Tax with holding for foreign investors?

Asked by Capital Investor, Orlando, FL Sun Mar 28, 2010

I understand that the IRS requires the property manager to with hold 30% of the gross rent received for foreign investors. And expense are only deductable if the investors makes an election. Can any one gives me a step by step procedure as to how to make this election, or whether anyone can recommend a tax preparer who specialize in this area?

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Condo Metrop…, Agent, Orlando, FL
Mon Mar 29, 2010
If your property manager isn't doing this, they could have a problem. Feel free to call me if you need to switch. We specialize in condos and deal with a lot of overseas buyers by helping them purchase and then managing. We are also based in MetroWest. See our site at

Here is the advice I received from my overseas CPA specialist:

"When a foreign national earns US source income, they are subject to 30% withholding tax (unless otherwise specified by an income tax treaty). As a property manager, you are responsible for withholding 30% of the gross rents and submitting it to the IRS each month. If you do not withhold, you can be fined up to $10,000 by the IRS.

If the foreign national provided you with a properly filled in and executed Form W-8ECI declaring that they have made the election to file annual income tax returns, you don’t have to withhold the 30%. The W8-ECI form must include their US ITIN.

At the end of each year, you are required to report to the IRS the gross rents collected on Form 1042-S (for foreign nationals) and Form 1099 (for US citizens). A copy of the form is sent to the taxpayer. They must match that income on their annual tax return.

A foreign national will make the election to file an annual income tax return reporting their net income with the filing of their tax return for the year in which they purchased the rental property.

When they sell their property, as you know, they are subject to a 10% withholding of the gross sales price. (unless reduced or eliminated by the IRS with a Withholding Certificate).

You can get any of the above listed forms from the IRS website at ."
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Alan Martin, Agent, Orlando, FL
Mon Mar 29, 2010
the election is easy to do. THe Foreign person just fills in a form

but ask this lady. It is what she does

Pamela Moats
R.R. Moats, CPA, PA
Certified Public Accountants
851 Dunlawton Ave., Suite 101
Port Orange, Florida 32127

Phone: 001-386-760-3083
Fax: 001-386-760-6134
Alt Email:
Alt Email:
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Carla Rayman, Agent, Sarasota, FL
Mon Mar 29, 2010
Yes, Renea Glendinning, who is the head of the International Tax Department at Kerkering Barberio. Her phone is 941-365-4617. Please wait until tomorrow to call for we just finished speaking at a property exhibition in London and are both flying back to Florida today. She is excellent and works with all our clients.

Best Regards,
Carla Rayman, Your Global Agents
Director of International Business Development
Prudential Palms Realty, Sarasota, Florida
+1 941 724 0519
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