When a non resident of the US sells a US property (including a timeshare). they will be subject to FIRPTA tax on the gross amount of the sale.
FIRPTA is a withholding tax and it does not mean that that is the actual amount due.
You would then file a 1040NR US tax return for the sale and declare the actual capital gain (or loss) and make a reclaim of overpaid tax. This is because tax is due on the net gain and not on the gross gain.
In most cases, as timeshares are loss making by nature, you will receive a full refund of tax held.
Why hold 15% tax then?
The withholding agent and buyer are responsible for the correct withholding tax on any non resident sale. If they make a mistake, the IRS will go after them (as they are based in the USA) and not you (non USA).
So why do I need an ITIN? The FIRPTA unit have written to me asking for one?
An ITIN is a US tax number, same as your local country of residence, it is used to file a tax return and log taxes paid. So if the US withholding agent has held and then paid the tax to the IRS, it will sit in a suspense account (with millions of other tax transactions).
The IRS need to log the paid tax against a person and therefore require you to obtain an ITIN, so they can do so.
The good news is, the same number is then used to file a US tax return and if the FIRPTA unit has already matched the tax to your ITIN, you will receive your refund quicker. Currently, due to ongoing Covid backlog, if the tax is not assigned to the ITIN, the IRS agent has to search for it and this process can take up to 6 months.
How do I prove the tax was paid on my behalf?
The withholding agent must provide a US tax document to you. For US property sales relating to FIRPTA tax, this is Form 8288-A. If you have not received it, please contact your withholding agent or realtor for assistance in obtaining it.
How can Just Breve assist me?
We file US tax refund claims regularly for non residents of the US on Form 1040NR. If you have received a 1042-S, W-2 or 1099 with overpaid tax held, do get in touch.
We offer fixed fees and free consultations to discuss what you need to do to receive back the overpaid tax.
Get in touch today:
T: 0208 1444632
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