Federal and State Taxes

Investing in the United States, in a global economy and a relatively strong Euro, it is now an increasingly more attractive to Italians. A foreigner who invests in the United States, however, must take into account various tax implications, and if it intends to buy a residential apartment income to be if he has the ultimate goal is to open a business in the United States. Five taxes are America’s most important to keep in mind : i) FIRPTA, ii) Income Tax ( Income Tax), iii) Capital Gains (Capital gains ), iv) Taxes on sales (Sales Tax) and v) Tax on transfers (such as inheritance taxes, gift taxes and taxes on the transfer to subsequent generations).

The objective of this article is to provide a brief description of these fees and the implications they pose to the foreign investor. Then provide advice on how to effectively execute tax planning for your investment in the United States. A tax planning, when done properly and intelligently, can in fact minimize the tax liability generated by your investment in this country.


The American tax provides specific rules for foreigners who sell a property in the United States.

At the time of sale, the buyer is required to withhold and pay to the Agency after the American Revenue (Internal Revenue Service or IRS) an amount equal to 10% of the purchase price of the property as a prepayment of the fees payable by the seller on profit made from the sale. For example, if Tom has bought an apartment in New York for USD 800,000 in 2011 and decided to sell it to Gaius after 2 years to USD 1,000,000, Caio USD 100,000 is required to withhold at source and remit that amount to the IRS as a tax on the estimated gain that Tom got from the sale of the property. In truth, in this particular case, that Tom should pay taxes on the gain from the sale are around USD 40,000. However, due to a lack of tax planning, an additional sum of $ 60,000 will still be withheld by the IRS in advance. It’ should be noted that such withholding tax is payable by the buyer even if the property is sold at a loss.

The foreign seller may recover the amount paid in advance by the buyer only upon presentation of their annual income tax return by a specific request for restitution to the IRS. Only in that statement, in fact, will be correctly calculated the tax on the profit made by selling and given the opportunity to the seller to get a refund. Keep in mind that the whole process can take up to 18 months from the act of sale.

Nine out of ten times a refund is required of facts, as, in most cases, the amount retained in advance by the buyer is greater actual fee payable by the seller.

With proper tax planning you can avoid the application of such withholding mandatory. Two solutions to this end are the ones to get a certificate restraint before the date of the sale or possession of the property through an effective structure in American tax level. The best solution will depend on your specific situation and will have to be custom built to suit your needs.


Whenever you are conducting a business in the USA, both “active” (as in the case of an ice cream parlor ), that “passive” (as in the case of an apartment lease ), you must pay taxes on the profit generated by the business.

While almost all foreign investors are aware of the fact of having to pay taxes on the income generated from an active business, do not always know they have to pay taxes even on the income generated by a business liabilities ( eg income from rental of a apartment in South Beach). Even if the lease is for a period of only one month, you may be obligated to report such income. Nevertheless, in most cases, there will still be required to pay any tax, thanks to various deductions available to property owners.

While it is true that both Italy and the United States apply to taxes on income generated from business operations in the United States, this does not necessarily mean that taxes must be paid in both countries for the same profit. The United States and Italy have signed a tax treaty to regulate such cases. According to the provisions of this treaty, the Italian investor can receive a tax credit in Italy for fees paid to the United States on the income generated by a business transaction and / or investment in the USA.


Another group of fees to be taken into account if it is your intention to invest in the United States is related to transfers. Unlike the income tax, this group of taxes is imposed upon a gratuitous transfer of property located in the United States, such as in the case of inheritance or donation. There are three types of fees that fall into this category. Inheritance tax, the tax on donations and the tax on the transfer to subsequent generations.

The inheritance tax is imposed on the transfer of property located in the United States, the death of the owner, such as in the case of bequest or legacy. The general rule is that when a foreigner to transfer the ownership of a property of this type at the time of his death, the inheritance tax is applied. The first $ 60,000 is exempt from taxation (free transfer) and the remainder of the value of the property or the estate is taxed according to a progressive rate system, with a maximum rate of 40%.

To be considered, however, that Italy is one of the few nations to have signed a tax treaty with the United States, thus making this tax almost irrelevant. However, it is important to know what is the definition of property located in the United States, so that your tax lawyer knows about it and no other tools are necessary tax planning.

For the purposes of inheritance tax, the following assets are considered assets located in the United States:

• Property within the boundaries of the United States;
• Movable tangible so-called, which are located in the United States (eg, cash, jewelry, works of art and automobiles);
• Equity investments in US companies, such as Corporations and Limited Liability Companies; and
• Units of property insurance on the life of another person.

The tax on donations is tax on transfers of assets located in the United States during the life of the donor, with a value less than the average market value of the asset. To consider that a legal person can not make donations, and so this tax is in principle applicable to individuals and not to companies, trusts or associations.

Contrary to what is stated above for inheritance tax, there is a treaty between Italy and the United States on the tax on donations. E’ therefore necessary to pay special attention when you transfer a well located in the United States for an amount less than the market value. Moreover, unlike what was said to the estate tax, the amount of the exemption is only USD 14,000 per year per person.

For the purposes of tax on donations, the following assets are considered assets located in the United States :

• Property within the boundary of the United States; and
Movable tangible so-called, which are located in the United States (eg, cash, jewelry, works of art and automobiles).

For example, if you own a second home in Los Angeles, estimated USD 500,000 and want to give it to your daughter, the tax on this donation would be roughly the amount of USD 200,000. In such a scenario it is understandable the need for careful tax planning to minimize the tax consequences, such as selling the house to your daughter or donate only a portion thereof.

The tax on the transfer to subsequent generations is a tax that is levied in addition to the inheritance tax and the tax on donations. This tax is imposed on transfers to the second or subsequent generations. These transfers are taxed at a flat rate of 40 %. The assets in question are valued at the average market value.

Returning to the example above, if instead of giving the Los Angeles home to your daughter, your niece would like to donate, you should pay an additional tax of 40% since the donation is made to your grandchild (in practice you are doing a donation to a next generation, from which the fee is named). This fee is in addition to the tax on donations which is still due.


The United States is regarded as a country with great attractions for foreign investors. A tax planning can not guarantee a perfect investment, but it certainly is able to ensure efficient investment while minimizing the taxes owed and at the same time protecting the investor from unpleasant surprises.


This document was produced in 2013 by Studio Legale Tosolini, Lamura, Rasile & Toniutti LLP, based in New York, Miami, Rome and a subsidiary office in Milan. This document and its contents are the exclusive property of Tosolini, Lamura, Rasile & Toniutti LLP and may not be reproduced or copied in any form or manner.

This document does not constitute legal advice. The information contained herein may be incomplete and / or inaccurate. This document is purely informative nature and is subject to the laws of the State of Florida. If, in the course of this document, there are indications related to results obtained with other customers, these results depend on the circumstances of each customer, therefore, results previously obtained can not be guaranteed. This document is representable as advertising’ for lawyers (attorney advertising).

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