New York's New Pied-à-Terre Tax: Key Considerations for International Investors

A new annual tax on high-value secondary residences reinforces the importance of reviewing cross-border ownership structures.

The State of New York has approved new legislation introducing the Pied-à-Terre Tax (PAT Tax), a measure expected to significantly impact owners of high-value residential properties located in New York City.

Although primarily directed at luxury second homes, the new tax represents another important development within the broader context of international real estate ownership. For foreign investors, particularly Brazilian families and individuals with assets in the United States, the legislation serves as an important reminder that ownership structures should be periodically reviewed to ensure they remain aligned with current legislation, long-term investment objectives and evolving tax considerations.

Understanding the new PAT Tax:

The Pied-à-Terre Tax is intended to apply to certain high-value residential properties located in New York City that are not used as the owner's primary residence.

The measure seeks to increase taxation on luxury residential units that remain vacant for substantial portions of the year or are maintained primarily as secondary residences.

Unlike traditional property taxes, the Pied-à-Terre Tax is designed as an additional annual tax, imposed on qualifying properties based upon their assessed value and applicable statutory thresholds.

The legislation generally targets residential condominiums, cooperative apartments and similar residential properties meeting the statutory requirements.

Which properties may be affected?

While the legislation contains detailed technical requirements, the principal characteristics include:

• Residential properties located within New York City;

• High-value residential units meeting the statutory valuation thresholds;

• Properties that are not occupied as the owner's primary residence;

• Annual taxation in addition to existing New York real estate taxes.

The legislation establishes progressive tax rates, with higher-value properties becoming subject to proportionately greater annual taxation.

Consequently, investors acquiring premium residential properties should carefully evaluate not only acquisition costs, but also the long-term annual tax implications associated with ownership.

Why this matters for International Investors?

For many international investors, acquiring U.S. real estate represents only one component of a broader wealth planning strategy.

Ownership structures frequently involve multiple jurisdictions, family succession considerations, corporate entities, financing arrangements and ongoing tax compliance in both the United States and the investor's country of tax residence.

Accordingly, changes in local legislation, even those affecting only one state or city, may have broader implications than initially anticipated.

The introduction of the Pied-à-Terre Tax illustrates how state-level legislative developments can influence long-term holding costs and reinforce the importance of periodically reviewing existing ownership structures.

Entity selection is only one part of the planning process:

One common misconception among international investors is that selecting an entity, such as a Limited Liability Company (LLC), by itself constitutes an effective planning strategy.

In reality, entity formation represents only one aspect of a comprehensive international wealth structure.

An appropriate ownership strategy should also consider:

• International tax residency;

• U.S. federal and state tax consequences;

• Brazilian tax implications;

• Estate and succession planning;

• Asset protection objectives;

• Banking and financing requirements;

• Corporate governance and ongoing compliance.

Each investment presents unique characteristics, making standardized structures rarely appropriate for sophisticated investors.

Periodic review has become increasingly important:

International tax and regulatory environments continue to evolve.

Recent developments, including Brazil's enactment of Law No. 14,754/2023, continuing changes to U.S. reporting obligations and state-level legislative initiatives such as New York's Pied-à-Terre Tax, demonstrate that structures established several years ago may no longer provide the same level of efficiency or protection originally intended.

Periodic strategic reviews allow investors to assess whether their current structures continue to satisfy legal, tax and succession objectives while maintaining compliance across multiple jurisdictions.

Final Considerations

The Pied-à-Terre Tax should not be viewed merely as another real estate tax.

Rather, it represents an example of how legislative developments may affect the economics of international real estate ownership over time.

For investors holding, or considering acquiring, high-value residential properties in New York, this may be an appropriate opportunity to revisit existing ownership structures, evaluate long-term tax exposure and confirm that current arrangements remain consistent with broader wealth planning objectives.

About E&G Financial Group

E&G Financial Group provides integrated advisory services to internationally mobile families, entrepreneurs and investors with interests across multiple jurisdictions.

Our multidisciplinary practice combines international tax planning, corporate services, U.S. accounting, cross-border compliance, wealth structuring and global mobility advisory, assisting clients throughout the life cycle of their international investments.

Disclaimer: This publication is intended solely for general informational purposes and does not constitute legal, tax or accounting advice. The application of the rules discussed herein depends upon the specific facts and circumstances of each case. Professional advice should be obtained before making any decision based on the information contained in this publication.