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Q: If a property manager for a foreign investor fails to withhold 30 of the gross receipts and the manager has not been given a W-8ECI form the manager?
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YES! But, with some differences from the U.S. citizens. Basic Requirements for Foreign Investors wishing to Purchase Real Estate in the US 1. FIRPTA (Foreign Investment in Real PropertyTax Act) Foreign Investors must acquire a US taxpayer identification number (TIN) before purchasing property. 2. Capital Gains Tax on Sales Income resulting from the sale of US Real Property is taxable. The Capital Gains tax is calculated by using the Sale Price today minus the Original Sale Price, plus Capital Costs, minus Depreciation. Since this tax is approximately 20% of the gain, Sellers may consider an exchange. The time to divest can become the time to reinvest. 3. Income Tax Foreign Investors are taxed at a flat 30% federal tax rate on gross rental income, unless they take the "net election" on their income tax returns allowing them to take deductions for regular expenses before income tax is calculated. Furthermore anyone who collects income for a Foreign Investor is generally required to withhold 30% of the Gross Income such as rents. 4. Title Decisions Decisions as to how title is taken should be address beforehand. Title can be taken as an Individual , a foreign corporation, a US corporation or trust, for example. In these and other matter it is advisable to seek out a competent accountant and or lawyer with international experience.