Back in March 2021, Google warned YouTube creators that their AdSense account earnings were at risk of having US tax deducted from payouts, with the process set to start in June. But is this now happening to all AdSense accounts, not just those linked to YouTube accounts?
What was announced in March?
In March 2021, Google announced that it may have to start withholding up to 24% of publisher earnings, starting in June 2021. Pursuant to Chapter 3 of the US Internal Revenue Code, Google has a responsibility to collect tax information on creators based outside the US, and withhold taxes accrued on amounts earned from YouTube videos shown to US viewers, whatever the country of origin of the creator. This applies to all forms of YouTube revenue, including YouTube Premium, Super Chat, channel memberships and so on.
At that time, Google announced that they would start collecting this tax information from within users’ AdSense accounts. Within the payment settings, there is an option to manage US tax information and to fill out a form from the Internal Revenue Service (IRS).
According to the Google payments center help page (see here), the following forms might be applicable:
- “A Form W-9 will be required from US persons, companies, partnerships and so on.
- Generally, a Form W-8BEN or Form W-8BEN-E is required from individuals and entities (respectively) outside of the US who are the beneficial owner of the income received. It may be used to claim a treaty benefit (in other words, a reduced rate of withholding).
- A Form W-8ECI is used by persons claiming income received and is effectively connected with a US trade or business. A US TIN will be required for all payees that provide a Form W-8ECI.
- A Form W-8IMY is required for certain intermediaries, partnerships and flow-through entities outside of the US. If this form is provided, Google may ask for additional documentation (for example, an allocation statement).
- A Form W-8EXP is used by entities to establish non-US beneficial owner status and eligibility for a reduced rate of tax withholding as a non-US government central bank, international organization, non-US tax-exempt organization, non-US foreign private foundation or government of a US possession.”
If you’re not sure which form you should fill in, contact a local tax advisor for advice.
One last titbit when filling out forms, specifically the W8-BEN. There are three options under the tax treaty section, namely ‘services’, ‘motion picture & TV royalties’ and ‘other copyright royalties’. If your tax treaty applies to all three, make sure you tick all three, even if you currently don’t have income from all three sources.
We’ve also found this useful article that will help you through the prompts on the AdSense forms.
What are the consequences of not supplying information when prompted?
Google may be forced to assume, depending on your circumstances, that you’re a US-resident or US-taxpayer. Chapter 3 withholding, currently 30%, would be applied to all income generated from US viewers and users on business accounts. If Google can’t determine whether you’re a non-US resident, it might be forced to apply the backup withholding rate of 24% across all earnings, not just earnings generated from US viewers.
Can I reduce or stop the tax withholding?
This will depend on whether your territory (or the territory in which you are resident for tax purposes) has a tax treaty with the United States. You can view a list of countries with tax treaties on the IRS website here.
In general, these treaties exist to stop a person being taxed twice on the same income. For example, if you were a publisher from the UK who earned $1000 from YouTube videos shown to US viewers, you could be taxed in the US as this income is related to US viewers, and then declare the remainder to the UK authorities and be taxed again under the UK’s income tax laws. To prevent this, the UK and the US have a mutual agreement to not tax the other’s citizens on earnings generated in their territories.
Not all countries have this agreement in place, and they are not always complete relief. For example, if you submit to Google that you are a UK or Canadian resident, Google can reduce the withholding rate to 0%, while for Mexico and Korea it would reduce to 10%.
Bear in mind that these numbers can change, there can be different rates of withholding for different income streams and new treaties can be signed, so check the latest information for your territory.
Has the process started for AdSense publishers who don’t have YouTube earnings?
According to a post on the AdSense community forum by the community manager, “at the moment, if a valid tax form is provided, only YouTube royalty earnings will be subject to withholding. AdSense services earnings would only be subject to withholding tax if you are performing services in the United States”.
(For this purpose, ‘services in the United States’ would be applicable if some or all of your resources used to create AdSense revenue was within the United States, for example if you had an office there, created content while there, employed staff or writers who lived there, etc. As before, we would recommend you contact a tax advisor if you’re not sure of your exact status.)
However, we’ve started to see circumstances where AdSense publishers with no YouTube revenue are being asked to fill in tax forms. Our advice would be that you should not ignore these prompts; while it might be possible to reclaim withheld US taxation over the next few months, this process will no doubt not be straightforward.
How can I reclaim taxes that have been withheld?
If you do get taxes withheld, act quickly. Google might be able to refund these amounts if the completed forms are received by 31 December 2021. After that date, the US moves into the 2022 tax year and refunds would have to be claimed from the IRS.
You will need to provide an ‘affidavit of unchanged circumstances’, which is a declaration that your circumstances haven’t changed between the date that the tax was withheld and the date you submitted your completed forms. You can do this within AdSense (see here for more information).
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