New 0% US Tax Withholding Relief for UK Kindle authors?

The dreaded US Withholding Tax swallows 30% of our US Kindle earnings, even when we’re UK-based writers who have never even visited the USA let alone worked there. To circumvent this tax at source it’s necessary to obtain a US taxpayer ID or ITIN. This is do-able but as I described in this article, the method of getting a US ITIN number and filling out countless forms as a ‘non-resident alien’ is a very onerous process. US bureaucracy is every bit as bad as anything British or European, and even more hard-nosed.

The IRS identity checks have been particularly rigid; the US Embassy in London stated that I would have to visit with my UK Passport or photo driver's licence (haven't got one!), as they would only accept UK Government ID if the authentication was conducted by the US IRS themselves.  British Notary Public notorisation was not acceptable. Otherwise I would have to mail my passport to the IRS in the USA and complete the process that way instead.

So I decided to swallow the US 30% Withholding Tax, as the cost and effort needed to escape it far outweighed the 10% extra benefit gained by paying 20% UK tax and NIC on Kindle earnings instead. That's the thing: as my accountants pointed out, I'd pay UK income tax and NICs on earnings instead, so the benefits of enjoying 0% Withholding weren't that great.

A bunch of envelopes appeared in the post from Amazon, being the annual 1042-S (Foreign Person’s US Source Income Subject to Withholding) summarising the tax withheld by various Amazon websites including OnDemand Publ. LLC, the name behind Amazon’s Createspace print on demand.

The arrival of these envelopes prompted me to log into my Amazon Kindle account where in the Tax Information section I spotted that, even if I still had no ITIN number, it seemed I could now enter my UK Tax ID Number instead and claim 0% tax under the tax treaty that way.

Entering a UK HMRC tax ID to claim 0% tax relief on Kindle royalties [click to see] So that’s what I’ve done: my Tax ID from the HMRC Self Assessment statement was entered online and the resulting W8-BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals)) was signed electronically and submitted by Amazon. We’ll see what happens and whether future royalties are going to be assessed under the 0% tax treaty.

Update on Friday, March 27, 2015 at 9:42AM by Alan W

Successful 0% Withholding Tax for UK Copyright

Appears to be successful so far [click to see]

In 2015 it became possible for UK authors to enter their HMRC Tax Reference Number instead of needing a US ITIN.  This is handled via the online Amazon Kindle 'tax interview' as before. So I entered my UK tax ref number...

A look into my Kindle account appears to show a successful application for 0% Withholding Tax for UK Copyrights. It sounds too easy and too good to be true, and why couldn't the IRS do this to begin with? As always, I will believe it when I see it.

Update on Monday, May 11, 2015 at 11:03AM by Alan W

US Withholding Tax Avoided

I checked the next US $ royalties paid by Createspace (View Reports in your CS account) and can confirm that no US Withholding Tax was deducted. So the method of using your UK HMRC tax reference number on the online tax interview has worked. Note that royalties will be subject to UK Income Tax instead.

Comments

[ML]

Hi, I am a HK resident and I face the same dreaded problem here. However, it seems HK doesn't have a tax treaty with the US. Do you have any suggestions?

[Alan W]

If there is no tax treaty then I can’t see how you can avoid paying US Withholding Tax without getting an ITIN number and obtaining an exemption from the IRS. Otherwise I believe you would pay the 30% tax then file a return to claw it back again.

These notes were correct as at May 2013:

http://alanwinstanley.squarespace.com/alan-winstanleys-journal/2013/5/23/writing-for-amazon-kindle-tackle-the-us-withholding-tax.html

You could try contacting an Acceptance Agent for Hong Kong to handle it on your behalf. http://www.irs.gov/Individuals/Acceptance-Agents---Hong-Kong

If the amounts of tax are relatively small in my view it is not worth spending your time trying to claw it back or employing someone to do it for you.