FIRPTA and the 15% Withholding Rule: What Foreign Sellers Must Know Before Closing in Florida

Why the IRS Gets Paid Before You Do

If you are a foreign national selling a condominium in Daytona Beach, a vacation home in Ormond Beach, or an investment property in Port Orange, federal law requires the buyer to hand a significant portion of your sale proceeds directly to the Internal Revenue Service before you receive a single dollar. That law is called FIRPTA, the Foreign Investment in Real Property Tax Act of 1980, and for most transactions it means 15 percent of your gross sales price is withheld at closing.

That number surprises nearly every international seller who encounters it for the first time. Understanding exactly how FIRPTA works, where the exemptions apply, and how to minimize the financial impact through proper planning can mean tens of thousands of dollars preserved or forfeited. This article breaks it down in plain language, with the legal specifics you need to act on before your closing date.

What FIRPTA Is and Why Congress Created It

Before FIRPTA was enacted, foreign investors could sell U.S. real estate and exit the country without paying capital gains tax, an advantage that domestic sellers did not have. Congress closed that gap by codifying a withholding obligation under Section 1445 of the Internal Revenue Code. The mechanics are straightforward: when a foreign person sells a U.S. real property interest, the buyer becomes the withholding agent and is legally responsible for collecting and remitting the tax to the IRS.

The word "withholding" is important here. The amount sent to the IRS is not necessarily the seller's final tax bill. It functions as a prepayment. If the actual capital gains tax owed turns out to be less than the amount withheld, the seller can file a U.S. tax return and claim a refund. If more is owed, additional payment is required. Either way, the transaction cannot close cleanly without this obligation being addressed.

The 15 Percent Rate: How It Is Calculated and Who Triggers It

The current withholding rate is 15 percent of the gross sales price, not the net profit. The PATH Act raised the rate from its original 10 percent, and that increase remains in force today. On a $500,000 property in New Smyrna Beach or Palm Coast, that is $75,000 held back at the closing table. On a $1,000,000 DeLand investment parcel, the figure reaches $150,000.

The buyer, or transferee, bears the legal responsibility for withholding and remitting these funds. Payment must reach the IRS within 20 days following closing, transmitted via IRS Form 8288 along with withholding statement Form 8288-A. As of September 30, 2025, an executive order now mandates that all FIRPTA remittances be sent electronically through the Electronic Federal Tax Payment System (EFTPS). Paper checks are no longer an accepted option, and failure to comply exposes the buyer to personal liability for the full withheld amount plus penalties.

Exemptions That Can Eliminate or Reduce Withholding

FIRPTA is not absolute. Several exemptions exist, and a foreign seller who qualifies for one should document that qualification carefully before closing.

• The $300,000 Owner-Occupancy Exemption: If the sale price is $300,000 or less and the buyer signs a written affidavit confirming the intent to use the property as a personal residence for at least 50 percent of the time during each of the two years following closing, no withholding is required. This exemption appears frequently in Daytona Beach and Port Orange transactions where a Canadian or European seller is offloading a modestly priced primary or secondary home. The buyer's signed affidavit is the critical document; without it, the exemption does not apply regardless of the buyer's actual intentions.
• IRS Withholding Certificate (Form 8288-B): A foreign seller can apply to the IRS for a withholding certificate before closing. If granted, the certificate can reduce or eliminate the withholding amount based on the actual expected tax liability rather than the gross sales price. This process takes time, typically 90 days or more, so the application must be submitted well in advance of the anticipated closing date.
• Non-Foreign Status Certification: If the seller is, in fact, a U.S. person or entity, the buyer can accept a written certification of non-foreign status. This removes the withholding obligation entirely, but the buyer who accepts a false certification still bears liability, which is why verification through a qualified attorney or title agent matters.

The Florida Context: Volusia County's International Seller Profile

Volusia County has a substantial base of international property owners, particularly Canadians, British, German, and Brazilian nationals who purchased vacation or investment properties during periods of favorable exchange rates. As those sellers move toward exit, especially in markets like Ormond Beach, DeLand, and New Smyrna Beach, FIRPTA compliance has become a routine but high-stakes closing issue.

For international sellers who also want to understand the buying side of the equation, including financing structures, treaty considerations, and how Florida closings work from a foreign buyer's perspective, our detailed guide on Canadians buying property in Florida: financing, taxes, and closing explained covers those mechanics in full.

Florida's documentary stamp tax obligations under Chapter 201, Florida Statutes also apply to foreign sellers just as they do to domestic ones. The doc stamp on the deed is assessed at $0.70 per $100 of consideration in most Florida counties, including Volusia. These costs layer on top of the FIRPTA withholding and must be factored into a foreign seller's net proceeds calculation before the listing price is set.

Why You Need an Attorney-Broker in Your Corner

FIRPTA sits at the intersection of federal tax law, real estate contract mechanics, and closing logistics. Getting any piece of it wrong carries real financial consequences: buyers can be held personally liable for unwithheld taxes, and sellers who mismanage the withholding certificate process can face delayed closings or forfeited funds.

Working with a licensed Florida attorney who is also a real estate broker means your transaction is reviewed through both lenses simultaneously. Contract language, closing coordination, buyer disclosure obligations, and IRS remittance timelines are all handled within a single professional relationship rather than handed off between separate professionals who may not communicate efficiently under deadline pressure.

Speak with Arthur Simpson Before Your Listing Goes Live

Arthur Simpson, Esq., CIPS, is a Florida-licensed attorney and REALTOR broker serving international sellers and buyers throughout the Daytona Beach area, including Ormond Beach, Port Orange, New Smyrna Beach, Palm Coast, and DeLand. If you are a foreign national preparing to sell Florida real estate, the time to address FIRPTA is before the listing agreement is signed, not the week of closing.

Contact Arthur Simpson at Realty Pros Assured through arthursimpson.com to schedule a consultation and receive a clear picture of your net proceeds, your withholding obligations, and your options under current law.