Foreign investors who want to buy real estate in the United States have a number of legal and tax implications to consider. In south Florida, there are a lot of foreign investors buying vacation homes or investment properties that are both commercial and residential. In any type of purchase, a foreign investor needs to meet with an accountant and a tax attorney before buying. This is necessary to review and orchestrate how the purchase will be set up. There are several things to take into consideration:
Questions Foreign Investors Must Ask
Some of the questions that foreign investors need to discuss with their attorney and their accountant include:
– Is there a tax treaty between the investor’s country of origin and the U.S.?
– What are the tax laws in the investor’s country of origin?
– Is the foreign investor engaged in any business activities in the U.S., or is the real estate investment the only activity?
As you can see, many aspects need to be taken into account, and it is crucial that you meet with an experienced tax attorney and an accountant who has experience with foreign investors. Do this before you make an offer or buy a property.
Consider an LLC or a Corporation
Plan to buy your property under an LLC or a corporation. It may be a domestic corporation or a foreign corporation, or a foreign trust, depending on the situation. This will have an impact on estate taxes and income taxes. For example, a foreign investor has a liability when he or she is buying under their own name. The tax liability shows up when the investor passes away because the estate taxes can be up to 55 percent of the property’s market value. So to minimize and avoid the tax implications, we recommend proper planning and a potential LLC or other entity. Know what the situation is with your country and the U.S. Will you need confidentiality? Do you need to do some estate planning and purchase a property under an entity? Make it a trust so the estate planning process allows your family members to inherit on their own. That’s the first step and one of the most imp things to consider.
Working with Property Managers
Foreign investors need to have a very good relationship with a property management company. Property managers have required forms for foreign investors. If the foreign investor doesn’t have the property documentation, the property manager is required to withhold 30 percent of before forwarding any rent payments.
This are the essential things for any foreign investments when you’re thinking about buying a vacation home or a rental property. If you need any assistance, please don’t hesitate to contact us at Florida Property Management Services in Fort Lauderdale.