What is FIRPTA Withholding? | Foreign Investment on Kauai

Great Investment at Islander on the Beach

Islander on the Beach 320 is a condo in the Hawaii Building. I have personally always like this building because of the large green space between Islander and the Beachboy, the next resort north. Unit 320’s orientation in the building makes the condo receive the oceanic tradewinds.

This was my first listing at Islander on the Beach, and the sellers were from Canada. They made an excellent investment on the condo, not just because of the capital gains but also they invested when the US dollar and the Canadian dollar were nearly equivalent. When they sold the exchange rate $.7 per $1 USD, they used the proceeds to help their son purchase a place in Vancouver. They owned two units and still love to come yearly to check on their property and enjoy Kauai during British Columbian winters.

Foreign Investment in Real Property Tax Act

If you are a foreign investor, you are subject to FIRPTA (Foreign Investment in Real Property Tax Act). This is not a tax but rather a 15% of the sale price is withholding. It was put in place to ensure non-citizens pay the appropriate taxes to the state of Hawaii and the federal government. This would include all of your Transient Accommodation Tax (TAT) and General Excise Tax (GET) on all vacation rental income that your condo received in the year of sale. This also ensures that you pay all capital gains tax before and remaining withheld funds will be released.

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