Glossary

Withholding Certificate (Form 8288-B)

Also known as: FIRPTA withholding certificate, Form 8288-B application

An IRS pre-closing authorization, requested on Form 8288-B, that permits FIRPTA withholding to be reduced below the standard rate — or eliminated — to match the seller's actual maximum tax liability on a disposition rather than the full amount realized.

The withholding certificate exists because the standard FIRPTA withholding calculation ignores basis, prior depreciation, selling costs, and installment terms entirely, so it frequently withholds far more than the seller will actually owe; the certificate application substitutes an IRS-reviewed computation of maximum tax liability for the blunt percentage-of-price default. Either the buyer or the seller may apply, but in practice the seller typically drives the process since it is the seller's cash that is otherwise trapped, and the application must generally be submitted before closing — the IRS target processing window (historically around 90 days, though it fluctuates with agency workload) means the request has to be filed well in advance of a scheduled sale, and a pending, unresolved application does not by itself excuse the buyer from withholding at closing unless specific procedures for escrowing the withheld amount pending IRS action are followed. A parallel certificate process applies to installment sales and to certain corporate distributions and liquidations involving USRPIs, which is why cross-border sell-side counsel treats the FIRPTA withholding certificate as a standard, time-sensitive workstream on any disposition by a foreign seller rather than an optional refinement.