If you’ve tried self-publishing a book on Amazon Kindle Direct Publishing as a non-U.S. person (i.e. not a U.S. citizen, resident, or business with direct connections to the U.S.), then you may have experienced the 30% withholding tax levied on your U.S. royalty payments.
As required by U.S. tax laws, Amazon will, by default, deduct the full 30% tax from royalties earned on your Kindle book sales.
The problem with this is that you end up paying taxes twice: U.S. taxes of 30% and taxes in your own country. Talk about double taxation!
If the country you are a resident of (for tax purposes) has a tax treaty with the U.S., I will show you how to reduce the tax withheld in the U.S. or pay nothing at all.
How To Avoid or Reduce the 30% Withholding Tax For Non-U.S. Self-Publishers
In the past, to avoid paying or to reduce the withholding tax, individual publishers either had to obtain a U.S. Individual Tax Identification Number (ITIN) or an Employee Identification Number (EIN).
After providing one of these identification numbers in your tax information, the tax withheld will depend on the tax treaty between your country of residence and the U.S.
Non-U.S. publishers preferred the EIN route by calling the U.S. Internal Revenue Service and requesting their EIN. After answering a few questions and receiving the number, they update their tax information (on the W-8BEN form) and voila, they can now keep more of their earnings!
The other alternative, ITIN, is a notoriously difficult process involving lots of paperwork, fees, and potentially several months to get it sorted out. I have heard of people who spent 6 months to a year to get their ITIN!
Bad News: The EIN appears to no longer be an option on Amazon Kindle for non-U.S. individuals or sole proprietors. The options available to you now are a U.S. TIN (i.e. social insurance number or ITIN) or a foreign (non-U.S. income tax identification number).
So this is where it gets interesting!
As per Amazon:
If you are a non-U.S. publisher interested in claiming tax treaty benefits to reduce your withholding, you will have to provide a tax identification number (TIN). If you have a U.S. TIN (ITIN for individuals, EIN for non-individuals), you must provide it. If you do not have a U.S. TIN and the tax authority in your country of residence issues an income tax identification number, you may enter it to claim treaty benefits.
Amazon
As a self-publisher, you actually no longer need to go through the hassle of obtaining an ITIN, or waste your time calling to request the EIN…you can now simply enter your tax identification number from your own country!
Easier, don’t you think?
So, if you are a Canadian resident, you can use your Social Insurance Number (SIN).
Other examples of identification numbers that are applicable include United Kingdom residents (National Insurance (NI) number), Australia (Tax File Number), Finland (Personal Identity Code – HETU), Netherlands (Citizen’s Service Number – BSN), France (INSEE code), etc.
Completing Amazon’s Tax Information Interview – Step by Step
Step 1: Choose Individual/Sole Proprietorship, and “No” if you’re a non-U.S. person.
Step 2: Complete the information at the top of page 2 of the form (name and address, etc.) and for the Tax Identification number section, choose the “foreign (non-U.S.) income tax identification number option.
Step 3: Enter your foreign income tax identification number (SIN for Canadian residents, NI for UK residents, and so on).
Step 4: Review your tax information on the W-8BEN form for accuracy. As you can see, my royalty payments will now be subject to 0.0% U.S. withholding tax!
Step 5: Consent to electronic delivery of form 1042-S and electronic signature.
Step 6: Woo-hoo! Your tax interview is completed.
Final Thoughts
In my opinion, the ability to use a foreign tax identification number significantly simplifies the process of reducing or avoiding the U.S. 30% withholding tax.
Your eventual “savings” will depend on the terms of the tax treaty between your country of residence and the U.S.
If you can register, as shown above, the tax withholding rates on your royalty payments based on where you live will be:
Australia: 5%; Austria: 0%; Bangladesh: 10%; Belgium: 0%; Canada: 0%; China: 10%; Denmark: 0%; Finland: 0%; France: 0%; Germany: 0%; Jamaica: 10%; Mexico: 10%; Netherlands: 0%; New Zealand: 5%; Pakistan: 0%; Philippines: 15%; Poland: 10%; Russia: 0%; South Africa: 0%; Sweden: 0%; Tunisia: 15%; Turkey: 10%; United Kingdom: 0%.
You can also confirm what withholding rate applies to your country of residence via the IRS’ Tax Treaty publication 901.
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If you have any questions, please feel free to drop them in the comments section below.
Great post Enoch.
Since I open my company in Estonia Amazon started to apply 10% withholding. Is there any way to avoid it or… get this 10% back later on?
@Kevin: Not if Estonia lacks a tax treaty with the U.S.
Thanks for this, it’s been an interesting read.
I’m a Canadian and also hesitate to provide my SIN (similar to a comment above). Can I not provide my SIN and just accept amazon giving the IRS 30%? Is that an option?
Hello sir
I’m into kdp but from Nigeria. Can i input my Nigerian TIN inplace of the U.S ITIN??
@Omolayo: I believe so. That said, I suspect you won’t be able to avoid the tax withholding as I don’t see an applicable tax treaty between Nigeria and the U.S. unfortunately.
Hi Enoch, Thank you so much for sharing great information. I am an Indian Citizen but now a permanent resident in Canada. when I fill out tax forms for KDP, what should I select for country of citizenship as it says
“If you are an individual, enter your country of citizenship. If you are a dual citizen, enter the country where you are both a citizen and a resident at the time you complete this form. If you are not a resident in any country in which you have citizenship, enter the country where you were most recently a resident”.
I am confused that should I select Canada or India as I want to use Canadian SIN.
@Ashish: Tricky, but I would use Canada to simplify things.
Hi Enoch. My name is yonathan I’m refugee living in Uganda. Now want to publish a book on Amazon KDP. When I try to get account they ask me a tin number. Is it your information work for me?. Thanks.
@Yonathan: I think it may come in handy. That said, Uganda does not appear to have a tax treaty with the U.S., so you may not be able to stop the tax withholding. I assume you can use your foreign income tax identification number e.g. a national residency card number or something similar. All the best!
Hi Enoch,
Thanks it was really useful. I followed the steps. in the end, they add a new step!
I mean after I insert the SIN, and choose the country (Canada) Amazon asked me:
“Do you derive the income for which you are claiming treaty benefits?” If I answer “NO” Amazon show this message: “You do not appear to be eligible for the treaty benefits.”
But if I answer “Yes” then Amazon ask about “Limitation on Benefits (LOB)”
which has some option to choose from. You have to choose an option. Which I don’t understand any of them. Could you please advise me which option is the correct option for Corporation in Canada?
Thanks again,
Pejman
HI Enoch,
Thank you for helping self publishers going through the tax review process. Do you know if the tax review process for a small publisher is the same or different?
Mei
@Mei: I think they are the same based on my experience. Cheers.
I am Canadian and have a company with an NEQ # it is a sole proprietorship could I not use this instead of my SIN?