Can I apply for Form 8288-B if I am selling at a loss?
That is one of the clearest cases for it. The application rests on a comparison: the tax that will actually arise on the disposition, against the amount that would otherwise be withheld. Where the seller is disposing at a loss there is no tax for the withholding to be a payment on account of, so the standard amount over-collects by its whole value. What the case needs is evidence rather than assertion, meaning what the property cost, what has been spent on it, and what it is being sold for, assembled in a form somebody can check. A loss you can document is worth applying on.
Do I apply for the certificate, or does my buyer?
The seller applies, because the seller is the person whose actual tax is said to be lower than the amount otherwise withheld, and the seller holds the evidence of what the property cost. The buyer's side is not a bystander, though. Until the application is determined the standard withholding is what governs the closing, so the buyer's representatives will want to know an application exists and what they are expected to do with the funds in the meantime. Tell them early and in writing. An application the closing table does not know about protects nobody.
Is it worth applying if the gain on the sale is small?
The test is not whether the gain is small but whether the withholding substantially over-collects against it. Withholding on a property disposition is applied to the sale price rather than to the gain, so a modest gain on a property held for a long time can sit under a withheld amount many times the tax. That is exactly the case the application exists for. Where the gain is large enough that the tax approaches the amount that would be withheld anyway, an application buys little, and the effort is better spent on getting the return right.
How late can I apply, is after closing any use?
It works early and it barely works late. Applied for before the closing, it can release most of the cash at the table, which is the entire point of it. Applied for afterwards, the money has already gone to the tax authority and comes back through the return cycle instead, on the ordinary timetable for the year of the disposition. So the decision is a diary matter. As soon as a sale is in prospect and you think the tax will be well under the amount to be withheld, that is the moment to look at it, not the week of completion.
If the certificate is granted do I still file a US return?
Yes. The certificate deals with how much is held back at closing, not with whether the disposition is reported. The tax on the actual gain is settled on the return for the year of the sale, and the amount withheld, whatever it turns out to be, is credited there. Treat the two as separate pieces of work with different deadlines. Sellers who read a granted application as the end of the matter are the ones who discover the reporting obligation a year later, having by then thrown away the closing papers that would have proved what the property cost.
What does the application actually need to show?
An arithmetic case, evidenced. In substance you are saying that the tax on this disposition will be a certain amount, that the amount otherwise withheld is far more, and that the difference should therefore not be collected. That means showing what the property cost and when, what has been spent on it since, what it is selling for, and how the tax on the difference is arrived at. Purchase documents, improvement invoices and the draft settlement statement do most of the work. An application asserting a low gain without the documents behind it is the version that fails.
Which kind of investor income is most exposed to double taxation?
Dividends from a foreign corporation. They have already borne corporate tax, the source country withholds on payment, and your residence country taxes the receipt — three layers, only two of which a credit can reach. Interest and royalties carry the same source withholding without the corporate layer. This is why the withholding article and the paperwork that reduces it matter more for portfolio income than for salary. See dividends, interest and royalties articles.
What is a permanent establishment, and how easily do we create one?
A taxable presence in another country under the treaty — typically a fixed place of business such as an office, branch, factory or workshop, or a dependent agent habitually concluding contracts on your behalf. Some treaties add a services test measured in days. Purely preparatory or auxiliary activity is excluded, but that carve-out is narrower than it sounds: one senior employee working from home in the other country, with authority, has been enough. See business profits and permanent establishment.
