International Buyer

In addition to my tips for buyers, the international buyer needs to do some additional homework before going into the purchase process. There are some legal and tax issues that affect the international buyer and I highly recommend to get professional advice from lawyers and CPA’s in order to proceed the right way.

However, I would like to mention some issues important to be aware of in case the buyer is not a US citizen/resident.

Disclosure: This is not a legal advice nor I pretend to replace the advice of an accountant or legal professional. The following information is only to give some guidance, each particular situation is unique, might have exceptions and has to be treated in a especial way by a professional.

Considerations of a foreign national:

1.      Entity formation: Foreign national will consider to form an entity, the type of Entity chosen depends on acquisition cost, type of property, country of origin, worldwide income, taxation in home country.  Tax planning will differ between buying $25M shopping center and $200K Condo.

2.      Taxes affecting the foreign national:

2.1.The foreign national that makes income from US Real Estate must pay taxes in the US just like a US Citizen, rates can vary depending on bilateral agreements of countries.

2.2.Capital Gains Taxes: The foreign national who earns capital gains on the sale of real estate must pay capital gains taxes at the same rates as a US resident. Individual rates are different than corporate rates.

2.3.Estate Tax: As high as 50%, nationals get an exemption of USD 5.34M and foreign nationals only USD 60K

2.4.Gift Tax: as high as 45%

2.5.Branch Tax: Additional 30% tax imposed on foreign corporations that earn profits on US Investments.

3.      Tax Id Number: Foreign national should apply early for a tax Id number if he will derive income from the US real estate purchased.

4.      Power of Attorney/Document execution: Is Power of Attorney necessary? Is US Embassy accessible? It is recommendable to avoid POA and be present for the closing.

5.      Closing Funds/Deposit: Confirm when funds will be transferred and wiring instructions

6.      Proof of funds/Source of funds: Be prepared to explain and document

7.      Property management: In case of an income property: who will manage? Get contract.