Delaware House Bill No. 349, signed into law by Governor Markell on June 11, 2010, and effective December 31, 2010, requires non-resident sellers of Delaware real estate to file and pay an estimated state income tax on capital gains recognized from the sale of that real estate prior to the recording of the deed.

The Director of the Division of Revenue has prepared  Form 5403 titled “Real Estate Tax Return Declaration of Estimated Income Tax”, which must be submitted to the applicable Recorder’s Office.

Form 5403 provides for a deferral of the payment of tax if there is insufficient information to determine if the sale or exchange is subject to withholding at the time of transfer. Once such information is available, payment of tax may be due and the appropriate return must be timely filed.