Accepted Answer

Hello again,

Please see the article Foreign Persons Receiving Rental Income From U.S. Real Property for the basic information about tax return responsibility and links to additional pertinent information.


"Rental income from real property located in the United States and the gain from its sale will always be U.S. source income subject to tax in the United States regardless of the foreign investor's status and regardless of whether the United States has an income treaty with the foreign investor's home country."

Most foreign owners of rental property located in the United States use a property manager who collects rent on behalf of a foreign owner and manages the property at the direction of the foreign owner. That property manager who collects rent on behalf of a foreign owner of real property is considered a withholding agent and must collect, file and pay thirty percent (30 percent) of the gross rental receipts.

You may elect to have your passive rental income taxed as if it were effectively connected with the U.S. trade and business and be able to have withholding on the net instead of the gross rent.

In some cases you can qualify to submit to the property manager a fully completed Internal Revenue Service Forms W-8ECI, Certificate of Foreign Person's Claim for Exemption From Withholding on Income Effectively Connected With the Conduct of a Trade or Business in the United States

Indeed you need to get an Individual Taxpayer Identification Number "ITIN" for use in filing United States tax forms. "To obtain an ITIN, you must complete IRS Form W-7, IRS Application for Individual Taxpayer Identification Number . The Form W-7 requires documentation substantiating foreign/alien status and true identity for each individual. You may either mail the documentation, along with the Form W-7, to the address shown in the Form W-7 Instructions, present it at IRS walk-in offices, or process your application through an Acceptance Agent authorized by the IRS."

Although we are not able to recommend or advise on a particular property manager, accountant or tax practitioner you may wish to use Find an Enrolled Agent (EA). You can search and include International under "search by profession" to find an EA experienced in foreign owned rental real estate. Of course, as an Enrolled Agent my clear bias is that you would choose this type of tax practitioner.

I hope this helps for general information you need to fill your tax return responsibility to the United States and in discussion with your tax practitioner or property manager.

Best wishes.


Edited by John Gordos EA on 9/13/2009 at 3:12 PM

Expert:	John Gordos EA
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Answered:	9/13/2009

Enrolled Agent

I have prepared individual, trust, partnership, and corporate taxes since 1987.