Are you considering buying or selling property in the vibrant city of Miami as an foreign national? Whether you're in the market to sell or purchase your vacation home, an investment property, or a place to call your own, Miami provides an exciting array of options for buyers like yourself from around the world.
As an international buyer, it’s essential to familiarize yourself with the regulations and requirements for purchasing property. It’s also important to note that buying property in Miami, FL or any other state does not grant you residency or immigration status.
Non-US citizens can purchase property in the United States without requiring residency or citizenship status. However, it's important to note that some states, like Florida, may have specific restrictions regarding property purchases by foreign nationals within their jurisdiction.
Florida has legislation such as SB 264, which establishes regulations specifying which foreign nationals are prohibited from purchasing property within the state, along with limitations on certain property types. Individuals and corporations from particular countries, such as China, are restricted from buying land in Florida.
The law came into effect on July 1, 2023, and comprises three primary components. Initially, it prohibits individuals and corporations from specific countries from purchasing farmland in Florida.
These countries encompass China, Russia, Iran, North Korea, Cuba, Venezuela, and Syria. Secondly, individuals and corporations from these countries are restricted from acquiring land within a 10-mile radius of significant locations such as military bases. Thirdly, it explicitly states that non-American citizen or non-permanent resident Chinese individuals are ineligible to purchase land in Florida, except under special circumstances.
If you are a foreign national and own property in Miami and contemplating selling it, it's essential to grasp the intricacies of federal, state taxes and legal requirements associated with the transaction.
(Disclosure: On February 1, 2024, the American Civil Liberties Union ( ACLU) issued a press release announcing that the Eleventh Circuit Court of Appeals had issued a temporary halt to the enforcement of SB 264 deemed unconstitutional, against two Chinese immigrants who had contested the statute in court. Please note that this information may be subject to change, and it is advisable to consult with a legal professional for the most current updates.)
Foreign Investment in Real Property Tax Act
One significant aspect impacting property sales for internationals is the Foreign Investment in Real Property Tax Act (FIRPTA). FIRPTA plays a pivotal role in real estate transactions involving international investors, aiming to prevent potential loss of tax revenue from the sale of real estate by non-residents.
For FIRPTA purposes, the term ‘foreign person’ includes:
- individual non-resident aliens
- foreign corporations
- foreign estates
- foreign trusts
Navigating compliance with FIRPTA can often be complex and may introduce delays or additional hurdles in completing transactions smoothly.
When selling real estate, one notable tax consideration is the imposition of capital gains tax. Capital gains tax is essentially a tax levied on the profit from the sale of an asset, such as real estate, when the selling price exceeds the original purchase price.
The FIRPTA tax rate applicable to the property's purchase price is as outlined below.
- $300,000 and below there is no withholding provided the buyer signs a declaration confirming the following: the sales price is below $300,000, the buyer is an individual (not a company), and the buyer intends to use the property as their residence for at least 50% of the year during the first two years of ownership.
- $300,001 and $1,000,000, a withholding of 10% of the sales price is required.
- $1,000,000, the withholding increases to 15% of the sales price.
How to Avoid or Reduce Paying FIRPTA
Exceptions to FIRPTA withholding, designed to alleviate or diminish payment obligations in certain scenarios, include:
1) U.S. property sellers are generally exempt from FIRPTA concerns. However, it's worth noting that some green card holders, despite being permanent US residents, may be classified as foreign by the Internal Revenue Service (IRS). Similarly, certain foreigners may possess valid Social Security numbers.
2) Another avenue to circumvent FIRPTA is through obtaining a Withholding Certificate. This option allows sellers to petition the IRS for reduced withholding if the amount withheld exceeds the actual tax owed. For example, if the property sale results in a loss for the non-resident, FIRPTA can be entirely avoided.
3) An alternative approach involves applying for a "Tax Withholding Certificate." This application demonstrates that the seller has already remitted more tax than required, potentially resulting in reduced overall tax payment. However, this process necessitates the provision of an International Taxpayer Identification Number (ITIN), which may introduce additional complexities and elongate the transaction timeline.
4) Obtaining U.S. permanent residency also serves as a means to bypass FIRPTA obligations.
In conclusion, regardless of your situation, I cannot stress enough the significance of partnering with seasoned international tax and legal professionals who comprehend the intricacies of FIRPTA and the nuances of Florida regulations, tailored to your specific circumstances. As a Miami real estate expert with extensive experience in transactions involving foreign nationals, don't hesitate to
contact me for personalized assistance with your property requirements.