YouTube will soon withhold up to 30% of income from non-US creators as tax for the United States!
Find out whether you will be double-taxed, and how much income non-US YouTube creators will lose!
YouTube To Tax Non-US Creator Income By Up To 30%!
On 10 March 2021, YouTube creators started getting this email :
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.
Yes, the alert says that up to 24% of your total worldwide earnings may be deducted, but the actual deduction could be as high as 30%.
It all depends on which bracket you fall into :
Those Who Submit US Tax Info
- Foreign creators : 24% to 30% withholding tax, unless your country has a tax treaty with the US.
- US creators : 0% withholding tax, because they have to pay taxes on their total income
Those Who Do NOT Submit US Tax Info
- Business account (Foreign) : 30% withholding tax of US earnings
- Business account (US Resident) : 24% of total worldwide earnings
- Individual account (Foreign + US) : 24% of total worldwide earnings
This change only impacts the earnings of non-US YouTube creators, since US creators are already paying taxes on their income.
Why Are Non-US Residents Getting Taxed On US Income?
You may not be a US citizen or resident, but the US government requires income generated in the US to be taxed.
Since they cannot tax your income like they would an actual US resident, they require companies to withhold a portion of your US income as tax.
The general idea is that as long as you make money in the US, or from US residents, you must pay tax on that income.
Does This Mean Non-US Residents Will Be Double-Taxed?
Check the latest IRS list of countries with income tax treaties with the United States.
Unless your country has a Double Taxation Agreement (DTA) with the United States, yes, you will end up getting double taxed – by the US government and your own government.
Since YouTube will withhold part of your income, the double taxation impact is somewhat lessened because you will only pay your country’s income tax on what’s left over.
That is scant consolation because you are still getting double-taxed, and will end up with considerably less income.
How Much Tax Will Non-US YouTube Creators Have To Pay?
How much income non-US YouTube creators will lose depend on four factors :
- whether they file their US tax info,
- whether their country has a double tax treaty with the US,
- whether they are an individual or a company, and
- how much income they get from US viewers
YouTube shared a hypothetical example, but it is overly optimistic – assuming only 10% US traffic.
So we came up with our own scenarios of 25%, 50%, 75% and 100% US traffic. For simplicity, we eliminated ”discounts” eligible to countries with US tax treaties.
This table we created shows the maximum US withholding tax you have to pay, with a monthly YouTube income of US$1,000.
| Tax Deducted From $1000 Income |
% of US Traffic | |||
| 25% | 50% | 75% | 100% | |
| Did not submit tax info (24% worldwide) |
$240 | $240 | $240 | $240 |
| Individual with Tax Info (24% US income) |
$60 | $120 | $180 | $240 |
| Business with Tax Info (30% US income) |
$75 | $150 | $225 | $300 |
And this table shows how much income you will receive, after deducting the US tax, from a YouTube income of US$1,000.
| Income Per $1,000 After Tax Deduction |
% of US Traffic | |||
| 25% | 50% | 75% | 100% | |
| Did not submit tax info (24% worldwide) |
$760 | $760 | $760 | $760 |
| Individual with Tax Info (24% US income) |
$940 | $880 | $820 | $760 |
| Business with Tax Info (30% US income) |
$925 | $850 | $775 | $700 |
There is no doubt that this is a massive tax that is going to cut deeply into the income of every non-US YouTube channel, because it is a non-progressive flat tax, with no deductions.
What Can You Do About This US Tax By YouTube?
This withholding tax is going to irk a lot of YouTubers who have never stepped foot in the US, or received any benefit from the US government.
More so for non-US creators in countries without a double tax treaty with the US, because they would get double-taxed.
YouTube creators may be incentivised to target non-US viewers by producing more localised content, but ultimately, US traffic still pays the best. So we don’t see shifting focus away from US viewers as a good strategy.
Unfortunately, there is nothing anyone can do but bite down and bear the pain, on top of what has already been a terrible 2020 and 2021.
But if you are ever in the US and get some shit about being a foreigner, I suppose you can send them this smackdown, “I have every right to be here! I pay taxes too!“.
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