The Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) is a law of the United States of America that applies to the sale of interests held by nonresident aliens and foreign corporations in real property located within the United States.

FIRPTA authorized the IRS to apply a withholding income tax on nonresident aliens and foreign corporations with sales of US real property interests.[1] A real property interest includes sales of real property as well as sales of shares in certain US corporations that primarily hold and sell real property in the US. When a person or corporation purchases a US real property interest from nonresident aliens or foreign corporation, they are required to withhold 10% of the amount realized.

The withholding tax is intended to ensure that the US is able to tax the gains realized on the sale of such interests.

A common exception to FIRPTA withholding is that the person or corporation purchasing the property is not required to withhold tax when the purchaser purchases real estate for his or her own home and the purchase price is $300,000 or less.

Taxation of Foreign Individuals Definition of resident A foreign citizen is considered a resident of the United States for income tax purposes if he is considered a resident for immigration law purposes (he holds a "green card"), or he is present in the United States for at least 31 days during the current calendar year and during the last three years (including the current year) he was present in the United States on average at least 183 days. This average is computed by giving the days in the current year a weight of 1, those in the first preceding year a weight of one-third, and those in the second preceding year a weight of one-sixth. Foreign tax credit A foreign tax credit is allowed for income tax payable to a foreign country. The credit is limited to an amount of foreign tax equal to the U.S. tax on foreign income. Shares in foreign corporations A US citizen or resident is taxed on his share of certain income of some foreign corporations in which he has shares. This mostly applies to corporations controlled by US shareholders ("Controlled Foreign Corporations"), and corporations which have a high proportion of their assets in cash or investments or a high proportion of their income from interest or investments ("passive foreign investment companies"). Although these rules were intended to prevent US taxpayers rolling up income offshore without paying US tax on it, their application is much broader and is not confined to corporations in tax havens. Non-residents Non-residents involved in a trade or business in the United States are subject to US tax on the profits of that business. Other income (such as dividends or royalties, but not usually interest) is subject to a 30 percent withholding tax, or a lower rate of tax under the provisions of a tax treaty. Interest paid to non-residents is not generally taxed. Rental income can either be treated as a US trade or business or subject to withholding tax.  International Tax PPT, Don Gonzalez Seminar