The US IRS on March 7 released final and temporary tax regulations under sections 897 and 1445 relating to the taxation of, and withholding on, foreign persons upon dispositions of, and distributions with respect to, United States real property interests (USRPIs).
The regulations, of concern to holders and withholding agents, reflect changes made by the Protecting Americans from Tax Hikes Act of 2015 (PATH Act).
The PATH Act creates a new tax exemption for the disposition of USRPI by qualified foreign pension funds.
It also increases the withholding tax rate for USRPI dispositions after February 16, 2016, from 10 percent to 15 percent, except for some dispositions of residences.
If further eliminates the “cleansing exemption” for dispositions where the corporation or its predecessor was a REIT or RIC during the applicable testing period.
The regulations update section 1.897–2 and sections 1.1445–1 through 1.1445–5, and add a footnote to section 1.1445–11T(d)(2)(iii).
Additionally, the regulations designate the mailing address for filings that are described in regulations under sections 897 and 1445.
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