It’s been in June 2021, when Google, as the owner of YouTube, has started to apply withholding taxes to youtubers who are not resident in the United States. This is important for the tax planning of these content creators, especially when it comes to handle relevant amounts.
Withholding taxes on non-resident youtubers in the United States
Chapter 3 of the US Internal Revenue Code stipulates that a 30% tax rate will normally be applied to income paid to non-residents generated in the United States.
Based on that, and according to the terms that you can read on Google's own US tax requirements on YouTube revenue, we quote verbatim: "In June 2021, we may begin applying US withholding taxes to your channel's revenue from US users. Please submit your US tax information through AdSense as soon as possible. If you have not provided us with this information by May 31, 2021 (inclusive), we may be required to apply a 24% withholding tax on your total worldwide earnings."
Tell the U.S. that you are a non-resident: Form W-8
Basically, if you do not declare anything, then Google considers you a US resident. However, there is a simple way to tell the American authorities that someone is a resident of another country, by means of a W-8 form. These forms include several models such as W-8BEN, W-8BEN-E, and W-8ECI... where, the creator will indicate in which country he/she is a resident. Normally, if there is a double taxation agreement between the United States and that country, the rate of 24% is reduced (depending on the country, even to 0%). In addition, the mechanisms provided for eliminating double taxation can then be applied.
These W-8 forms are the same as those used by international brokers such as Degiro, Interactive Brokers, etc., which in these cases are mainly used for withholding taxes on dividends from American companies.
Normally, despite appearances (lots of text and small font size) these forms are easy to fill in. Doing so can avoid over-taxation and subsequent tax problems. An example of a W-8BEN form can be seen below:
Withholding taxes for youtubers resident in countries without double taxation treaties
A paradoxical situation may arise if the taxpayer reports that he is resident in a country with which there is no double taxation agreement with the United States; hence the withholding tax becomes 30% without the possibility of recovering it later on in the tax return filed by the taxpayer in his country of residence.
It is therefore advisable to analyse this circumstance carefully before deciding to change residence to another country that is fiscally more attractive a priori, such as Andorra, in addition to other aspects that we already mentioned in our post in spanish on the taxation of youtubers in Andorra. What is clear is that tax planning is becoming increasingly important when it comes to minimising the tax bill.
If you are a youtuber and you earn income from the United States, reach out for us. Our Tax Department will be delighted to support you.
