A common misunderstanding is the thinking that HARPTA is a tax. This is a means for the State of Hawaii to collect taxes from absentee owners. HARPTA stands for Hawaii Real Property Tax Law.
A question that arises from military families is whether HARPTA applies to them. If an active duty member closes a sales as a primary residence and being transferred from Hawaii under military orders the 5% HARPTA does not apply. If however the property was rented as an investment then HARPTA would apply.
Here are some other listed exemptions for HARPTA:
EXEMPTIONS FROM WITHHOLDING
1. Transferor furnishes Hawaii Resident Certification. No withholding is necessary if the seller or transferor furnishes to the transferee a properly completed Form N-289 stating (i) the transferor’s federal taxpayer identification number, (ii) address, and (iii) that the transferor is
2. a Hawaii resident. However, this exemption will not apply if the transferee has actual knowledge that the information on the Form N-289 is false. (Note that the definition of Hawaii resident for purposes of the withholding required by HRS §235-68 would include foreign corporations and partnerships which are registered with the Hawaii Department of Commerce and Consumer Affairs to do business in the
State of Hawaii).
3. Transferor’s Affidavit of Principal Residence. No withholding is necessary if the transferee receives an affidavit by the transferor stating (i) the transferor’s federal taxpayer identification number, (ii) that the transferor used the property as a principal residence for the year preceding the date of the transfer and (iii) the sales price for the property does not exceed $300,000.
4. Transferee Receives Hawaii Withholding Certificate.
(a) The withholding under HRS §235-68 may be reduced or eliminated pursuant to a “withholding certificate” issued by the Hawaii Department of Taxation. A withholding certificate may be issued by the Hawaii Department of Taxation upon receipt of Form N-288B establishing that either (i) the transferor will not realize any gain with respect to the transfer or (ii) the transferor will have insufficient proceeds to pay the withholding required by HRS §235-68 after payment of all costs, including selling expenses and the amount of any mortgages or liens secured by the property.
(b) The withholding may also be reduced or eliminated pursuant to a “written agreement” with the Hawaii Department of Taxation. Persons who engage in more than one real property transaction in a calendar year or to whom meeting the withholding requirements are not practicable are eligible to enter into these written agreements.
5. Notice of Non-recognition Treatment. No withholding is necessary if transferee receives from transferor a properly completed Form N-289 stating (i) that transferor is not required to recognize gain or loss with respect to the transfer and (ii) briefly describing the transfer and summarizing the law and facts supporting transferor’s claim. Non-Hawaii residents doing 1031 exchanges of real estate may consider this option to avoid withholding.
A question that arises from military families is whether HARPTA applies to them. If an active duty member closes a sales as a primary residence and being transferred from Hawaii under military orders the 5% HARPTA does not apply. If however the property was rented as an investment then HARPTA would apply.
Here are some other listed exemptions for HARPTA:
EXEMPTIONS FROM WITHHOLDING
1. Transferor furnishes Hawaii Resident Certification. No withholding is necessary if the seller or transferor furnishes to the transferee a properly completed Form N-289 stating (i) the transferor’s federal taxpayer identification number, (ii) address, and (iii) that the transferor is
2. a Hawaii resident. However, this exemption will not apply if the transferee has actual knowledge that the information on the Form N-289 is false. (Note that the definition of Hawaii resident for purposes of the withholding required by HRS §235-68 would include foreign corporations and partnerships which are registered with the Hawaii Department of Commerce and Consumer Affairs to do business in the
State of Hawaii).
3. Transferor’s Affidavit of Principal Residence. No withholding is necessary if the transferee receives an affidavit by the transferor stating (i) the transferor’s federal taxpayer identification number, (ii) that the transferor used the property as a principal residence for the year preceding the date of the transfer and (iii) the sales price for the property does not exceed $300,000.
4. Transferee Receives Hawaii Withholding Certificate.
(a) The withholding under HRS §235-68 may be reduced or eliminated pursuant to a “withholding certificate” issued by the Hawaii Department of Taxation. A withholding certificate may be issued by the Hawaii Department of Taxation upon receipt of Form N-288B establishing that either (i) the transferor will not realize any gain with respect to the transfer or (ii) the transferor will have insufficient proceeds to pay the withholding required by HRS §235-68 after payment of all costs, including selling expenses and the amount of any mortgages or liens secured by the property.
(b) The withholding may also be reduced or eliminated pursuant to a “written agreement” with the Hawaii Department of Taxation. Persons who engage in more than one real property transaction in a calendar year or to whom meeting the withholding requirements are not practicable are eligible to enter into these written agreements.
5. Notice of Non-recognition Treatment. No withholding is necessary if transferee receives from transferor a properly completed Form N-289 stating (i) that transferor is not required to recognize gain or loss with respect to the transfer and (ii) briefly describing the transfer and summarizing the law and facts supporting transferor’s claim. Non-Hawaii residents doing 1031 exchanges of real estate may consider this option to avoid withholding.
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