Non-Foreign Person Affidavit Forms - Firpta Real Estate

What is a Non-Foreign Person Affidavit? What Is Firpta In Real Estate

Pursuant to a federal law, the Foreign Investment of Real Property Tax Act (FIRPTA), a buyer of a real estate from a foreigner is required to withhold some amount as tax and pay the amount to the Internal Revenue Service (IRS) at the close of escrow. Sec. 1445 provides that when a sale of a U.S. real property interest is made by a foreign person, the buyer is required to deduct and withhold a tax equal to ten percent of the amount realized from the sale of property. An exemption to this rule is a foreign residence affidavit, also called non-foreign person affidavit.

A non-foreign person affidavit is a sworn statement under Internal Revenue Code (IRC 1445). A non-foreign person affidavit is made by a seller of a real property stating that s/he is a non-foreign seller as defined by the Internal Revenue Code Section 26 USC 1445. The non-foreign affidavit is required to afford the buyer with guarantee that the seller is not a foreign person. A non-foreign certificate liberates the buyer from his/her requirement to withhold the tax.

Generally, foreign persons are exonerated from tax on gains from sale of U.S. real property interests. However, under FIRPTA, foreign persons are subject to a non-resident tax called foreign withholding tax for capital gain obtained from disposition of U.S. real property.

To be legally valid, non-foreign affidavit forms must be signed by the seller and notarized. A valid non foreign affidavit is an exemption from withholding and legally protects the buyer even if the seller turns out to be fraudulent and tries to evade payment of tax.

Apart from non-foreign real estate affidavits, there are other exemptions where withholding of tax is not required. Buyers can use a real property tax exemption without a non-foreign affidavit under other provisions of FIRPTA rules. A buyer is not required to deduct and withhold any amount relating to a disposition if:

  • A real estate property is purchased to be used use as a principal residence of the buyer and the price is $300,000 or less. FIRPTA provisions define a principal residence as a residence in which the buyer will live for over fifty percent of the time in each of the next two consecutive years.

  • An interest is acquired in a domestic corporation that trades non publicly and the corporation furnishes an affidavit stating that interests in corporation is foreign property interest and not U.S. real property interests.

  • A buyer receives a certified declaration from the secretary notifying that the tax will be paid by the seller or there is a tax exemption for such property or seller's unsatisfied withholding liability is otherwise satisfied.

  • Shares of a publicly traded corporation are acquired.

A person who fails to exercise his/her duty to withhold tax will be liable for an amount equal to the total payment in the transaction, and sometimes the liability amount will be same as the amount of tax that must have been withheld.

Tips for Preparing Non-Foreign Person Affidavit Forms

Real estate transactions are probably the most challenging operations due to minor property details that most people don’t know to think about. Let’s look closer at some specific circumstances and streamline the process of preparing real estate forms with the following tips:

  1. Check the rights of both parties. Be sure that all of them have required capabilities to administer property before preparing a document.
  2. Use state-specific real estate contracts. Regulations for documents vary between states. Discover the appropriate Non-Foreign Person Affidavit Forms form in our collection that consists of more than 85 000 regularly-reviewed legal samples.
  3. Determine all desired time frames. Bringing a Non-Foreign Person Affidavit Forms into force is usually a stumbling block that leads to a lot of misunderstandings and lawsuits between parties. Make starting dates clear from day one.
  4. Record property condition. Take photos or describe in writing the state of a house or flat and check if everything is in order on the day of releasing it to the another party.
  5. Take advantage of modern technologies. Save your time using the available integrations with a comprehensive PDF editor and innovative eSignature solution. Benefit from our Premium subscription to fill out, verify, modify, and certify your sales contracts without the need of printing, manual filling, or scanning hard copies.