Page 6 - Foreign Investor Guide - Hawaii

HARPTA - The Hawaii Real Property
Tax Act (1990) which says that a sale of
Hawaii Real Estate by a Non-Hawaii resident
is subject to a Hawaii State Tax. The tax
liability belongs to the seller, and 7.25% of
the total sales price will be withheld and
submitted to the State of Hawaii Department
of Taxation.
There are some exemptions from this
withholding:
• Hawaii Resident (Must fill out form N-289,
which is provided to seller in opening
instructions)
• Foreign corporations and partnerships
which are registered to do business in the
state of Hawaii (Must fill out form N-289,
which is provided to seller in opening
instructions)
• Property used as principal residence for
year prior to the sale and sales price does
not exceed $300,000
For more information on these taxes, please call
the appropriate departments or visit their website.
HARPTA - State of Hawaii Department of Taxation:
Oahu 808.587.4242
Maui 808.984.8500
Kauai 808.274.3456
Big Island-Hilo 808.974.6321
or visit www.hawaii.gov/tax
FIRPTA - Internal Revenue Service
www.irs.gov and search for FIRPTA
FIRPTA - Under current federal law, if a foreign
person sells US real property, the buyer is obligated to
withhold 10% of the gross sales price and remit this to
the lRS. However, pursuant to the Protecting Americans
from Tax Hikes Act of 2015, which became law on
December 18, 2015 (the “PATH Act”) the required 10%
withholding will increase to 15% for all closings occurring
on or after February 17, 2016, except those wherein the
sales price is greater than $300,000 and does not exceed
$1,000,000 and the buyer acquires the property for
use as a personal residence. Under the circumstance, a
reduced withholding of 10% will apply.
Sales Price $300,000 or less and the buyer No
acquires as personal residence Withholding
Sales Price more than $300,000 but not 10%
more than $1,000,000 and the buyer Withholding
acquires as personal residence
All transactions - Any Sales Price and the 15%
buyer NOT acquiring as personal residence Withholding
In short, if a foreign person is selling a US real property
interest, the following parameters apply UNLESS THERE
IS AN EXCEPTION FROM WITHHOLDING:
No withholding is required under the following
circumstances:
• Buyer acquires for use as a personal residence and
sales price not more than $300,000
• Seller provides Non-Foreign Affidavit
• Seller provides a Withholding Certificate from the IRS
which excuses the withholding
• The amount realized by the seller is zero
• The property is acquired by the United States or a
political subdivision thereof