What is HARPTA? HARPTA stands for Hawaii Real Property Tax Act. It requires a Buyer of real property from a Non-Resident Seller of Hawaii to withhold 5% of the amount realized and remit it to the Hawaii Department of Taxation within 20 days of Closing unless an exemption applies. Generally, the amount realized is considered to be the purchase price of the property. The 5% withholding represents an estimate of the Hawaii capital gains tax that may be owed by the Non-Resident Seller.
The Hawaii Association of REALTORS Purchase Contract provides that Escrow is to withhold and remit the HARPTA amount to the Hawaii Department of Taxation unless the Seller provides the Buyer with a certificate of exemption or waiver from HARPTA. The burden of proof falls on the Seller to prove that an exemption or waiver applies and for the Buyer to acknowledge and approve the Sellerʻs exemption or waiver prior to the Closing of Escrow. Under Hawaii law, it is the Buyerʻs responsibility to determine if the Seller is a Non-Resident of Hawaii and that the proper withholding amount is remitted to the Hawaii Department of Taxation on a timely basis.
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