The IRS has issued regulations pursuant to the Protecting Americans from Tax Hikes Act (“PATH”) that make changes to the income tax withholding requirements for nonresident aliens when U.S. situs property is liquidated. While foreign individuals are generally exempt from capital gains for asset sales which are not connected with a U.S. trade or business, the IRS treats U.S. real property as being connected to the U.S. and subjects such sales to withholding requirements. The regulations imposed by the IRS increase the withholding requirements thereby resulting in less funds being immediately available for sellers of U.S. real propertThe requirement to withhold funds is generally imposed on transferees and is often part of the escrow process. Prior to the imposition of the new regulations, the transferee was required to withhold 10%. For sales that take place after February 16, 2016, the withholding rate increases to 15%. (PATH Act §324(a)) While the 10% continues to apply for the sale of homes used as a residence, this exception only applies to residences that have a realized sale value of between $300,000 and $1 million. PATH Act §324(a)).
New Regulations Change Withholding Requirements for Dispositions of U.S. Real Property
Do You have any Questions?
We look forward to assisting you. For the sake of simplicity and efficiency, we request that you use our contact form for your inquiry and describe the matter as clearly as possible. In addition, you can include relevant attachments. After submitting your inquiry, we will contact you either by telephone or e-mail within one working day. If we can assist, we will suggest a time and date for an initial consultation. Of course, you can also contact this firm or a particular attorney directly to make an appointment for a personal consultation or telephone consultation (find contact details here). Please be advised that no attorney-client relationship is created by sending us an email or filling out this contact form. For information on our fees, please click here.
Related publications
- Germany-U.S. Estate and Gift Tax Treaty
- Germany-U.S. Income Tax Treaty
- Recognition of a Will executed under the laws of California in Germany
- Taxation of the Estate of Nonresidents under U.S. Domestic Law
- Determination of the Law Applicable to German-Californian Estate Matters
- Recognition of a German Will in Florida as Regards to Form
- U.S.-Trusts in German-American Estate Planning
- Taxation of Capital Gains on Sale of Real Property situated in Germany and German-American Estate Planning
- Taxation U.S. Citizens/Residents of Rental Income Derived from Real Property Located in Germany
- Real Property Capital Gains Taxation for Non-Resident Aliens Residing in Germany
- Taxation of Rental Income Derived from Real Property located in the U.S. for Non-Resident Aliens Residing in Germany
- Trust Quaterly Review: Election Fever
- Gifts from Abroad to U.S. Persons
- Probate and Estate Planning in California: Issues Associated with Alzheimer’s disease and Dementia
- The Impact of Community Property on Inheritance Matters
- Intestate Succession and California
- Mixed Marriages: U.S. Tax Implications for U.S. Citizens Married to German “Aliens”
- Taxation of Distributions from an inherited IRA to a person Resident in Germany
- Taxation of the Estate of Non-resident US-citizen in Germany
- U.S. Federal Estate Tax on the U.S. Estate of German Citizen resident in Germany
- German Certificate of Inheritance
- The Administration of a U.S. Domiciled Decedent’s German Assets
- Taxation of U.S.-Trusts under the German Inheritance and Gift Tax Act
- USA: Estate Tax treaties
- Recognition of a German Will in California as regards to Form