FIRPTA and Foreign-Buyer Closings in Miami

Arturo R. Alfonso P.A. represents buyers and sellers, in English and Spanish, in Miami-Dade closings where one side lives outside the United States or is not a U.S. person. When the seller is a foreign person, federal law makes the buyer responsible for withholding tax from the price, and when a party signs from abroad, the deed and any power of attorney must meet Florida’s signing rules. This page explains how the firm handles those closings, stage by stage, and what to send us early.

For the basics of buying Miami property as a foreign national, including the Florida buyer’s affidavit, ITINs, and foreign-national financing, start with our guide Do foreign buyers need anything special to buy Miami property? This page covers the closing work itself: who withholds, how the paperwork is prepared, and how documents signed in another country get recorded here. The general closing process is on our page about residential closings in Miami.

Stage 1: Finding Out Whether FIRPTA Applies

The first question in every file is whether the seller is a foreign person. Under 26 U.S.C. 1445(a), when a foreign person disposes of a U.S. real property interest, the transferee, meaning the buyer, must deduct and withhold a tax equal to 15 percent of the amount realized. The withholding is figured on the amount realized, not on the seller’s profit.

A seller who is a U.S. person can show it. Under Section 1445(b)(2), no withholding is required if the seller gives the buyer a sworn affidavit, under penalty of perjury, stating the seller’s U.S. taxpayer identification number and that the seller is not a foreign person.

When the seller is foreign, we look at whether a reduced rate or exemption may fit. Under Section 1445(b)(5), there is no withholding when the buyer acquires the property for use as a residence and the amount realized does not exceed $300,000, and under Section 1445(c)(4) the rate is 10 percent for a residence where the amount realized does not exceed $1,000,000. The IRS explains that the buyer must have definite plans to reside at the property for at least 50 percent of the days it is used during each of the first two 12-month periods after the transfer. Because the buyer carries the withholding duty, we review that plan with the buyer before anyone relies on it.

Stage 2: Withholding Certificates and Taxpayer Numbers

Because the tax is withheld from the gross price, a foreign seller may want the IRS to approve a smaller amount. Section 1445(c) allows the IRS to approve reduced withholding, and the application is made on Form 8288-B. According to the IRS, it normally acts on a withholding certificate application within 90 days after it receives all necessary information. A seller who does not have a U.S. taxpayer number can request an ITIN on Form W-7 once there is a legally binding contract.

If the application is still pending on the closing date, the buyer still withholds. Under Treasury Regulation 1.1445-1(c)(2)(i), the full amount is withheld at closing, but it need not be paid over to the IRS until the 20th day after the IRS mails the certificate or a notice of denial. We set out in the closing instructions who holds those funds and what happens to them once the IRS decides.

Stage 3: Signing From Outside the Country

A deed must be signed in the presence of two subscribing witnesses under Section 689.01, Florida Statutes, and to be recorded it must be acknowledged in one of the forms Section 695.03 allows. For signatures outside the United States, Section 695.03(3) accepts, among others, a notary public of that country or a civil-law notary with an official seal, and a U.S. ambassador, consul general, consul, vice consul, or consular agent. We prepare the signing package with those rules in mind and review the signed originals before closing.

A party who cannot sign in person may appoint an agent. Under Section 709.2105(2), a power of attorney must be signed by the principal and two subscribing witnesses and acknowledged before a notary public or as otherwise provided in Section 695.03. An original power of attorney relied on to affect title to real property may be required for recording, so we plan the courier timing with you and confirm with the title company that the document will be accepted.

Stage 4: The Closing Table

At closing, the settlement statement shows the withheld amount as a charge against the seller’s proceeds. Under Treasury Regulation 1.1445-1(c)(1), the buyer must report and pay over the tax withheld by the 20th day after the transfer, using Forms 8288 and 8288-A. Under Section 1.1445-1(f)(2), a stamped copy of Form 8288-A must be attached to the seller’s U.S. return to establish the amount available as a credit, so we make sure the seller’s address and taxpayer number on the forms are correct.

On the buyer’s side, every buyer of Florida real property provides the affidavit required by Section 692.204(6)(a), signed under penalty of perjury, on the form the Florida Real Estate Commission adopted. A buyer with any connection to a country listed in Section 692.201 should raise it with us before signing the contract. After closing, the deed is recorded with the Miami-Dade Clerk’s Office of County Recorder, and we confirm the recording.

What to Send Us Early

• The signed contract and every addendum.
• For each seller: citizenship and residency status, and any U.S. taxpayer number.
• For each buyer: whether the property will be your residence and how you will take title.
• The country and city where each party will sign, and whether anyone will sign by power of attorney.
• The name of your U.S. tax professional, if you have one.

Related Pages

• Real Estate Law in Miami
• Do foreign buyers need anything special to buy Miami property?
• Residential real estate closings in Miami
• How long does a real estate closing take in Florida?
• Deed preparation and transfers in Miami