Tax matters with Kindle Direct Publishing

Setting up an account on Amazon’s Kindle Direct Publishing service (KDP) now requires you to submit the information they need to deduct the correct amount of tax from your royalty payments. The process is not very intuitive and the documentation difficult to understand as it is intended to cater for a wide range of eventualities. What follows is a description of what you have to do if you are not a US citizen, do not have any other operations in the US, and are not operating as a limited company. These details are specific to a British publisher, but are probably valid for many other nationalities.

What Amazon requires from you is a Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, otherwise known as a W-8BEN. This is a four-part form that enables you to take advantage of a tax treaty that exists between the UK and the US which allows Amazon to release the full value of your royalties, with nothing withheld for tax purposes, on the basis that you will be declaring it to the UK authorities. Note that this applies to all royalties, regardless of the country in which the sale occurred.

In order to benefit from the treaty you need to be assigned a Tax Identification Number (TIN) by the US Internal Revenue Service (IRS). There are two types of TIN, however the most straightforward is the Employer Identification Number (EIN). This is the case even for a self-employed citizen of the UK.

You apply for an EIN using a form entitled Application for Employer Identification Number, also know as an SS-4, which has to be submitted to the IRS in the US. It takes some time for you to receive notification of your EIN, so we will return to the details later. In the meantime you should get on with submitting your W-8BEN to Amazon as you can always go back and enter your EIN at a later date.

Amazon has streamlined the process by providing an online questionnaire that extracts the information needed for your W-8BEN. You access this through your account page on the KDP site, and should go through it step by step:

1. Obviously you can’t physically sign an electronic form, so you start by consenting to the use of an electronic signature, and accepting an electronic receipt.
2. Confirm that you are not a US citizen, and then enter your name and address. Make sure you enter your own personal name and address, which should be those you would use when submitting your income tax details. For reasons that will come apparent later, you should include any middle names as initials, as in ‘Joanna M Bloggs’.
3. If you do have a TIN (in other words an EIN), then enter it here. If you have yet to receive one, leave the entry blank.
4. You are now asked a number of questions concerning any links you have to the US, such as holding a Green Card or a student visa. We are assuming that none of these apply, so you should leave them blank.
5. Make sure the next screen, concerning Treaty Benefits, indicates ‘United Kingdom’.
6. You are again asked if you have a TIN. Click yes if you entered one earlier.
7. The final step displays the W-8BEN form itself, filled out with the details you have entered. Make sure that Part 1 identifies you personally as an Individual, and that line 9a of Part 2 confirms that you are a resident of the United Kingdom. If you have submitted a TIN then 9b should be ticked. Once you are satisfied, click to Complete.

Amazon has arranged to have your details automatically checked against IRS data, which can take a little time. However if all goes well you should be presented with a green ‘Complete’ status, and an Applicable Withholding Rate of 0% if you submitted a TIN, or 30% if you didn’t. The most likely reason for not achieving a ‘Complete’ status is a mismatch between the name you entered at stage (2) and the name you submitted when applying for your TIN. Make sure the two match before you resubmit.

If you have yet to apply for an EIN, now is time to do so. US citizens can do this online but as a non-US citizen you can either download an SS-4 form and fill it in by hand, or you can apply by phoning the IRS on +1 (267) 941-1099. This is of course an international call and is best left to after midday in the UK. It’s also worth downloading the form anyway so you are familiar with the information they require:

1. Enter your ‘legal name’, spelling out your first name and surname in full and any middle names as initials, as in ‘Joanna M Bloggs’.
2. If you trade under a different name, such as ‘Bloggs Publishing’, put that next.
3. Enter your mailing address without your UK postcode in sections 4a and 4b, as in ‘5 High Street, Bristol, United Kingdom’.
4. Repeat your county and country in section 6.
5. Repeat your ‘legal name’ as the ‘Name of responsible party’ in section 7a.
6. Tick ‘No’ in section 8a to indicate your are not a limited company.
7. Tick ‘Sole proprietor’ in section 9a, leaving the SSN entry and the other tick boxes blank.
8. In section 10, click the box marked ‘Compliance with IRS withholding regulations’. Then click the box marked ‘Other’ and write ‘To obtain a reduced rate of withholding imposed by section 1441 pursuant to an income tax treaty’ in the adjacent space.
9. In section 16, tick ‘Other’ and specify ‘Publishing’ as your principle activity.
10. Write ‘Books’ or ‘Electronic books’ in section 17 as the merchandise or service you provide.
11. Tick ‘No’ in section 18 to indicate that you have not applied for an EIN before.

The address to which you should post the completed SS-4 form is shown in its accompanying documentation. If you have applied by phone you may be given your EIN on the spot. Either way, you should receive confirmation by post from the IRS within a few weeks.