When a Foreign Seller Can’t Afford to Have Taxes Withheld

The Foreign Investment in Real Property Tax Act requires buyers in certain transactions involving foreign sellers to withhold funds for federal taxes. What if I represent a foreign seller and he cannot afford to have the tax taken out of his proceeds?

The seller may request an adjustment of the amount withheld from the IRS by filing a withholding certificate application (IRS Form 8288-B). The buyer or buyer’s agent can also request this adjustment.

The IRS will generally act on the request within 90 days of receipt of an application. A seller who applies for an adjusted withholding must notify the buyer in writing that the certificate has been applied for no later than the closing date. Since the seller’s agent may not make the request on behalf of the seller, the seller’s agent should discuss the withholding certificate with the seller as an option during the negotiation process.

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