INSIGHTS & IDEAS

Withholding tax may be required for sale of U.S. real property to foreign persons

Generally a 10% federal withholding tax is required for the sale of U.S. real property to a foreign person.  This may include the sale of a personal residence if the amount exceeds $300,000 or the sale of non-publically traded U.S. corporate stock if the corporation owns U.S. real property.

In addition withholding taxes are generally required for the payment of rent, royalties, interest, dividends, license fees and other income not "effectively connected" with the U.S. trade or business paid to a foreign person.

U.S. corporations that become at least 25% foreign owned, U.S. partnerships with foreign partners and U.S. partners in a foreign partnership may also be required to file certain information returns.