FOREIGN INVESTMENT IN REAL PROPERTY
We advise foreign investors acquiring or investing in real estate in the United States. The tax rules for foreign investment in U.S. real estate is governed by the Foreign Investment in Real Property Tax Act (“FIRPTA”). FIRPTA imposes a unique withholding tax regime upon the disposition of U.S. Real Property Interests. The best choice for structuring investment in U.S. real estate will depend on a number of factors and depend on the unique circumstances of each individual investor, but the complex tax rules in this area should always be included among the factors considered before finalizing any investment structure. Learn more about FIRPTA.
TAXATION OF REAL ESTATE BUSINESS ACTIVITIES
In addition to advising clients about FIRPTA, we advise foreign investors about the taxation of real estate business activities. The ownership of U.S. real property by a non-U.S. investor by itself will not constitute the conduct of a business in the United States. If the real estate investment is not treated as a business, the gross rents paid to the non-resident owner would be subject to 30% withholding tax as non-ECI. Foreign corporations or nonresidents may make an election to treat their U.S. income as ECI, and pay a tax on their net income at ordinary rates. This election would enable the investor to deduct its real estate business related expenses.
ESTATE TAX ASPECTS OF FOREIGN INVESTMENT IN REAL ESTATE
We advise foreign investors about the U.S. estate taxation of non-resident aliens. For U.S. estate tax purposes, the gross estate of a non-resident consists of all U.S. property in which the decedent had an interest at death. Direct ownership of U.S. assets, such as U.S. real estate or shares of a corporation organized in the United States, would subject the non-U.S. investor to U.S. estate taxes if the investor still owns such assets at the time of his or her death.