CLAIM EXEMPTION FROM US ROYALTY TAX
If you’re a British author, being paid by an American publisher, or self-publishing through Amazon/KDP, 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 OR your self-employed Unique Taxpayer Reference (UTR) as your UK “Tax Number”, and send that to your publisher(s).
Download a blank copy of the W8-BEN HERE including IRS detailed instructions for completion.
NOTES and UPDATES:
DEC 2014: It is now acceptable for major distributors like Amazon to 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!
The Amazon/KDP Tax Interview is based on the W-8BEN form.
AUTHORS: I’ve had confirmation from other 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.
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.
How recent is this? Does it mean I could get a letter from my publisher, fill out this form, take my passport, toddle down to London and get it all rubber-stamped there and then, then wait about a week for the number? (Please say yes!) I didn’t realise I needed one and my book comes out in April!! Thanks, Sophie.
Hi Sophie. This is up to date as of Jan 2015, and YES you can go to the US Embassy in London with your passport and a letter – or signed contract – from your publisher, and apply there and then. I’ve done it myself, for my first book!
But also, if you read the top update information, you’ll see that you no longer need an ITIN at all, so the trip to London isn’t necessary. If your publisher is based in the US, the new version of the W-8BEN form has more detailed instructions that state you can use your LOCAL tax number (i.e. your UK NI number, or UTR number if you’re self-employed) instead of getting an ITIN, especially if it’s only for the purposes of proving exemption from withholding tax. If you have any more queries, please feel free to email me from the FreeQ page. And congratulations on the release! Clare 🙂