HARPTA is an acronym for the Hawaii Real Property Tax Act, a state law. In order to promote a greater level of compliance by non-residents of Hawaii (whether U.S. persons or foreigners) in reporting income from sale of real property located in Hawaii, HRS § 235-68 requires every buyer of Hawaii real estate to deduct, withhold, and pay to the Hawaii Department of Taxation 5% of the amount realized by the seller of transferor of Hawaii real estate.
Under the Hawaii withholding requirement, the buyer or transferee of any Hawaii real estate is required to (i) withhold and deduct a tax equal to 5% of the amount realized by the seller or transferor upon the disposition of the property.
FIRPTA is an acronym for the Foreign Investors Real Property Tax Act of 1980, and is a federal law that provides that foreign investment in U.S. real estate would be subject to U.S. capital gains on dispositions of U.S. real property interests (defined as (i) any interest in U.S. real property or (ii) any interest in a U.S. corporation in which 50% of its assets constitute U.S. real property interest).
Under the FIRPTA withholding provisions of Code Section 1445, the buyer or transferee of any U.S. real property is required to (i) withhold and deduct a tax equal to 10% of the amount realized by seller or transferor upon the disposition of the property regardless of the amount of cash otherwise present in the transaction.
ITIN Guidance for Foreign Buyers/Sellers of U.S. Property: Foreign buyers and sellers of U.S. real property interests need Individual Taxpayer Identification Numbers (ITINs) to request reduced tax withholding when disposing of the property interest, and to pay any required withholding. Individuals who do not qualify for Social Security Numbers (SSN) may obtain an ITIN to meet the requirement to supply a Taxpayer Identification Number (TIN).
Please contact your tax professional to identify procedures where TINs are required.
The above information provided from Title Guaranty Hawaii. Information deemed reliable, but not guaranteed. Always consult your tax professional.