Can the Buyer Rely of the Seller’s Certification That They are not a Foreign Person?

The IRS assumes that FIRPTA withholding applies to every closing, unless one of the withholding exceptions is met. The most common exception applies where the sellers can certify that they are not “foreign persons” for FIRPTA purposes.  In other words, that they are either U.S. citizens or resident aliens with “green cards.” This is the seller’s “Non-Foreign Certification” with which we are all familiar, and which we use whenever possible.

The buyer (and the closing agent and Realtors®) can rely on the seller’s certification, as long as they have not received any notice or have any actual knowledge that the certification is false.

The buyer and the closing agent should retain a copy of this document for a period of five years.

If the seller can sign the non-foreign certification, there is no withholding requirement, and no risk of tax liability to the buyer. Of course, sellers who are in fact foreign cannot sign this certification, so the parties to the closing must either find another exception or comply with the 15% withholding requirement.