Article Updated: 23 Aug 2021
Update: And it’s official. Today’s email from YouTube about new Terms of Service update confirms global changes coming into effect on June 1, 2021:
YouTube To Introduce Tax For Creators Outside United States
YouTube Creators / Google AdSense account owners are given a deadline:
- by May 31, 2021 YouTube creators / Google AdSense account owners should provide a valid tax information (tax forms will be renewed each year afterwards)
- from June 01, 2021 Google / YouTube will start collecting U.S. withholding tax* from all accounts if applicable
Here’s the original YouTube announcement from March 9, 2021:
We’re reaching out because Google will be required to deduct U.S. taxes from payments to creators outside of the U.S. later this year (as early as June 2021). Over the next few weeks, we’ll be asking you to submit your tax info in AdSense to determine the correct amount of taxes to deduct, if any apply. If your tax info isn’t provided by May 31, 2021, Google may be required to deduct up to 24% of your total earnings worldwide.
What do I need to do?
In the next few weeks you will receive an email to submit your tax information in AdSense. The online tax tool in AdSense is six steps and will ask you a series of questions to guide you through the process to determine if any U.S. taxes apply. For more information on these changes and a list of tax info to prepare, visit our Help Center.
Why is this happening?
Google has a responsibility under Chapter 3 of the U.S. Internal Revenue Code to collect tax info from all monetizing creators outside of the U.S. and deduct taxes in certain instances when they earn income from viewers in the U.S.
For creators outside of the U.S., we will soon be updating our Terms of Service where your earnings from YouTube will be considered royalties from a U.S. tax perspective. This may impact the way your earnings are taxed, and as required by U.S. law, Google will deduct taxes.
How will my earnings be impacted?
If you provide your tax info, U.S. taxes may only be applied to your monthly U.S. earnings from AdSense (revenue earned from viewers in the U.S. through ad views, YouTube Premium, Super Chat, Super Stickers, and Channel Memberships). If no tax info is provided, your tax rate will default to the higher individual backup withholding rate (24% of total earnings worldwide). To estimate the potential impact on your earnings follow these instructions.
The YouTube Team
In addition, TeamYouTube tweeted further explanation about what is going on:
@TeamYouTube via Twitter
“For creators outside of the U.S., we’ll be updating our TOS, where earning from YouTube will be considered royalties from a US tax perspective. This may impact the way earnings are taxed and as required by US law, Google will need to withhold taxes”
Three years ago YouTube shocked creators with stricter rules regarding eligibility for channel / content monetization. Fast forward to 2021 and things do not appear to be settling down at all.
Despite the fact that we live in a highly technological society and that vaccines were developed in record time by several countries independently, the cost is taking its tall wherever we look. In short, each country is requesting a piece of (your) cake, dear creator!
At this moment, it is not clear if this affair is Google’s or IRS’s (Internal Revenue Service) doing, which is controlled by Department of the Treasury and U.S. government / administration (in another words), shifting responsibility to collect taxes of any business activity on its own territory to companies themselves.
Before, your earnings from YouTube were classified as services, but from now on they will be treated as royalties (for example, like a music video or movie screening). Google is simply submitting to the laws in this case, but who initiated and provoked this change and why remains to be revealed. While we still have no definitive answer, it is most likely initiated by Google / YouTube itself.
Progressive tax rates are more advanced, and in many ways, offer larger degree of social justice. The more you earn – the more taxes you pay, to put it simply. But, in the eyes of the other (richer) side, that will always be unfair, because it is “not their fault” that you cannot earn more.
Some countries deploy fixed tax rates, and others (usually more developed ones) use progressive tax rates and more advanced financial systems. On the other end, there are countries which do not have any tax system established at all, because, like everything else, tax collection and enforcement requires huge financing as well, which is simply too expensive for them to manage.
YouTubers, vloggers, bloggers, website or app owners who run YouTube channel(s) earning majority of their income from an audience located in the United States (U.S.) will probably* experience a reduction in their revenue later this year. According to Chapter 3 of the U.S. Internal Revenue Code Google is required to collect tax info from all monetizing YouTube creators living outside United States and deduct taxes. This tax will be as high as 30% deducted from your total YouTube revenue.
* not true for some countries: UK, Canada, Ireland, Iceland, Denmark, Finland, France, Germany, Greece, Hungary, Japan, Norway, Slovenia, Switzerland and several other countries should not experience any change at all because of existing 0% U.S. Income Tax Treaties (avoiding double taxation). Many other countries have 5%-10%-15% tax relief rates, which will considerably reduce effective tax to manageable levels. Other countries which do not have tax treaty in effect with U.S. government will be impacted by the maximum amount of 30%.
information is provided as-is and we do not claim it to be 100% accurate. Please consult IRS Treaty Table (links provided below) and your local tax administration representative for clarification and actual values.
The upcoming change by Google is just a beginning of the end of low prices for goods and services on the mighty Internet. In
decades years to come every country will likely introduce “internet” tax rates in one way or another, and many countries already do, as we can witness first hand.
For example, eBay services are already taxed in many countries, so whenever you sell something on the oldest trading internet platform, fees are increased automatically by the tax amount for specific country.
Popular stock photography sites have this practice implemented for years (royalties, remember?). In addition, many online earning platforms used by freelancers have automatic tax withholding practice, as well.
Amazon did something similar in the past few years, shifting its business operations for customers residing in Europe and updating its tax policy.
This change will effectively impact all english-based* YouTube channels, blogs and websites from individuals and companies, residing outside U.S. territory. Even if you’re part of MCN (Multi-Channel Network), you’ll be required to submit correct tax information. Of course, you can always opt-out and choose to ignore, but in that case you will be treated in less favorable way.
Needless to say, this affects AdSense users on a global scale, including blogs and websites earning revenue from U.S. based audience, further complicating their local tax submissions, forms and regulations.
Legal document this tax is based on is called Internal Revenue Code and it seems to be old almost a decade (last update was in 2014). However, it seems little contradictory to tax earnings by organizations and individuals who reside outside U.S. regardless from where their customers come from.
What if every country in the world makes a decision to take same actions? Imagine if you had to pay taxes for each country individually – your earnings would quickly evaporate, but more importantly, your tax management affairs will become a nightmare! These measures are effectively designed to limit money flow from one country to another via imposed taxes. Strange and interesting times are ahead, that’s for sure.
Is this fair? We can certainly argue about that. The issue is not in the tax itself, but the fact that this measure puts certain countries, and ultimately their users, in clear advantage over the others. But, such is the state of affairs in this world, there’s a lot of injustice and inequalities wherever you go, and this is not an exception. In the future, a global treaty between nations might fix this problem for good. Until then…
Google AdSense Tax Form: How much YouTube tax will I have to pay?
Once you sign-in and head over to your Google AdSense account, you will notice required tax info message both in an outlined rectangle box and under your notification bell icon. Once you click to fill-in required information, you will be presented with a complex W-8BEN (for individuals) or W-8ECI / W-8BEN-E (for legal entities / Businesses / Companies) forms that require some important personal or business information. In case of individuals, this is a lot of personal and legal information to submit. You will most likely require a lawyer, tax advisor or help from your respective government department to properly fill out all the data required.
In the 3rd step of U.S. Tax Info form you will be presented with an option about existing tax treaty (see provided IRS link PDF document in last section below) between your country of residence and U.S. How much tax deduction will that provide depends on individual countries and regulations. If your country has a treaty, you must provide TIN number, which in case of individuals may simply be a unique social security number or alike (every country is different and you should consult your tax advisor with international experience).
What is my TIN number?
TIN = Taxpayer Information Number
TIN in UK = Unique Taxpayer Reference (UTR), National Insurance Number (NINO)
TIN in Canada = Social Insurance Number (SIN)
TIN in India = Permanent Account Number (PAN)
TIN in Indonesia = Nomor Pokok Wajib Pajak (NPWP)
TIN in Japan = Individual Number (“My Number”)
TIN in Korea = Business Registration Number (Google does not accept any other identification)
TIN in Russia = Taxpayer Personal Identification Number (INN)
TIN in Australia = Tax File Number (TFN)
Failure to provide proper information will default your account to generic 24% or 30% worldwide tax deduction rate!
However, even when you submit the tax information form, if your country does not have any special tax treaty with U.S., tax will remain at 30% rate for U.S. viewers. In the future, failure to submit U.S. Tax info form might even disable your AdSense account, although this remains yet to be seen.
Default U.S. tax form withholding (WHT) rates:
Motion picture and TV default WHT rate: 30%
Other copyright default WHT rate: 30%
Services default WHT rate: 30%
Tax Form Information Collection: Privacy Implications
One thing is certain: the world we are living in is rapidly changing — for better or for worse.
YouTube Tax: What should I do?
You have 2 choices (options) at the moment — decision is entirely up to you.
YouTube U.S. WHT Tax: Choice #1
You decide to submit a proper tax form and pay up to 30% tax on your earnings from U.S. based viewers alone (this 30% value may go down to 0% for specific countries and tax-exempt entities). Earnings from other countries / regions will remain at the same level as before the change (excluding other factors like views change etc.).
Earnings / Revenue Example: Let’s suppose your country does not have any preferential tax treaties with U.S., which means you’ll be taxed by a considerable 30% rate. You earn $1000 each month total, out of which $500 comes from U.S. based viewers or visitors. This means that 0.30 x $500 = $150 will be deducted from your regular monthly income, and instead of $1000 you will receive only $850 as your finalized monthly earnings (effective reduction changes with U.S. viewership percentage).
YouTube U.S. WHT Tax: Choice #2
You decide to ignore this and do not submit any tax information. In this case, Google / YouTube will assume that you are a legal U.S. resident and your YouTube channel / AdSense account will be subjected to a 24% global (worldwide) tax if you are an individual (regardless of your country of residence) or 30% global (worldwide) tax in case of a business / legal entity registered / located outside U.S. or 24% global (worldwide) tax in case of a business / legal entity registered / located within U.S.
This is why it is important to submit your tax info form as soon as possible, to avoid extra tax deduction from your revenue when this law comes into force.
Earnings / Revenue Example: As in our previous example, you still earn $1000 monthly, but this time you did not submit any tax information form. Google will assume that you are a U.S. resident (from a legal perspective) and automatically tax all your YouTube earnings with a global / worldwide rate of 24% (assuming individual account). Instead of $1000 you will receive ($1000 – 0.24 x $1000) = $760 finalized monthly earnings.
If you are a U.S. resident living outside U.S. territory, your tax obligations might still be in effect. Call your tax advisor to clear any confusion regarding this matter and be sure you make the right choices while filling the Google YouTube AdSense tax form!
Does YouTube Tax apply to AdSense earnings outside YouTube?
AdSense earnings from Blogs / Websites / Android / iOS Apps and other non-YouTube products and services are not affected by this change (for the time being). In another words, you will continue to receive full amounts, as you did before.
According to Google answers source:
Question: Does this apply to my other AdSense earnings aside from YouTube?
Answer: No, under the condition that you provide valid tax info in your Google AdSense account, the U.S. withholding taxes under Chapter 3 should only apply to your YouTube earnings.
This is another valid reason to submit tax form and avoid extra expenses when this change comes into effect.
Does YouTube estimated revenue report include U.S. tax deduction?
Question: Are U.S. taxes already subtracted from “estimated revenue” reports in YouTube Studio?
Answer: No, according to our knowledge, they are not included in estimated revenue reports. Tax deductions under ch.3 are applied later, which you can check on your AdSense transactions page every month.
This means that whatever number you see in your estimated revenue is the amount you will receive after subtracting YouTube’s revenue share in case that your country of residence has preferential tax treaty with U.S. and tax amount is 0%. In all other cases that estimated sum will be subjected to taxation, according to the new terms.
Help Center / Resources / Links
- U.S. tax requirements for YouTube earnings
- Tax requirements for MCNs and affiliate channels
- Submitting your U.S. tax info to Google
- Check your AdSense account type
- U.S. IRS Income Tax Treaties A-Z
- U.S. IRS Income Tax Treaties Table (simplified table, not 100% complete according to IRS’s own words — read introduction, footnotes, and Royalties / Film & TV / Copyrights columns)
Watch YouTube Creators U.S. withholding tax introductory video: