When and to whom is this tax paid?

Depending on the land linkage, in Miami-Dade County, property taxes can range from 1.75% to 2.00% annually. Additionally, several thousands of taxes can be collected for a limited time by the tax authorities, individually for special investments (Special Assessments); for tax calculation purposes, the estimated value (Assessed value) of the property is used, which is determined by the city or county tax appraiser.


The property tax is collected once a year, regardless of the owner's residency status.

 

Generally, payment of this tax can be made from November first until March 30th. Counties offer discounts for those who pay in November and would already consider a payment late on April first

What is FIRPTA?

The acronym in English is "FIRPTA," which stands for the Foreign Investment in Real Property Tax Act of 1980.

Who does FIRPTA affect?

FIRPTA affects any non-resident foreign individual and foreign companies that are not considered domestic corporations. From a tax perspective (tax declaration), when a non-resident individual or a foreign corporation or entity sells a property within the United States, they are subject to the provisions of FIRPTA.

How does it affect?

At the time of the notarization (transaction closing), a withholding of 10% on the sale price will be applied to the seller in transactions below $1,000,000, and 15% if the sale price is above $1,000,000. For instance, a "foreign investor" sells a property for $350,000. The closing agent (company or attorney handling the title) will withhold $35,000 in a special account called an "escrow account," until the "foreign investor" submits their income tax declaration in January of the following calendar year after the sale closure.

What is the difference between Withholding and Tax?

Withholding is the mechanism by which the tax authority (IRS) "compels" the foreign individual or company to file their declaration to determine if there is a gain or loss in the transaction.

Once the declaration is made and the IRS determines the amount to be attributed as tax, the difference between the withholding and the tax is refunded to the seller.

Can this withholding be avoided?

It is very important to give proper attention and planning to this point, so that there are no negative surprises at the time of closing.
Buying in your personal name or under a company's name is one of the most important aspects in the application of FIRPTA. However, it's not only the type of legal structure but also the internal constitution that could make the difference. On the other hand, FIRPTA is just one of the factors to consider, therefore, it is extremely important to understand the advantages and disadvantages of different purchase structures (LLC, S-Corp, Trust, Inc, etc.).

How does it affect buyers?

As a buyer, you should ensure that the withholding is carried out if the seller is a "non-resident foreign individual or foreign company not considered a domestic corporation"; otherwise, you could be responsible for paying that withholding.

How do I recover the withheld amount?

In this case, you should hire a real estate attorney or a certified public accountant who can fill out the appropriate applications and obtain an Individual Taxpayer Identification Number (ITIN). The ITIN is a number assigned by the IRS for individuals who do not have a Social Security number, to determine if the seller is eligible to receive a portion of the withholding since the actual tax liability is not known at the time of closing.
After submitting the applications and forms to the Internal Revenue Service (IRS), the application process can take up to 90 days.
 
LEGAL DISCLAIMER: FIRPTA provisions are complex and require the expertise of a real estate attorney or a certified public accountant who can fill out the appropriate applications and assess potential implications. This information should not be taken as legal advice at any time.
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