The US Internal Revenue Service (IRS) requires that non-US self publishers withhold 30% of the gross profit from their book sales for a total tax burden of 70%. This can be avoided by filing Form 1040NR.
The us-uk tax treaty is a treaty between the United States and the United Kingdom. There are some exceptions to this treaty, which can be found online.
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Day 1: 5 Things You Should Know About Kindle Publishing If You’re a Beginner
Day 2: 7 Reasons Why Your Business Should Create an eBook
Day 3: Creating and Publishing an eBook
Day 4: How to Find Profitable Online Niche Markets
Day 5: The Biggest Self-Publishing Mistake I Made and How to Avoid It
Day 6: How to Sell More Books on Amazon in 6 Easy Steps
Day 7: Creating Effective Book Covers
Day 8: Avoiding the 7 Most Common Self-Publishing Mistakes
Day 9: 40 Book Promotion and Marketing Ideas
Day 10: Top Authors Share 49 Inspiring Marketing Tips
Day 11: The Top 10 Self-Publishing Author Tools
Day 12: The 12 Best Platforms for Self-Promotion Make Money by Publishing Your eBook
One of the most difficult aspects of being a non-US self-publisher is losing an additional 30% of your earnings to Uncle Sam.
However, if you publish a book on Amazon Kindle Direct Publishing as a non-US citizen, Amazon will automatically withdraw 30% of your earnings for tax reasons in addition to the 30% cut they take. And all you have left is a meager 40%…
There isn’t a simple method to handle it. According to US tax laws, all US-based businesses like as Amazon, iBooks, and Barnes & Nobles must withhold 30% of any royalties received by non-US self-publishers on behalf of the US government.
It doesn’t end there…
Even though you have paid 30% tax to the United States, you must still pay taxes in your own nation. Double taxation is the legal name for this situation.
Here’s a sample of one of the Amazon KDP profits I earned. As you can see, Amazon immediately withheld $1,418.96 from my total earnings, leaving me with just $3,310.90 in take-home income for that month. Don’t forget that in my nation, I still have to disclose and pay taxes. That’ll be a tough pill to take!
Fortunately, depending on where you reside and where your business is registered, you may take a few measures to minimize or eliminate your US tax withholdings.
In this post, I’ll show you how to minimize the amount of tax withheld in the United States, depending on where you reside and where your company is incorporated:
- For individuals who reside in a nation with whom the United States has an income tax treaty,
- For individuals who reside in a nation with no tax treaty with the United States,
First and foremost, you must determine if your nation of residency has a tax compact with the United States.
The following is a list of nations with whom the United States has an income tax treaty. You are ELIGIBLE to apply for a lower (or zero) rate of US tax withholding if you are a citizen or resident of any of these countries.
- Austria, Belgium, Canada, the Czech Republic, Cyprus, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, the Netherlands, Pakistan, Russia, Slovakia, South Africa, Sweden, Switzerland, and the United Kingdom all have 0% tax withholdings.
- Australia, Barbados, Bulgaria, New Zealand, Slovenia, Spain, and Thailand all have a 5% tax withholding rate.
- Bangladesh, China, Estonia, Indonesia, Israel, South Korea, Mexico, Poland, Portugal, Sri Lanka, Turkey, Ukraine, and Venezuela all have 10% tax withholdings.
- Egypt, India, the Philippines, and Tunisia all have 15% tax withholdings.
Visit the IRS website to view the complete list of nations.
If you’re not so fortunate and your country of permanent residence, like mine (Malaysia), doesn’t have a tax treaty with the US, you’ll have to pay the full 30% tax.
However, there is still a method to deal with it by forming a corporate company in the United States. We eventually took the initiative last year and established up a C Corporation via Stripe Atlas for $500 (one-time charge) to address the problem once and for all. I’ll come back to it later.
Continue to the following step if your nation is on the US tax treaty list…
When filling out the tax form, you may give any of these TINs to claim tax treaty advantages and lower your withholding:
- Number assigned to the employer (EIN)
- Taxpayer Identification Number (TIN) (ITIN)
- Your nation of residency will provide you with a tax identification number.
It’s worth noting that you may still publish and sell books on Amazon without giving a tax identification number. However, you must get your TIN from the IRS in order to benefit from the lower tax advantages.
Employer Identification Number (EIN) for corporations and non-individuals (EIN)
One of the simplest methods to minimize 30 percent tax withholding is to get an Employee Identification Number (EIN). You may apply for an EIN via phone, fax, or mail at the time of this writing.
Obtaining your EIN over the phone is the quickest method. Call the Internal Revenue Service at (+1) 267-941-1099. (not a toll-free number). Monday through Friday, 7 a.m. to 10 p.m. US Eastern Time. They will ask for information such as your name, address, and purpose for calling, among other things. You’ll be issued an EIN right at the conclusion of the conversation. Remember to take note of the number since you’ll need it for the following step.
Individual Tax Identification Number (ITIN) for people (ITIN)
Obtaining an ITIN may be a difficult task. It is not possible to get an ITIN by phoning. You may apply for an ITIN either by mail or in person at an IRS office.
It’s a long procedure that may take up to eight weeks to finish. Furthermore, it requires the submission of specific papers, such as your passport and an official ITIN letter, together with your IRS application. Check out the official guideline here if you’re interested.
Number of the International Tax Identification System
If you live in a nation where your own local tax number is recognized by the IRS, this is the best choice. This implies you may claim the tax treaty advantage using the tax identification number provided by your home country. You are not required to apply for an EIN or ITIN.
Residents of the United Kingdom, Canada, Australia, and France, for example, use the National Insurance Number (NI), the Social Insurance Number (SIN), and the Tax File Number (TFN) (INSEE code).
After you’ve obtained your EIN/TIN/International tax number, you’ll need to input it into KDP’s online Tax Information and send it to Amazon.
- Go to your KDP account and sign in.
- To access your account, click “Your name -Account” (for example, “Winson’s Account”) in the upper right corner of your window.
- Then choose “Tax Information.”
- You must now respond to a few questions about your tax information. If you operate under your own name, choose “Individual/Sole-proprietor,” and if you run as a business/company, select “Business.”
- Then, for a non-US individual, choose “No.”
- After that, type in your address.
- You have the option of entering your EIN/ITIN or your local tax number (for certain countries). Choose the option that applies to your situation and enter your tax number in the appropriate field.
- Click “Complete Tax Information” after you’ve finished the tax interview.
- That is all there is to it. Now that you’ve submitted your tax information, Amazon will decrease or eliminate your tax withholding based on the information you’ve given.
This seems to be a very clear and uncomplicated issue for individuals who reside or work in a nation that benefits from a tax treaty with the United States.
But, in my opinion, what about individuals who live in nations that aren’t on the treaty list?
We must pay the 30% US tax since we live in Malaysia. We’ve been paying Uncle Sam tens of thousands of dollars for years.
Which leads me to my next point…
If you reside in a country that does not have a tax treaty with the United States, Amazon will withhold a full 30% tax on royalties received.
Setting up a business in one of the nations having a tax treaty with the US is a sensible step as you publish more books and your royalty revenue grows.
Remember that it is not your nationality that determines your eligibility, but rather where your business is registered or where you now reside.
You’re publishing books as a business by establishing a corporation. You will be able to take advantage of a variety of advantages, including but not limited to:
- Your company will be assigned an EIN. You may eliminate or decrease the tax withholding instantly depending on the nation you choose to register your new business in.
- Expenses and operational expenditures such as promotion, marketing, cover design, proofreading services, purchasing a laptop, and enrolling in a course may all be deducted.
- Scaling and increasing your royalties is simple.
- You may be able to escape personal responsibility for any possible losses connected with your business depending on the kind of company you establish.
Of course, establishing and maintaining a business only makes sense if you’re earning money from publishing books. Because everyone’s case is unique, it’s advisable to consult with several competent international tax advisors/lawyers for assistance with your tax concerns.
We are now functioning as a business in the United States of America. Stripe Atlas allows anybody in the globe to establish an online business without having to be physically present in the United States.
We were first frightened and overwhelmed, but Stripe Atlas made establishing a company in the United States a breeze.
All that is required of us is the submission of pertinent information (company name, founder’s name, address, business type, etc.) and a $500 payment. We open a bank account in the United States, establish a business, receive our Employer Identification Number (EIN), and have our debit cards sent to our local address all within a week.
All I wish I had done was do it sooner. It eliminates the most vexing problems associated with excessive tax withholding imposed on foreign nations.
If less tax is deducted from your royalties, you’ll have more money in your pocket!
You’ll be able to receive monthly royalty payments through wire transfer if you have a bank account in the United States. When compared to getting checks, this is more convenient.
The process of converting your KDP account to a business account is simple after you’ve created a corporation. Go to your KDP dashboard, change your payment method and bank data, and input your business information (name and address). Fill in your EIN number in the tax information box. You may also notify Amazon KDP through email, and they will update your account details.
You’ll need an invitation to start a business in the United States using Stripe Atlas.
Click here to access the unique Stripe Atlas Invitation link if you’re interested in establishing a company and opening a business bank account in the United States (without physically being there) (only for my readers).
I’ll take you through the process of setting up an internet business + getting your EIN number + opening a US bank account in easy-to-follow stages in this thorough tutorial on how to establish a corporation and a bank account in the United States as a foreigner.
There is a method for everyone, regardless of where they reside, to reduce their US tax withholdings.
Two simple methods to avoid the 30% US tax withholding are to use your local tax identification number (if feasible) and get an EIN number.
More royalties, less taxes!
What are your thoughts?
What has been your experience with avoiding the 30% US tax? Do you have any suggestions or ideas for us?
Please leave a remark below if you have any problems or questions.
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The amazon tax withholding is a common problem for self publishers. Amazon will withhold 30% of the amount that the publisher receives from selling their books on Amazon.com. To avoid this, publishers can send their royalties to an account in a foreign country and then withdraw them from that account.
Frequently Asked Questions
Does KDP take taxes?
Yes, KDP does take taxes.
Can you use KDP in Canada?
Unfortunately, Canada is not a country that allows for the use of KDP.
What is applicable withholding rate on Amazon?
The withholding rate is the percentage of income that a person or business must withhold from an employees pay before it becomes taxable.
- paying tax on self-published books
- how to avoid 30% withholding tax
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- applicable withholding rate 00 meaning
- kdp and sales tax