YouTube creators outside of the US under the YouTube Partner Programme will have taxes deducted from their US earnings as early as June 2021. According to YouTube, these are earnings from viewers in the US through ad views, YouTube Premium, Super Chat, Super Stickers and Channel Memberships. The tech giant explained that it has a responsibility under Chapter 3 of the US Internal Revenue Code to collect tax info from all monetising creators outside of the country and withhold taxes in certain instances when they earn income from viewers in the US.
In a support page, YouTube said creators will need to submit relevant tax info in AdSense by 31 May this year so Google is able to determine the correct amount of taxes to deduct, if any apply. Failure to do so will result in Google having to deduct up to 24% of the creator's total worldwide YouTube earnings.
On the other hand, if the tax information is provided, the withholding rate for creators will be between 0% to 30% of monthly US earnings. The tax holding rate will be made available to creators via their AdSense account once their tax information has been submitted. According to the tech giant, the withholding rate depends on whether the creator's country has a tax treaty with the US. Treaty benefits can be claimed as long as the creator provides a taxpayer identification number.
A check by MARKETING-INTERACTIVE on the US Inland Revenue Service website showed that US does not have tax treaties with Singapore and Malaysia but does with countries including Indonesia, China and Australia. Under the tax treaties, the IRS said residents (not necessarily citizens) of foreign countries are taxed at a reduced rate, or are exempt from US taxes on certain items of income they receive from sources within the US.
For example, if a creator in India earns US$1,000 in revenue from YouTube in the last month and US$100 was generated from US viewers, a final deduction of US$240 will be made if the creator does not submit tax info. If the creator submits tax info and claims a treaty benefit, the final tax deduction will be US$15, since India and the US have a tax treaty relationship.
Meanwhile, if the creator submits the tax info but is not eligible for a tax treaty, the final tax deduction will be US$30 because the tax rate without a tax treaty is 30% of earnings from viewers in the US.
The company will soon be updating its Terms of Service where its earnings from YouTube will be considered royalties from a US tax perspective. The change was already made for US creators since 18 November 2020. According to the updated Terms of Services for US creators, any payments they may be entitled to receive from YouTube under any other agreement between the creator and YouTube will be treated as royalties. If required by law, Google will withhold taxes from such payments, the update said.
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