Section 899 Surcharge: What FIRPTA Sellers from 'Discriminatory Tax' Countries Need to Know

Section 899 of the One Big Beautiful Bill Act adds 5–20 percentage points to FIRPTA withholding for sellers from designated countries. Here's who's affected, the math, and how Form 8288-B interacts with the surcharge.

The One Big Beautiful Bill Act, signed into law on July 4, 2025, introduced something foreign sellers of U.S. real estate should pay close attention to: Section 899, a country-specific surcharge that can add 5 to 20 percentage points on top of the standard FIRPTA withholding rate. If you're a foreign seller and your home country is on the IRS's list of "discriminatory tax" jurisdictions, your effective FIRPTA withholding is no longer 15% — it's 20%, 25%, or eventually as high as 35%.

This post explains what Section 899 actually does, who's affected, and what it means in practice for someone selling U.S. property in 2026.

What Section 899 actually says

Section 899 amends the Internal Revenue Code to authorize the Treasury Department to impose an additional tax — separate from but layered on top of existing taxes — on income paid to residents of countries the U.S. deems to be imposing "unfair foreign taxes" on U.S. persons.

The categories of foreign taxes that trigger Section 899 designation are:

• Undertaxed Profits Rules (UTPRs) — the OECD's Pillar Two minimum-tax framework being implemented across Europe
• Digital Services Taxes (DSTs) — taxes targeting U.S. tech companies' revenues in the country
• Diverted Profits Taxes — anti-avoidance taxes that the U.S. views as discriminatory against U.S. multinationals

The structure is gradual. In the first year a country is designated, the surcharge is 5 percentage points. It increases by 5 percentage points each year the offending tax remains in place, capping at 20 percentage points above the standard rate.

Why FIRPTA sellers care

FIRPTA withholding under § 1445 is one of the affected categories. A standard FIRPTA withholding for a non-Section-899 country is 15% of the gross sale price. For a Section 899 country in year one, it becomes 20%. In year four, it becomes 35% — more than double the standard rate.

The math at typical sale prices is striking:

• $500,000 sale, year-one Section 899 country: $100,000 withheld instead of $75,000 — an extra $25,000 sitting at the IRS until refund
• $1,000,000 sale, year-four Section 899 country: $350,000 withheld instead of $150,000 — an extra $200,000 frozen
• $2,500,000 sale, year-four Section 899 country: $875,000 withheld instead of $375,000 — an extra $500,000 frozen

None of this changes your eventual U.S. tax liability on the gain — the surcharge is layered on top of the withholding, not on top of the underlying tax. So the difference comes back as a refund the year after the sale. But the cash-flow gap is real and, depending on what you needed to do with those proceeds, can be meaningful.

Which countries are designated as of mid-2026

The Treasury maintains the active Section 899 list and updates it annually. As of mid-2026, the list reflects countries that have implemented UTPRs under OECD Pillar Two or have unrepealed Digital Services Taxes. Several European countries fall in this category. Specific countries shift as policy changes; we confirm current designation at the start of every engagement.

Notably absent (as of mid-2026) are most major Latin American countries, most Asian jurisdictions, Canada, the U.K. (which repealed its DST), and most Caribbean countries. So a Mexican, Colombian, Brazilian, Chinese, or Canadian seller is generally facing the standard 15% — not a surcharge.

The list is updated annually in October for the following calendar year. Countries that repeal the offending tax come off the list prospectively the following year. There's currently a meaningful pipeline of European countries either at risk of designation, on year one (5pp surcharge), or pushing legislation to repeal their DSTs to come off the list.

How Form 8288-B interacts with Section 899

The Form 8288-B Withholding Certificate is still your most powerful tool, even if you're a Section 899 country seller. The certificate authorizes a withholding amount equal to the actual expected tax on your gain — which already accounts for any additional Section 899 tax that applies.

What this means: a Section 899 surcharge doesn't make Form 8288-B less valuable. If anything, the cash-flow stakes are higher and the certificate provides more dollar relief because the standard withholding is now larger.

The mechanics of filing 8288-B are unchanged — same Form W-7 ITIN application under Exception 4, same $1,510 IRS user fee, same 30–90 day pre-closing timeline. Only the math inside the certificate differs.

Practical takeaways

If your home country is on the Section 899 list:

1. Confirm your country's designation status at the start of any FIRPTA engagement — it's an annually-updated list
2. Don't skip Form 8288-B. The surcharge makes the certificate more valuable, not less.
3. Plan cash flow with the higher withholding number in mind, even if the certificate will reduce it. Closing-table escrow holds the larger amount until the IRS rules.
4. Watch for legislative repeal in your home country. Several jurisdictions are weighing whether to repeal DSTs to come off the U.S. list.

If your home country isn't on the list:

1. You're at the standard 15% — Section 899 doesn't apply
2. Watch the annual October update — designation can change year to year
3. The rest of FIRPTA mechanics (Form 8288-B, ITIN, closing package) work normally

If you're not sure where your country stands or have a 2026 closing pending, a no-charge intake call resolves the question quickly.