When doing business with a company in the U.S. you may find yourself having up to 30% of your income withheld by the U.S. company. This is a requirement by the U.S. where tax information forms are completed by the payor and tax withheld on U.S. source income for persons residing outside the U.S. The tax rate remains unless the payee can prove they are entitled to a reduced or zero rate withholding (e.g. via a treaty claim).
This issue is particularly common if you are an author outside of the USA and you self publish through companies like Smashwords, Kindle Direct Publishing or CreateSpace.
Unless you have an ITIN the US publisher will withold 30% withholding on all your earnings.
You can reduce this, as most countries have tax treaties with the U.S. that say if you pay tax in the country that you live in, you can use the tax treaty to remove some, if not all of the U.S. withholding requirement.
What documents do I need to obtain an ITIN as an Author?
The process is the same as anyone applying for an ITIN using an exception (in this case Exception 1(d), royalties). You need to:
Complete a Form W-7.
Send original documents with the Form W-7 proving your foreign status and identity (e.g. passport) or use a Certified Acceptance Agent to verify the documents so you do not have to send originals.
Send an original letter from the U.S. publisher proving that you are owed U.S. royalty income.
Some authors have had ITINs rejected due to point 3. above - the letter has to be an original letter from the publisher not a pdf print out. The easiest way to obtain this letter is if you use Smashwords. They are smaller than Amazon Kindle and will send original letters in the post once you have $10 in sales. You can obtain more information on this letter on the Smashwords website. CreateSpace can also help out but you will need to email them and request an original letter else they issue a pdf version. Sample wording for the letters can be found here.
Once I receive my ITIN, what do I do?
You will need to complete a Form W-8BEN and then send this to the publishing company. This form basically informs them to stop or reduce the withholding based on any tax treaty with your country.
You need to remember to include your ITIN number (box 5) and enter the correct tax treaty and article number (line 9 and 10).
Do I need an ITIN?
Please refer to our blog post "ITIN Number Application" for further information.
A Certified Acceptance Agent (CAA) can assist you in obtaining the correct TIN.
Just Breve are part of the ITIN Acceptance Agent Program. As a Certifying Acceptance Agent (CAA), we are authorised by the Internal Revenue Service (IRS) to assist alien individuals and other foreign persons with obtaining ITINs from the IRS by validating the person’s foreign status and identity.
Don't live in the U.K? No problem, we can assist by phone, email and Skype. Please feel free to get in touch.
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