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Dianne Mehany Explains Tax Consequences of a Chinese National Buying Residential Property in the U.S.

November 23, 2017, Mansion Global

Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.

I’m a Chinese national with funds in Canada who’d like to buy residential properties in the United States. What is the Common Reporting Standard and how would that affect me?

. . .

If the Chinese national were to form a Canadian company to hold the U.S. real estate, Canada would likely disclose the company and its underlying holdings and/or net worth to China under CRS [Common Reporting Standard], said Dianne C. Mehany, partner at Caplin & Drysdale law firm in Washington, D.C.

Although the Organization for Economic and Cooperative Development (“OECD”) authored the CRS and is assisting the participating jurisdictions with implementing it, it doesn’t impose sanctions, she said. “Everyone generally follows what the OECD sets forth, but they are not technically bound by it.”’

The U.S. has the Foreign Account Tax Compliance Act (FATCA), its own system of international information sharing. It enacted FATCA in 2010 to prevent U.S. taxpayers from using offshore accounts or entities to avoid paying taxes, Ms. Mehany said.

. . .

And the Chinese national will eventually be subject to a withholding tax in the U.S. when the property is sold, Ms. Mehany said. It’d be a 15% gross withholding tax on the sale. But he can apply for a withholding certificate from the IRS to reduce the tax to 15% of the net gain, she said.

To view the full article, please visit Mansion Global’s website.

Excerpt taken from the article “Does the Common Reporting Standard Affect a Chinese National Buying a Home in the U.S.?” by Brenda G. Wong for Mansion Global.

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