This article is written for authors outside the US who currently have taxes withheld from your royalties from the sale of your eBooks. The aim is to reduce this with as little paper being pushed as possible.
When you first created your KDP Account on Amazon, as part of the online account setup, you were given a “short” tax interview.The purpose the interview was to find out what, if any, taxes should be deducted or withheld from your royalties before these were paid to you. Authors within the US for example would have an easier job completing this. Authors from the more remote areas around the world after answering the questions and submitting the interview online would be informed that up to 30% of the amount due to paid to them would be withheld for tax reasons.
Why, 30%? This figure is a safe amount for Amazon to withhold to keep the IRS happy, a kind of worst-case scenario amount. This amount being withheld could be released at any point if the author was to apply for and receive an ITIN. An ITIN stands for an International Tax Identification Number. I have heard through numerous author-friends that applying for the ITIN is a very painful and long process, which can often take months.
Up until recently many international authors selling their eBooks through Amazon (either through ignorance or fear of the paperwork involved) were having up to 30% of their royalties withheld.
The great news is that Amazon have made reducing the taxes withheld on royalties easier through an update in the tax interview.
In the latter half of 2014 Amazon updated the tax interview process allowing authors from outside the US to enter their personal income tax number during the tax interview. This is the tax number that would have been assigned to you by your local tax authority.
Once Amazon sees that you are from a country outside the US as well as a unique tax ID number, the amount of your royalty withheld is adjusted accordingly. Amazon will adjust the amount it withholds based on the agreements in place between your country of residence and the US.
As an example, as a South African, up until recently I had 30% of my local author-client’s royalties being withheld. After a 2-minute update to the tax interview in my author profile, adding in the income tax number the amount of my eBook royalties is reduced from 30% to 0%
Your Amazon KDP profile might look like this currently:
After the update, will hopefully look like this:
The only catch here would be now that Amazon knows your country of origin as well as your income tax number there is a good chance that your local tax authority will become aware of your income from the sale of your eBooks, be aware of the tax implications this might introduce.
I hope this very short and easy update will help many authors “increase” their income derived from Amazon eBook sales.
Let me know if you know any other tips that might help authors online via our comments section below.