Thomas C. Roberge & Company

GUIDELINES FOR FOREIGN SELLERS

APPLYING FOR RELIEF FROM

THE 10% WITHHOLDING

February 8, 2008

By Carol Doerr, CPA

Thomas C. Roberge & Company

St. Petersburg and Sarasota

Telephone: (727) 822-9393

Telephone (941) 952-5848

Contact: Info@RobergeCo.com

With the tourist season upon us we are seeing that numerous overseas investors are obtaining sales contracts on their Florida vacation property. With that in mind, we thought it would be a good idea to review some of the points you should be aware of when handling sales for foreign investors who do not want to wait well into 2009 to receive a refund for part or all of their 10% IRS “FIRPTA” withholding tax.

A non-U.S. seller can apply for relief from the 10% withholding when the actual tax is less than 10% of the gross sales price. This is commonly referred to as a “Withholding Certificate”. The benefit in applying for relief is that the seller can get part or all of the 10% released to him or her in the shortest amount of time. We are already seeing an increase in the number of people applying for relief from the 10% withholding in 2008 because of current market conditions.

The application must be filed between the time the sales contract is signed and the date of the closing. If the application is filed after the closing date (even by one day), the entire 10% must be remitted to the IRS and the seller must generally wait until the following year to file an income tax return for a refund.

When the application is timely filed, the 10% is held in escrow by the closing agent until the IRS processes the application and grants relief. At such time part or all of the escrowed funds are remitted to the seller.

The sellers and buyers must have U.S. tax identification numbers; otherwise, the IRS will not accept and process the application. If either the buyer or seller does not have one of these numbers, our firm is an Acceptance Agent for the IRS and has the ability to obtain these numbers.

Each year we process numerous applications for relief from the 10% withholding for non-U.S. sellers. The rules in this area are detailed and specialized, and should only be handled by someone experienced in dealing with international tax matters before the IRS.

Feel free to contact us at (727) 822-9393 or (941) 952-5848 to discuss how we can help you.

Internal Revenue Service Circular 230 Disclosure – You are hereby advised that any tax advice contained in this newsletter is not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or to support the marketing of any tax transactions or matters addressed herein.