GETTING AN EIN – an Employers Identification Number
Updated Nov 2020
This advice is ONLY for authors who are publishing or earning royalties as a UK Limited Company.
If you are an individual for tax purposes, you need the advice HERE.
American publishers have to pay American taxes to the IRS (Internal Revenue Service). If you’re receiving royalties into your limited company from an American firm, then the IRS are legally obliged to take 30% of your royalties in tax. You get what remains. However – and luckily – the USA and the UK have signed a tax treaty which means UK residents, and resident limited companies, can get taxed in just one place i.e. the UK. You can receive your royalties untouched by US tax, and the responsibility is yours to account for the tax in the UK.
Good news! But it doesn’t happen automatically. It’s up to you, the Director of your company, to prove to the IRS that you qualify under this treaty, and don’t have to pay US tax. And for that, you need to establish your company as a UK taxpayer.
This is done by obtaining a US tax number called an EIN – Employers* Identification Number – and complete a W8-BEN-E** form.
This tells the IRS that you qualify for US tax exemption.
*NOTE 1: you do not have to have Employees to get an EIN. You can be a single Director/owner of your company. It’s just the US terminology used.
**NOTE 2: try not to get confused between the W8-BEN-E form which is for a Limited Company, and the W8-BEN form which is for an individual, and is dealt with HERE.
YOU CAN ONLY USE THE EIN ON THE W8-BEN-E and
THE EIN IS THE ONLY TAX REFERENCE YOU CAN USE (not your NI number).
Nowadays if the only contact you have with the US Internal Revenue Service is to seek this tax exemption on royalties, all you need is to complete the W8-BEN-E form using your EIN, and send that to your publisher(s).
Obtaining the EIN
You can’t obtain one ONLINE unless you’re a US company. You need to make a phone call to the IRS direct.
First, download and complete form SS-4 from the link below:
including the notes on page 2. You DON’T NEED to send this anywhere – it’s just a memo so you can see which questions are relevant. You are NOT registering for US tax with the IRS, you are only applying to get this number for tax withholding purposes.
However, it’s essential to have this form in front of you during your phone call, as the operator will run through it with you, section by section.
At question 9a you are “Other” not “Corporation”. Although you’re a corporation in the UK, “Corporation” on the SS4 means a USA Corporation. If they register you as a US Corporation, you’ll be expected to make a US tax return as well, which is not applicable.
If asked, emphasise that you are asking for an EIN ONLY for the purposes of tax exemption on royalty income, NOT to be registered as a US-taxable entity.
Secondly. call the IRS’s dedicated line for businesses located outside of the US: 001-267-941-1099
This is not toll free – but I consider it a reasonable cost to set up your company, and it can be claimed as a business expense!
Keep your SS-4 form beside you when you call, as they will ask you about your entries. Keep your company information close as well, as they may ask about the incorporation date / directors etc.
Make it clear you are the OWNER of the business. They will then be able to complete the application there and then. You may be asked to quote your date of birth and other details.
They then give you the number over the phone and will send you confirmation by post in the next 2-3 weeks.
You can use the number immediately, so make a careful note of it.
Then you can download a copy of the W8-BEN-E and its accompanying guidance notes HERE.
Copyright: quidsandquills.com / 2019