The Foreign Investment in Real Property Tax requires foreign persons to pay U.S. Income Tax on the gains they make when they sell U.S. real estate. Closing agents will be required to hold back 15 percent of the gross sales price when a foreign national is the seller of the real estate.
The FIRPTA tax is actually a tax that the buyer is required to pay if the tax is not withheld from the seller’s proceeds and remitted to the IRS within 20 days of closing. So it is the buyer’s responsibility to ensure that 1) the seller is not a non-resident alien of the United States, and 2) if he is, then direct the closing agent to withhold and remit the proper amount of tax to the IRS.
There are exceptions to the withholding, but we have always advised buyers to not assume the risk of not paying the seller’s FIRPTA tax based on the exceptions. Instead, it is advisable to always pay the tax and let the seller apply for a refund on their own.
Similar to FIRPTA withholding, O.C.G.A. Section 48-7-128 provides for Georgia income tax withholding at a rate of 3 percent on sales or transfers of real property and associated tangible personal property by nonresidents of Georgia. The buyer withholds Georgia income tax from the payment to the seller. The buyer is responsible for providing the seller with a withholding tax statement, which the seller attaches to his Georgia income tax return, claiming credit for the withholding on the appropriate line of the tax return.