Claim exemption on US tax
CLAIM EXEMPTION FROM US ROYALTY TAX
If you’re a British author, being paid by an American publisher, the fact that you may get 30% more royalties if you read this will just have to be compensation for the dull subject!
American publishers have to pay American taxes to the IRS (Internal Revenue Service). If you’re receiving royalties 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 should only get taxed by the UK. You can receive your royalties untouched by US tax!
Good news! But it doesn’t happen automatically. It’s up to you, the writer, 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 yourself as a UK taxpayer.
This used to be done by obtaining a US tax number called an ITIN – Individual Tax Identification Number – and complete a W8-BEN form.
This tells the IRS that you qualify for US tax exemption.
You then need to present the W8-BEN to your US publisher(s), so they can send your royalties without deducting tax.
However, 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 form using your National Insurance number as your UK “Tax Number”, and send that to your publisher(s).
See this page for a blank copy of the W8-BEN form and the IRS detailed instructions for completion*.
*I can help you complete this or provide advice if you need.
NOTES and UPDATES:
DEC 2014: It now appears that major distributors like Amazon will also accept a non-US author’s local tax reference instead of an ITIN, when you complete their Tax Interview. This means you can use your National Insurance number (UK authors), or Self Assessment UTR (Unique Taxpayer reference, which will be on any correspondence from HMRC and your annual return). So you don’t have to go through the arduous quest in getting an ITIN!
AUTHORS: I’ve had confirmation from US publishers that they also will accept your home country tax ID as a reference. You still need to complete a W-8BEN form for their records but this can be completed without a US ITIN.
ITIN: There are occasions when you may need a full US ITIN in person at the American Embassy. For example:
– you have other tax dealings with the US Internal Revenue Service e.g. you are trading in the USA, or
– you’ve been deducted US tax in the past for whatever reason and want to claim for it to be repaid.
If this is the case, the instructions to obtain a full ITIN are HERE.
If you are a limited company who is dealing with a US publisher? you cannot use an ITIN or your NI number. You need an EIN, which I cover HERE.