If you are a non-US author your royalties from your US book sales will be subject to a 30% withholding tax until or unless you complete the necessary paperwork to claim full or part exemption.
The amount of exemption you can claim depends on the tax treaty your country has with the US. If you’re based in the UK the withholding rate is 0%, so you can claim full exemption if you wish. (In this case, you then declare the foreign income on your UK personal or company tax return and pay tax on it in the UK.)
You can check which countries have a tax treaty with the USA here. From a quick glance I can’t see a handy list of withholding rates in this document, so you’ll need to check with your own tax department to get the withholding rate for your country.
Key steps to claim reduced or no US withholding tax
In short these are:
- Obtain a tax identification number – called an ITIN (Individual Tax Identification Number) for individuals or an EIN (Employer Identification Number) for businesses – including limited companies or sole traders outside the USA.
- Complete and send a form W8-BEN, which includes your US tax ID, to each of your US distributors – they will then be able to pay your royalties in line with the exemption amount instead of automatically withholding 30% tax. (You can probably ask them to defer paying you any royalties until they have the form.)
Getting an individual tax ITIN takes many weeks, so make a start as soon as you can. Oddly it takes just half an hour to get an EIN if you’re a business. I’ve outlined both processes below. For info, I have an EIN as I self-publish through my limited company – and it really did only take me 30 minutest to get it!
How to get an ITIN if you’re publishing as an individual
This process requires you to take or send your passport to the American Embassy if you are British. After the bullets I’ve added a link to a UK author who describes the process in detail. (I have an EIN so didn’t use this method.)
- Request an original hand-signed letter from your US book distributor or publisher, addressed to the IRS, which states that you need an ITIN because you are going to receive royalties and wish to apply for a US withholding tax exemption or reduction. (Your distributor probably has a process for issuing these letters, and may make a small charge. But it can can take time: for example, Smashwords says that it can take them 3-6 weeks to snail mail the letter to you.)
- While waiting for your letter, download and compete form W-7 from the IRS website (PDF). (Here are instructions for completing form W-7.)
- If you’re based in the UK, take (or send special delivery) your completed W-7 form, your distributor’s hand-signed letter, and your passport to the American Embassy in London. They need to your passport as evidence that you are British and they need the hand-signed letter to prove that you are being paid by an American company. Copies won’t be accepted.
- From what I have read, it seems that since summer of 2012 they now send your passport along with the other documents to Texas for processing, rather than taking a copy of your passport as they did previously! But see a further note on this below*.
- It can take up to six weeks and sometimes longer to process your application – after which your documents are returned and you are notified from the US of your ITIN.
- Once you receive your ITIN, download and complete form W8-BEN (PDF) – making sure that you include you ITIN on it. (The form is dated 2006 but seems to be the most recent.
- Now send your completed form W8-BEN to your US distributor/s in accordance with their instructions. Once they have this they can pay your royalties without applying the full 30% witholding tax.
* In the comments section of UK author Scarlett Parrish’s blog below, a UK author says that the US Embassy in London agreed to send her UK Photo ID Driving Licence away instead of her passport – having already been presented with the original passport and an original birth certificate. Whether this is typical I am not sure – but I recommend that you read the full blog post and comments on Scarlett’s website below.
Note: Reading around, it seems that some self-publishers decide the application process is more hassle than it’s worth until they get a measure of their US sales. For example, if you’re an individual based in the UK and pay 20% tax, by not doing anything you will lose out on 10% of your royalties – you then declare the income as ‘taxed at source’ on your tax return.
How to get an EIN if you’re publishing as a business
Bizarrely, it’s a lot simpler for non-US businesses than it is for individuals to get a US tax ID – in fact it just took me half an hour! Don’t be put off by the reference to ‘employer’ – if you are a director of your own company or a sole trader** you can still apply.
- Read the notes on page 2 of the form – these confirm which questions you can miss off since you are only applying to get this EIN for tax withholding purposes.
- Complete the form – you can fill the fields in online and then save and print the form. (See the ‘Tips’ section below for answering question 9a.)
- Next call the IRS’s dedicated line for businesses that are located outside of the US: 1-267-941-1099 (not toll free). You need to have your completed form SS-4 beside you as they will ask you about your entries. (see the ‘Tips’ section below for how to avoid being asked to fax the form.)
- They then give you the number over the phone and say to expect it and relevant paperwork in the post in the next 2-3 weeks. And it does…
- Download and complete form W8-BEN (PDF) – be sure to enter your EIN on it.
- Send form W8-BEN to your distributors in line with their instructions.
NB: non-US publishing companies cannot apply for an EIN online, so ignore any instructions you see on this as they are directed at US corporations.
Tips for when completing form SS-4 and calling the IRS
- On form SS-4, at question 9a tick ‘Other’ and enter ‘Limited Company (UK)’ or ‘Self-employed Sole Trader UK’. The only other possible option at 9a would be to tick ‘corporation’ – which seems to refer to US incorporated companies. The woman at the IRS I spoke to agreed that my approach seemed the best answer.
- When you call, make it clear that you are the owner/director of the business. I say this because when I first called, the woman told me I would need to fax the form while I was on the phone to her (impossible as I only have one phone line…). At that point I had to come off the phone and had planned to call back on my mobile to enable me to fax whoever took the call (it’s a call centre type set-up), but then found it would cost me 72p per minute to do this! So I called from my landline again and the next woman I spoke to said she could do it over the phone without faxing her the form SS-4 because I was the owner of the business.
- Have the date of incorporation of your company or the date you registered as self-employed to hand. Even though their page 2 instructions said I didn’t need to fill in that info they still asked me for this.
You can find general instructions for completing form SS-4 here.
(**To become a sole trader in the UK you need to register with HM Revenue & Customs as self-employed and fill out a Self Assessment tax return each year where you declare your income from your sole trader business. You pay Class 2 National Insurance if you’re self-employed – and Class 4 if your profits are above a certain level.)
Getting help: US tax offices based in Europe and China
You can find contact details for IRS offices in the UK, France, Germany or China here. I’ve not yet tried this out, but, according to the IRS website, “The IRS offices listed can answer your federal income tax questions, help with account and refund problems, and assist with the preparation of current and prior year tax returns.” I will update this section once I have spoken to them. It’s Columbus day today, so they are closed!
You can read more about withholding tax on the IRS website here.
UK authors
If you’re a UK author and aren’t sure how to declare you income from books sales, check out my related post on paying UK Income Tax on book royalties
Thanks for this post Karen – it helps a lot! I was honestly so put off by the process for an individual that I was prepared to skip it and put up with a double-taxation (on a book that wouldn’t be making much to begin with). But since I’m also the technical publisher, I’ll apply as a business.
My pleasure, Sally. Glad to help spare others unnecessary pain! It’s odd how much simpler it is if you’re a business…
Thank you so much for writing this. I was really struggling to get my head around how to fill in the ITIN application form with my UK limited company information! This has really helped me.
Glad you found it of use!
Got my EIN – yay!
I also got a letter from the IRS saying I’d have to complete and return form 1065 by April 15th, 2013. Did you have to do that, too?
Hi David – I don’t recall that – but I do remember getting something initially that made me double check if I had to send something in and I therefore asked my accountant – plus faxed the US embassy in London – I’ll check out the response over the next few days and leave another note…. Karen
That’s really informative – thank you!
I want to give all the proceeds from my book to charity. The proceeds from US sales on Kindle are already set up to go to a charity in the States to avoid bank charges with cheques in dollars etc. Can I do the same with sales on CreateSpace? Is there a facility for the charity to get the 30% tax back, the way gift aid works in the States?
Hello there – I’m afraid that I have no idea. However, CreateSpace is really helpful – if you email their contact team they generally reply within a business day. Otherwise why not try asking in the CreateSpace Community Forum. You’ll find a link to it on my page about Print on demand. Everyone there is really helpful too.
Best of luck! Karen
So helpful, many thanks!!
My pleasure, Jen! Karen
You’ve just saved me a load of heartache here! I was puzzling about how I was going to fill in the ITIN as my royalties are paid to my company, with the further complication that I live in Italy. But this is a huge help, and it sounds so much simpler! thanks for taking the time and trouble to explain it so well. Would you be interested in either doing a guest blog for my indie author readers on the subject?
Hi Rachel
So glad you found it helpful! I remember at the time what a pain it was trying to find out how to do this and I discovered this method by reading the small print on the IRS website as I recall…. Once I made the call I coudn’t believe how quick it was to do! I’d be very happy to do a guest post on it… see my contact details on the contact page to get in touch….. I’m busy in the day job during the week so will be more likely to reply at the weekend…. I trust that you’re having better weather over in Italy than we are here!
Hi Karen – I tried emailing you as you suggested, but perhaps it didn’t get through (or perhaps you are on holiday?). The weather here is so hot it’s unbearable, to be honest. But I would still LOVE a guest post from you, if you have the time. My email is rachel@rachel-abbott.com, and I’d love to hear from you.
Hi Karen,
Thanks for this post. I have a problem I hope you could help me with (or point me into the right direction); according to the tax treaty between my country (Spain) and the US, I should pay 10% taxes to the US. After I got an ITIN and filed the proper papers with my publishers, they stopped withholding the 30% they had been withholding. At the moment, they aren’t withholding any money from my checks, so my question is; how do I pay this 10% if I’m not a US resident and I don’t have a US bank account? Thank you very much for your time. Elena
There’s a useful article on the Amazon website Elle at: https://kdp.amazon.com/self-publishing/help?topicId=A1VDYJ32T5D3U4
It would appear that your publishers should still be withholding US tax from your royalties but, because there is a tax treaty between Spain and the US, they should be withholding tax at the reduced rate specified by the treaty.
You may be able to claim a refund of US tax withheld but, if not, the tax treaty will allow you to set the US tax withheld against your liability to Spanish tax.
I think you will have to file a US tax return to claim a refund or pay any tax due for periods before you had your ITIN or when the withholding tax has been dealt with incorrectly.
Thanks, Nick! Hope you are well! Karen
Hi Elle – I am afraid that I don’t know the answer to this…! But if you call the US Embassy in Spain and ask to speak to a tax adviser they may be able to tell you? (Or I assume that any Spanish accountant would know?). Or if you are using a publisher could they find out for you? Sorry I can’t be of more help…. I did just have a quick look at the tax treaty tables but couldn’t really follow what they were telling me!
Good luck!
Karen
I am soon publishing my first poetry collection and I had no clue about how to do this. Happily, you have explained it all wonderfully. Glad I am a member of Linked In as I saw this link to this excellent feature about Tax on US Royalties. Many thanks again.
Glad to be of help, Cathy. I love your hub page by the way (not that I’m sure what a hub page is!) Karen
Karen,
Will you have to file a return to the US IRS? Even if it’s a no tax requirement thay may still want one?
Thanks. Karl.
Hi Karl – no you don’t. I had this confirmed to me on the phone when I asked at the time I got my EIN and have just seen my ‘note to self’ that confirms this in the relevant file. Subsequently – around the end of the tax year (US or UK, I can’t remember which…) – I received a one-page form/notification from the IRS which confirmed my US tax details but said that no tax return was expected. (I just tried to hunt that out to see if there was/is a form number, but can’t lay my hands on it at the moment! My filing system is clearly not as efficient as I had thought it was!)
If you use the telephone route to get your EIN suggest you ask for your peace of mind. I had read somewhere – or had seen someone ask about it – which is why I asked.
I hope this helps, but worth checking direct too! Karen
Thanks for the reply. I got my EIN by phone to the US yesterday. I was going to head, on foot, for the US embassy in London but rang the IRS office there and all i got was recorded messages. A waste of time. I glad I got your webpage.
Your advice on filling in the SS-4 form beforehand was a good idea, as the guy on the phone was looking at the boxes yesterday and I could follow it as I wrote out the form beforehand. I nearly made a mistake on Option 10 of the SS-4. It should just this – “Compliance with IRS withholding regulations”. I first ticked the option – “Starting a new Business” which NOT correct.
The W8-BEN form advice is a great help too.
For a UK Limited Company you need an EIN.
To get a EIN number from the IRS in the USA Phone: 001267 9411099 or 001267 99411329.
Hope this helps other too.
Glad it helped, Karl! K
I first applied for my ITIN in December 2010, and after 4 months it was rejected with no reason given. I applied again and had the same result. In January 2012 I sent my passport special delivery to the American Embassy in London who then sent a letter back saying they have authenticated it and passed it to the IRS is Texas, and that I’d have to wait 12 weeks for the ITIN, this was 23rd May. It’s now 13th October, and nearly two years after originally sending everything off, I’m still waiting for the ITIN. I’ve phoned the AE in London a few times and have been put on hold for well over an hour each time, nobody even comes to the phone to say anything, no mention of where I am in the massive cue.
I cannot see a way of emailing either the IRS in America or the Embassy in London, writing doesn’t get a reply in five months, and phoning them is useless as I’m not a business, so an EIN isn’t the correct thing to ask for.
Any advice?
Dan
Hi Dan – your experience sounds awful. I’m afraid I can’t advise as I went the EIN route. I read the other day that they are now changing the system and sending off passports to the States – which I find incredible. Is that what has happened in your case? I think if I were you I’d go to the US Embassy in person if necessary if they had my passport for so long (but check days/times and get there ridiculously early!). If they don’t have your passport now or if you get it back and still no ITIN one thought is if you register as self-employed and then apply for an EIN – I suggest this as have heard that EINs are also available for sole traders and it’s something I’ve been meaning to check out. Your note here has reminded me on this. I will call the US IRS this week and ask specifically about this as it was my impression from their forms that you needed to be a limited company, but that may not be right. The only thing about registering as self-employed here in the UK is that you will then need to pay Class 2 National Insurance and complete a Self Assessment tax return each year – which may be more hassle than it’s worth. I guess it depends what level of royalties you are getting. I’ll post an update on the sole trader thing in the next week or so but if anyone reading is a sole trader and knows the answer, please speak up. K
Karen, thank you so much for this. I’ve been looking for the last couple of hours for clear information about getting a US tax ID etc (having read your blog, I need a EIN). I feel so relieved to have found what I was looking for here. Thanks also to Karl for the contact info – very useful.
What about individuals. I am not a business owner but want to publish ebooks on Amazon under my own name. Will I need to apply for an EIN?
Hi Raj, Sorry I have taken so long to reply on this. In theory if you are publishing to earn a profit then I think that under HMRC tax rules you are effectively setting up a sole trader (self-employed) and should register with them as that. You can do that by phone. But it does mean that you have to complete a tax return each year and pay Class 2 National Insurance (and Class 4 NI if your profits exceed a certain amount). Why not call the HMRC self employed helpline and ask them at what point you would need to register? To my mind it would only make sense to do this once you know you are making an income – so if you don’t have a tax number to start with it may not matter…. I’m a member of the Alliance of Independent Authors, as you will see from the links at the top of this page. One of the authors there made this comment recently on our closed Facebook page (and this seems to back up what I have just said – so just ‘pick your moment seems’ the best advice!):
I hope this helps and apologies again for the late reply,
Karen
I’m just on the verge of self-publishing my first book (though I’ve been a writer for a while). Though the process looks ever more and more daunting as I go into it in more detail, I’m also finding that there’s a real sense of community out there, with people like yourself who offer help and guidance to poor, clueless newcomers like myself.
Thank you!
No problem, Paul. And do check out the Alliance of Independent Authors – see the link at the top of the page. They didn’t exist when I started my journey but are well worth joining for the community and have a great closed FB page where authors chat through issues they are having. Karen
Thanks Karen, I’ll give them a look! Sorry I’m a little late, still getting used to the way the ‘comments’ function works on here.
Karen, I have a publisher for an app on Apple’s App Store. This was brilliant advice for me and I struggled to find such a simple yet thorough explanation. The publisher insisted I needed an ITIN but, operating as a limited company, I actually needed the EIN and got it within 30 minutes. I just wanted to say thanks for the article.
Happy to be of service
Anything to make tax less taxing!!
Hi Karen, quick question, regarding whether it is better for me to get an EIN or an ITIN. I own my own company too. I spoke to my accountant yesterday and he said have Amazon put the money in my personal account and then declare it on a self assessment at the end of the year (reason being I am contracting at the moment, if I get a permanent job then I’d probably close the company).
I wonder then whether I should apply for an EIN or an ITIN?
On the SS4 application for an EIN it says ‘For use by… certain individuals’, I take it that would include company directors. Ultimately the US IRS or Amazon don’t care whether it goes into my business account or my personal account, they just need a number and don’t care how I declare it back in the UK.
Getting an EIN seems a lot more straight forward than an ITIN, I just want to get on and put my book up and not wait eight weeks for all this…
Any advice greatly appreciated.
Thanks
Farhan
(London)
Hi Farhan
I am not a tax adviser but as far as I understand it if you have a book that you have written that will generate royalties for you (hopefully!) (alongside your paid permanent job should you get that) then you are technically self-employed as an author/publisher for that royalties element of your work and so would / could still use an EIN – and would need to register as self employed with HMRC. (You can be employed and self-employed at the same time). Take a look at my related post on declaring tax on UK royalty income if you are a UK author – there’s a link to it at the end of my article here or you will see it in the main navigation area. Your accountant will know all of this though!) I can’t say whether it’s is more cost effective to run your book through a limited company or via self-employment though! Your accountant would need to talk you through that! Either way EIN feels the right choice I would say
Hi Karen
Just got off the phone to the nice lady at the IRS. Thanks so much for explaining how to get an EIN. Quick question: do I have to wait for the paperwork to arrive from the IRS before I complete and post my W8-BEN to Amazon? As I’ve already got my EIN, I’m thinking I could send it off straightaway. What did you do? (if you can remember – must have been a while ago now!)
Thanks again
Eva
Hi Eva – congratulations on getting your EIN! I remember the feeling of achievement when I got mine! No you don’t need to wait for any paperwork before sending off your EIN. However one thing to be aware of when you complete the W8-BEN, if you have applied as a sole trader (not a company) only tick boxes 9a and 9b at Part II. Someone in the Alliance of Independent Authors reported this week that Amazon rejected their W8-BEN because they had accidentally also ticked box 9c when they are not a company. When I look back at my W8-BEN I see that I did tick box 9c, but I applied as a limited company. However (not wishing to confuse matters….) some time later I received a reply to an earlier query I had sent the US Embassy here in the UK about form filling and they sent me back a mock filled-in W8-BEN on which they had shown me entered as a corporation but had still not ticked 9c in part II. However I think that was a mistake on their part – I’ve just done a quick Google and all the advice I have found suggests that if you are a company you should tick box 9c, which is what I did. ( If you are applying as a company you might want to find out the firm answer to this question before you post your form… perhaps by calling the US embassy here if you can get through. I will try to do so myself next week and will update this blog, but not sure how easy it will be to get through….!) If you are in the UK then at question 10 you can enter “12″ next to Article and “0″ in the next space which refers to the withholding rate of tax. Next to ‘type of income’ you can enter ‘Royalties’. All of this info is on the sample sent to me by the US Embassy. I left question 10 blank but have seen advice elsewhere that suggests that you can enter next to q 10 (Explain the reasons…) as follows: “Beneficial Owner is a resident of the United Kingdom.” (NB don’t abbreviate to UK.) Hope this helps..
Thank you for such a comprehensive (and swift) reply. Much appreciated. I’ll complete section 10 as you suggest. I am a sole trader, so I presume I just tick (a) and (b) – the examples on the Amazon help page is a tad confusing!
I would never have gone the easy EIN route if it hadn’t been for your fabulous advice – so thanks again.