I had a question yesterday from a real estate broker about the Federal 10 percent withholding tax on sale of a residence. This is a frequent question, thus should be a topic for the FAQ.
Let’s start at the top. When foreigners sell U.S. real estate, there is a 10 percent Federal tax withheld. The 10 percent is calculated based on the sales price.
Foreigners often think this 10 percent withholding is the only U.S. tax liability the face. That is a reasonable assumption. On dividends payments to foreigners, for instance, U.S. companies withhold a certain amount (somewhere between zero and 30 percent, depending on the country) for tax, remit the balance to the foreign recipient, and that’s it.
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