hikes Act of 2015 (also referred to as PATH), on December 18, 2015, which, among other things, increased the FIRPTA withholding from 10% to 15%. This increase was effective February 17, 2016.
Under the new legislation, a foreign national selling a personal residence property of $300,000 or less would pay no FIRPTA tax. If his personal residence property was worth between $300,000 and $999,999, then a 10% FIRPTA withholding would apply. If the property, whether or not it was used a residence, was worth $1 million or more, a 15% FIRPTA withholding would apply.