A foreign national (non-resident alien) visitor from Bermuda or other offshore jurisdiction entering the land of the free and the home of the brave, especially for the first time, finds it easy to assume that everything of interest may be obtainable and can be for sale.

Aside from a few customs forms, you are met just about everywhere by friendly open engaging people. Cities and sights are easy to visit, everyone wants your money and accommodates your tastes.

See that great little close-to-the-beach condo, or quaint little Northeastern mountain cottage, just show your greenbacks, and it is yours.

And if you want to sell it off later on when, say, the grandchildren lose interest, well, you've purchased in a prime resort area. The property is a good investment.

On the surface, there is no foreign spouse or alien registration rigamarole, or ministerial permission to purchase a home and massive tax overrides on top of the sales price imposed by government.

This exciting new country is a capitalist society through and through. Commerce and profit motives drive just about every situation. After all, United States residents and businesses have a very long history of innovative entrepreneurism.

Not all perceptions are reality, though, as we shall see from the following. In the daily international planning newsletters that we receive as part of continued awareness education of changing tax and related legal rulings in various jurisdictions, the United States Internal Revenue Service's Office of Chief Counsel has recently stated in an email that a non-resident (foreign national) seller of real property located within the United States should be credited for Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) withholding, where the buyer withheld the required amounts from the purchase price but never actually deposited them with the US Treasury, if the seller provides "substantial evidence" of the amounts withheld.

Sufficient tax complexity is evident in this information release citing the various facts and circumstances that generally accompany the conveyancing of US property owned (and sold) by a Foreign National (the Transferor) in the United States.

I have been unable to locate as of publishing date, the complete case on this issue, but reading between the lines, what appears to have happened is that the withholding tax on the sale of the property was never forwarded to US Internal Revenue Service's offices by the buyer (or an agent -transferee) conducting the conveyance transaction.

Whether IRS looked to the foreign transferor for additional tax liability or to provide a credit against the amount withheld at the closing is not known.

US FIRPTA tax law regarding the sale of real estate in the United States where ownership is a foreign national, foreign trust or other foreign entity is structured differently, than for a US resident or citizen - one who is presumed to meet tax filing obligations, as appropriate,each year.

In general, a foreign national (the transferor) entertaining selling real property interests in the United States will be tasked to recognise a capital gain (or loss) on the transaction.

This is accomplished as follows: Conveyancing agents/buyers are required under most circumstances (there are mitigating factors for others) to withhold 10 percent of the sale price, remitting this deposit to US IRS within a proscribed period of time directly after the completed sale.

The Transferor's responsibility. Even if 10 percent of the sales proceeds has been withheld on the transfer of a US real property interest, the transferor must file an income tax return reporting income or gains, if any, arising from the disposition of the property.

The withheld tax is then credited against the amount of income tax computed on the income tax return.

In addition, the transferor must attach to his/her return (unless the information is not attainable after a diligent effort) a statement supplying: othe name, identifying number, if any, and a home address, in the case of an individual, or office address, in the case of any entity, of the transferee(s) filing the return; othe name, identifying number, if any, and a home address, in the case of an individual, or office address, in the case of any entity, of the transferor(s); a brief description of the US real property interest transferred, including its location and the nature of any substantial improvements in the case of real property, and the class or type and amounts of interests transferred in the case of interests in a corporation that constitute US real property interest; othe date of the transfer; othe amount realised by the transferor; othe amount withheld by the transferee and whether withholding is at the statutory or reduced rate; and oother information that may be required for Dispositions by Foreign Persons of US Real Property Interests.

This is a small snapshot of tax and legal planning for owners of US property. US Federal tax law system can be detailed and complex. The taxation regime for United States citizens and residents is a voluntary system where each person (under tax law a person(s) can be many different entities besides individuals) is expected to report on and pay their fair share of taxes on their income from whatever source derived.

It is often not understood and overwhelming for a foreign national who has never dealt with, or lived in, a tax regime. The State government revenue agency that the real estate is situated will/may also play into the eventual equation outcome, depending upon state income, estate, gift and inheritance tax law.

Each country with tax regimes that Bermuda residents most often may be peripherally exposed to, operate differently. The intent, however, is the same. Taxpayers, whether domestic or foreign, deriving income within the boundaries of the country are expected to adhere to the tax laws of the government.

For instance, Canadian Revenue Agency (CRA) handles real estate property sales with even more precision. The seller must meet specific document requests as well as delivering a tax deposit, if required, to CRA for approval before the conveyance transfer and the sale is completed.

Over the years, I've heard indignant comments regarding the tax regimes of other countries. "Why should I pay taxes to those people, I'm not a citizen of that country?" The answer; for the same reason that Bermuda stipulates that foreign nationals pay taxes on purchase and sale of their property here.

If we use their resources and enjoy their environment, their legal, protection and government services, it is only fair play. Nothing, nothing is ever free. There is always an ultimate payday.

Next: Understand the environment you are using and living in. Prepare by planning first. The difference between tax responsibilities, tax and financial planning, tax avoidance and tax evasion. One of these is a felony in some countries. See Part II - July 31 - the Responsibilities of Foreign Property Ownership.

Martha Harris Myron, CPA, CFP(US) TEP(UK) JP- Bermuda is an independent fee-only cross border planning specialist in investment, tax, estate, and strategic retirement planning services for Bermuda residents with cross-border and multi-national connections, internationally mobile people and US citizens living abroad. For more information, contact martha.myron@gmail.com">martha.myron@gmail.com or 296 3528 at Patterson Partners Ltd. The article expresses the opinion of the author alone, and not necessarily that of the Royal Gazette. Under no circumstances is this advice to be taken as a recommendation to buy or sell investment products or as a promotion for financial plans. The Editor of the Royal Gazette has final right of approval over headlines, content, and length/brevity of article.