FIRPTA increase in withholding rate

Effective as February 16, 2016 the general withholding rate under the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”) was increased from 10% to 15%. FIRPTA is a tax law that imposes income tax on foreigners disposing of real property interests in the United States.

Until recently, 10% of the sales price was withheld from the sale by a foreigner to cover potential tax liability. The general withholding rate has now been increased. The 10% withholding rate will still apply in certain instances if specific exemption criteria are met but the general withholding going forward will now be 15%.