Page 51 - Withholding Taxes for Foreign Entities

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7. The amount the transferor realizes on the • Typing, copying, and other clerical tasks. must file a U.S. income tax return and attach
transfer of a U.S. real property interest is • Obtaining title insurance reports and re- the stamped Form 8288-A to receive credit for
zero. ports concerning the condition of the prop- any tax withheld.
8. The property is acquired by the United erty. A stamped copy of Form 8288-A will
States, a U.S. state or possession, a politi- • Transmitting documents between the par- ! not be provided to the transferor if the
ties.
cal subdivision, or the District of Columbia. CAUTION transferor's TIN is not included on that
9. The grantor realizes an amount on the Reporting and form. The IRS will send a letter to the transferor
requesting the TIN and providing instructions
grant or lapse of an option to acquire a
U.S. real property interest. However, you Paying the Tax for how to get a TIN. When the transferor pro-
vides the IRS with a TIN, the IRS will provide
must withhold on the sale, exchange, or
exercise of that option. Transferees must use Forms 8288 and 8288-A the transferor with a stamped copy B of Form
8288-A.
to report and pay over any tax withheld on the
10. The disposition is of an interest in a pub- acquisition of U.S. real property interests.
licly traded partnership or trust. However, These forms also must be used by corpora- Form 1099-S. In most cases, the real estate
this exception does not apply to certain tions, estates, and QIEs that must withhold tax broker or other person responsible for closing
dispositions of substantial amounts of on distributions and other transactions involving the transaction must report the sale of the prop-
non-publicly traded interests in publicly U.S. real property interests. You must include erty to the IRS using Form 1099-S. For more in-
traded partnerships or trusts. the U.S. TIN of both the transferor and the formation about Form 1099-S, see the Instruc-
Late filing of certifications or notices. If transferee on the forms. tions for Form 1099-S and the General
you become aware that you have failed to For partnerships disposing of U.S. real prop- Instructions for Certain Information Returns.
timely file certain certifications or notices, you erty interests, the manner of reporting and pay-
still may be able to file them. See Revenue Pro- ing over the tax withheld is the same as dis- Withholding Certificates
cedure 2008-27, available at IRS.gov/irb/ cussed earlier under Partnership Withholding
2008-21_IRB#RP-2008-27. on Effectively Connected Income. The amount that must be withheld from the dis-
Complete the required certification or notice
and file it with the appropriate person or the Publicly traded trusts must use Forms 1042 position of a U.S. real property interest can be
adjusted by a withholding certificate issued by
IRS. Also include the following. and 1042-S to report and pay over tax withheld
• A statement at the top of the document(s) on distributions from dispositions of U.S. real the IRS. The transferee, the transferee's agent,
or the transferor may request a withholding cer-
that it is “FILED PURSUANT TO Revenue property interests.
Procedure 2008-27.” QIEs must use Forms 1042 and 1042-S for tificate. The IRS will generally act on these re-
• An explanation describing why the failure a distribution to a nonresident alien or foreign quests within 90 days after receipt of a com-
was due to reasonable cause. Within the corporation that is treated as a dividend, as dis- plete application including the TINs of all the
parties to the transaction. A transferor that ap-
explanation, provide that you filed with, or cussed earlier under Qualified investment enti-
obtained from, an appropriate person the ties (QIEs). plies for a withholding certificate must notify the
transferee in writing that the certificate has been
required certification or notice. applied for on the day of or the day before the
The completed certification or notice at- Form 8288. The tax withheld on the acquisi- transfer.
tached to the explanation must be sent to the tion of a U.S. real property interest from a for-
Ogden Service Center, P.O. Box 409101, Og- eign person is reported and paid over using A withholding certificate may be issued due
den, UT 84409. Form 8288. Form 8288 also serves as the to:
transmittal form for copies A and B of Form
Certifications. The certifications in items 8288-A. 1. A determination by the IRS that reduced
(3) and (4) are not effective if you (or the quali- withholding is appropriate because either:
fied substitute) have actual knowledge, or re- In most cases, you must file Form 8288 a. The amount that must be withheld
ceive a notice from an agent (or substitute), that DUE by the 20th day after the date of the would be more than the transferor's
they are false. This also applies to the qualified transfer. maximum tax liability, or
substitute's statement under item (4).
If you (or the substitute) are required by reg- If an application for a withholding certificate b. Withholding of the reduced amount
ulations to furnish a copy of the certification (or (discussed later) is submitted to the IRS before would not jeopardize collection of the
statement) to the IRS and you (or the substitute) or on the date of a transfer and the application tax;
fail to do so in the time and manner prescribed, is still pending with the IRS on the date of trans- 2. The exemption from U.S. tax of all gain re-
the certification (or statement) is not effective. fer, the correct withholding tax must be with-
held, but does not have to be reported and paid alized by the transferor; or
Liability of agent or qualified substitute. over immediately. The amount withheld (or 3. An agreement for the payment of tax pro-
If you (or the substitute) receive a certification lesser amount as determined by the IRS) must viding security for the tax liability, entered
discussed in item (3) or (4) or a statement in be reported and paid over within 20 days follow- into by the transferee or transferor.
item (4), and the agent, or substitute, has actual ing the day on which a copy of the withholding
knowledge that the certification (or statement) is certificate or notice of denial is mailed by the Applications for withholding certificates are
false, or in the case of (3), that the corporation IRS. divided into six basic categories. This categoriz-
is a foreign corporation, the agent (or substitute) ing provides for specific information that is nee-
If the principal purpose of applying for a
must notify you, or the agent (or substitute) will withholding certificate is to delay paying over ded to process the applications. The six catego-
be held liable for the tax. The agent's (or substi- ries are:
tute's) liability is limited to the compensation the the withheld tax, the transferee will be subject to 1. Applications based on a claim that the
interest and penalties. The interest and penal-
agent (or substitute) gets from the transaction. transferor is entitled to nonrecognition
An agent is any person who represents the ties will be assessed for the period beginning treatment or is exempt from tax,
transferor or transferee in any negotiation with on the 21st day after the date of transfer and
another person (or another person's agent) re- ending on the day the payment is made. 2. Applications based solely on a calculation
lating to the transaction, or in settling the trans- Form 8288-A. The withholding agent must of the transferor's maximum tax liability,
action. A person is not treated as an agent if the prepare a Form 8288-A for each person from 3. Applications under special installment
person only performs one or more of the follow- whom tax has been withheld. Attach copies A sales rules,
ing acts related to the transaction. and B of Form 8288-A to Form 8288. Keep
• Receipt and disbursement of any part of copy C for your records. 4. Applications based on an agreement for
the consideration. the payment of tax with conforming secur-
• Recording of any document. The IRS will stamp copy B and send it to the ity,
person subject to withholding. That person
Publication 515 (2020) Page 49