UPDATED 3RD JULY 2014
The USA is one of the few countries in the world which taxes its citizens while they are overseas. You could be blissfully working for an employer in Germany and paying income tax in Germany, but still have to file returns and pay income tax to the IRS too. And self-publishing is a jolly fine way to be earning money overseas while not being in the USA.
To prevent US Nationals avoiding this tax whammy, legitimate businesses such as Amazon, Barnes & Noble, Smashwords and all the other wonderful places a self-publisher can turn to are forced by law to withhold 30% of your royalties. The idea is that even a US National would rather be declaring tax correctly than have a whole 30% of their income cut off at the knees.
This leaves you, my fine non-American friends, in a bit of a pickle. To prove that you are not an American National (and thereby get your Royalties), you need a Tax ID, but you don’t have a Tax ID, because you aren’t American.
What is a Tax ID?
The IRS (Internal Revenue Service) have a variety of numbers on offer. Would you like a number? Yes, you would! The numbers of particular interest to you are:
ITIN: This is the Individual Taxpayer Identification Number. Many websites will tell you that this is the one you need. Those websites are not necessarily correct.
The trouble with an ITIN is that it is basically a replacement for a Social Security Number, and therefore is only available to individuals who meet particular criteria; a subset of resident or non-resident Aliens, spouses and dependants who are ineligible for an SSN. Most likely, this isn’t you.
EIN: The Employer Identification Number. This is used to identify business entities. That’s you. Self-publishing is a business, even if you are the owner and sole employee of said business.
I am therefore going to walk you through obtaining an EIN.
Yes please! Give me the EIN!
Calm yourself, John Spartan. Here’s what you’re going to do: you are going to pick up the phone and call the IRS. You will speak to a very nice, helpful person, and they’re going to ask you some questions. What they are actually doing is filling out Form SS-4 on your behalf, so prepare yourself by downloading Form SS-4 yourself before you call. Got it? Good.
Look this form over and familiarise yourself with the sort of questions you are going to be answering. I say this because when I did it I had to ask for the lovely, patient lady to explain things to me like I was five and go through all available options.
Step One: Call the IRS.
Dial +1 267 941 1099 to get through to a dedicated team whose whole job is to help you with this exact requirement. You will reach an automated menu. Listen to it, and select the option which puts you through to an operator.
Tell the nice person that you would like to apply for an EIN, and that you are a foreign entity.
Step Two: Answer all the questions.
Fortunately you already downloaded Form SS-4, didn’t you? Hurrah! So, let’s look at the questions you are most likely to stumble over:
1. Legal Name. This is you. Your real, legal name.
2. Trade Name. This is your pen-name, if you are using one. Or you can create a publishing house if you prefer. Check the laws in your own country about self-employment, registering businesses, and so on before you make this stuff up though.
9a. Type of Entity. If you are working alone and have no employees, you are a Sole Proprietor.
10. Reason for Applying. You are starting a new business.
16. Principal Activity. You are publishing eBooks. The lovely person on the phone will find the right category for you.
The rest just takes some common sense.
The nice IRS person will give you your EIN, and you are free to go. The IRS will also post you a letter containing your EIN, and it’ll only take a week or two to arrive. They don’t mess about!
Rejoice, you now have your Tax ID!
What do I do with my wonderful EIN?
Every self-publishing channel whose business address is within the United States needs your EIN, and they will withhold 30% of your Royalties until they get it from you. That’s not 30% of the list price of your book, it’s a full 30% of your payments after they’ve had their cut out of it, which could leave you with peanuts if you’re selling on Amazon for anything below $2.99.
It’s not so simple as dropping them an email and saying “Here’s my EIN” though. You will, one way or another, need to become intimately familiar with Form W-8BEN.
Some channels need you to print out W-8BEN and complete it by hand, then post it to them. Some allow you to email it. And some let you fill out a virtual W-8BEN on their site without any trauma at all. Download the W-8BEN and we’ll go over it now. You can also download the Instructions for Form W-8BEN if you like, but be warned that it’s full of jargon.
Filling out Form W-8BEN
W-8BEN is still the form that you require as a foreign individual, not W-8BEN-E.
If you are completing the form by hand, you must do so in blue ink. If you edit the PDF and fill in the fields, it’s automatically done in blue for you. Mark checkboxes with a tick/check, not a cross. Amazon let you do this entire process through KDP, but will ask you the same questions as are on the form. The trickier points are:
1. Name. This is your real name, not your pen name.
2. Country of Incorporation. The country where you are resident. You cannot use abbreviations here. If you write “UK” instead of “United Kingdom”, your form will be rejected.
3. Type of Beneficial Owner. As per your EIN request, you are an Individual.
4. Permanent residence address. This must match the address on your EIN application precisely.
6. U.S. taxpayer identification number. Enter your EIN, and tick the EIN box.
7. Foreign tax identifying number. This is your unique taxpayer reference number in your home country. For UK citizens this is your National Insurance Number, in France it is your INSEE number, for Canadians it is your SIN, and so on. For a full list of what this means in your country, see the Wikipedia article.
9a. Tick this box, and enter your country of residence in the space provided. Again, no abbreviations are allowed. Do not tick b through e.
10. Special rates and conditions. If you are from a country who has a tax treaty with the United States, you must complete this section. Find your country on the list of United States Income Tax Treaties and open your country’s treaty. Skim through it and find the Article which covers Royalties. For the United Kingdom, this is Article 12. Canada, XII. France, 12.
Enter the relevant Article number in the space provided. Specify the percentage withholding rate that your treaty entitles you to. For the UK, this is 0% – check the Royalties Article of your country’s treaty document for your withholding rate. If your country’s treaty says “exempt”, then your rate is 0%.
Specify type of income: enter Royalties in this space.
Explain the reasons the beneficial owner meets the terms of the treaty article: State “Beneficial owner is a resident of” and add your country. Again, no abbreviations.
You do not need to complete Part III.
Sign and date the form. For “capacity”, write Individual.
Bingo! Your form is done! You’ll be a dab hand at it by the fifth one you fill out, believe me.
Oh my god! Is it over?
Almost! I’m just going to run through a quick note on your publishing options now.
Amazon got with the program! You can fill out the W-8BEN online and it’s done and dusted in ten minutes. If you hit any snags you can ask Amazon to withhold your entire Royalties payment until the W-8BEN is fixed to avoid them having to withhold 30%.
D2D allow you to email them an electronic copy of your W-8BEN. Either complete it digitally (if you have a scanned copy of your signature you can pop in the field), or print it out and sign it then scan it in. Email it to:
JPG is acceptable, and D2D will add the form to your account within 24 hours.
You need to print it off and post it to Smashwords. Send it to:
Attn: Tax Compliance Dept.
PO Box 11817
Bainbridge Island, WA USA 98110
Include your Smashwords screen name or the email address that your Smashwords account is registered to on the W-8BEN.
Google Play allow you to fill out the W-8BEN online. To do so, go into your Payment Center and create a Payment Profile. Once you enter your country of residence it leads you through the W-8BEN process automatically.
All Romance eBooks
ARe also allow you to complete this form online. Visit your Publisher Info page and complete the form, et voilà!
Barnes & Noble, Kobo, and iTunes
B&N only allow you to use Nook Press if you have a US-based Credit Card. Kobo doesn’t need a W-8BEN, as it’s a Canadian company. And iTunes will only let you in if you’re using a Mac. This is where a distribution channel like D2D or Smashwords can help you out.
That’s all there is to it! You can sit back and have a cup of tea now. Frankly you’ve deserved it.