FIRPTA explicado: lo que los inversionistas extranjeros deben saber antes de vender

FIRPTA stands for the Foreign Investment in Real Property Tax Act. It is a federal law that requires the buyer of U.S. real property to withhold a portion of the sale price and send it to the IRS when the seller is a foreign person. The withholding serves as a deposit against any U.S. tax liability the foreign seller owes on the gain from the sale.

This means that when a foreign investor sells a U.S. property, they may not receive the full proceeds at closing. The buyer — or more precisely, the buyer's title company or attorney — withholds the applicable amount and remits it to the IRS. The seller can then file a U.S. tax return to report the actual gain and claim any refund of excess withholding.

The standard FIRPTA withholding rate is 15 percent of the total sales price, not the gain. If the gain is smaller than 15 percent of the sale price — or if there is a loss — the seller may have overpaid and can file to recover the excess. The withholding rate can be reduced if the seller applies to the IRS for a withholding certificate before closing, which sets withholding to the estimated actual tax owed.

There are exceptions and reduced rates under certain conditions, including sales where the buyer intends to use the property as a primary residence and the sale price is below a certain threshold. The rules around exceptions are specific, and a qualified U.S. tax professional should review your transaction before you assume an exception applies.

The single most useful planning step is to apply for a withholding certificate before closing if the estimated tax is less than the standard withholding amount. The application is filed on IRS Form 8288-B and, if approved, instructs the buyer to withhold only the reduced amount. This can significantly improve cash flow at closing rather than waiting months for a refund.

FIRPTA also applies to sales from LLCs and partnerships where foreign persons own an interest. If you hold U.S. property through an entity, the FIRPTA analysis extends to the ownership structure. Work with a qualified tax professional early — ideally when you purchase, not when you sell — to understand how FIRPTA will apply and what planning options are available.

Sellers who ignore FIRPTA create risk for the buyer as well. If the buyer fails to withhold and the seller does not pay the tax, the IRS can pursue the buyer for the withholding amount. Buyers and title companies take this seriously, which is why FIRPTA paperwork is standard in any transaction involving a foreign seller.