Amazon KDP 30% Tax Withholding and Double Taxation.

Summary

The video script discusses the 30% tax that Amazon KDP often deducts from authors' earnings, particularly those living outside of the United States. The speaker, who has some accountancy qualifications, advises viewers to consult with an accountant due to the complexity of individual tax situations. They explain the concept of double taxation and how it can affect authors' earnings after Amazon's tax deduction. The video outlines steps to update tax information on Amazon KDP and emphasizes the importance of declaring all earnings, even those that have been taxed. It also touches on the possibility of claiming some taxes back, but highlights the difficulty of dealing with an overseas entity like Amazon. The speaker suggests that authors may be able to claim certain business expenses to offset taxes and recommends against letting Amazon handle tax deductions to avoid complications. The summary underscores the importance of professional accounting advice in navigating the intricacies of taxation for self-published authors.

Takeaways

• 📚 Subscribe to the channel for more informative content.
• 🔔 Hit the notification bell to stay updated with new videos.
• 💰 Amazon KDP takes a 30% tax on earnings, especially for those living outside the United States.
• 🤔 The concept of double taxation can affect how much you owe in taxes, depending on your country's tax laws.
• 🙅‍♂️ It's advised to consult an accountant for personalized tax advice, as individual circumstances vary.
• 📈 You are not selling books, but earning royalties from your creative work, which is a different financial perspective.
• 📝 When speaking to an accountant, clarify that you are living on royalties, not sales.
• 🔄 Amazon KDP's 30% tax can be modified or avoided, but it requires updating your tax information.
• 🇺🇸 If you have a non-US TIN (Taxpayer Identification Number), you may be able to reduce the tax taken by Amazon KDP.
• 💼 Some countries may not provide relief from the 30% tax, but you might only be taxed on a portion of your earnings.
• 🔋 If you've overpaid in taxes, you might be able to claim some or all of it back, but this can be complex and is best handled by an accountant.
• 🚫 Even if you've been taxed on your earnings, you must still declare them to avoid legal issues.
• 🏦 It's important to understand that tax laws and regulations can differ significantly from one country to another.
• 🧮 Deductible expenses related to your work, like a home office or equipment, might reduce your taxable income.
• ✅ It's generally better to handle taxes yourself rather than letting Amazon deal with it, to avoid potential complications.

Q & A

What is the 30% tax that Amazon KDP takes from authors living outside of the United States?

The 30% tax refers to the withholding tax that Amazon KDP (Kindle Direct Publishing) deducts from royalties for authors who are not U.S. citizens or residents. This is a standard tax practice for payments made to foreign entities or individuals.

What is double taxation and how does it affect authors receiving royalties from Amazon KDP?

Double taxation occurs when an individual or entity is taxed on the same income in more than one jurisdiction. For authors, this could mean being taxed by their home country on their worldwide income, including royalties from Amazon KDP, even if those royalties have already been subject to withholding tax in the U.S.

Why is it recommended to consult an accountant when dealing with taxes on Amazon KDP royalties?

An accountant can provide personalized advice based on an individual's specific circumstances, including their tax bracket, business structure, and potential deductions. They can also help navigate the complexities of international tax laws and double taxation agreements.

How does one's status as a seller of goods versus receiving royalties affect their tax situation?

Receiving royalties is different from selling goods because royalties are payments for the use of something one has already created. This distinction can affect how income is taxed and what deductions one might be eligible for.

What is an EIN and when would an author need to provide it to Amazon KDP?

An EIN, or Employer Identification Number, is a tax identification number used in the U.S. Authors who are not U.S. citizens may need to provide a similar identification number from their home country, such as a National Insurance number in the UK, when setting up their tax information with Amazon KDP.

How can authors update their tax information with Amazon KDP?

Authors can update their tax information by going to their account settings on KDP, clicking on 'View Tax Information', and then following the prompts to complete an interview that will guide them through the process of providing or updating their tax details.

What is the impact of double taxation on an author's income after Amazon KDP has withheld the 30% tax?

After the 30% tax withholding, the remaining income may still be taxable in the author's home country, depending on their tax laws and any tax treaties between their country and the U.S. This could result in the same income being taxed twice.

Can authors claim back the 30% tax withheld by Amazon KDP?

It may be possible to claim back some or all of the 30% tax, but this can be a complex process involving international tax laws and often requires the assistance of an accountant. The ability to claim back the tax also depends on the tax laws in the author's country of residence.

What is the advice for authors regarding claiming deductions on business expenses related to their writing?

Authors should consult with an accountant to determine what expenses can be claimed as deductions. This may include costs associated with creating their books, such as equipment and home office expenses, but the specifics will depend on individual circumstances and local tax laws.

Why might an author choose to handle their own taxes rather than allowing Amazon KDP to do so?

Handling taxes independently allows an author to have more control over their financial situation and potentially claim deductions that they might not be able to if taxes were handled by Amazon KDP. It also avoids the complexity of dealing with an overseas entity for tax purposes.

What is the importance of declaring all earnings, even those that have been taxed by Amazon KDP?

All income, including royalties that have been taxed by Amazon KDP, must be declared to the tax authorities in the author's country of residence. This is important for compliance with local tax laws and to ensure that the author is not inadvertently underreporting their income.

Outlines

00:00

📚 Understanding Amazon KDP's 30% Tax and Royalties

The first paragraph discusses the 30% tax that Amazon KDP imposes on authors outside of the United States, and potentially within the U.S. as well. It emphasizes the importance of understanding double taxation and seeking professional accounting advice tailored to the author's specific circumstances. The speaker, despite having some qualifications in accountancy, recommends consulting an accountant to navigate tax brackets, business nature, and the fact that authors receive royalties rather than selling books directly. The paragraph also touches on the print-on-demand model and the distinction between selling and earning royalties, which can impact accounting practices.

05:03

💼 Navigating Tax Implications and Potential Refunds

The second paragraph delves into the complexities of claiming tax refunds on earnings from Amazon KDP, especially for those living outside the U.S. It outlines the process of providing tax information through Amazon's system, including the distinction between individuals and businesses, and the use of tax identification numbers like the EIN or the UK's National Insurance number. The paragraph explains the concept of double taxation, where income may be taxed both in the country of source and residence, leading to a potential tax burden on the same income. It also discusses the challenges of claiming a refund on the 30% tax deducted by Amazon, highlighting the need for accounting assistance in dealing with overseas entities and the possibility of claiming the entire 30% back depending on the individual's earnings and tax situation.

Keywords

💡Amazon KDP

Amazon KDP, or Kindle Direct Publishing, is a platform that allows authors and publishers to publish their books in a digital format and sell them through Amazon's vast network. In the context of the video, it is mentioned in relation to the 30% tax that Amazon KDP takes from authors, particularly those living outside of the United States.

💡Tax

Tax refers to the mandatory financial charge levied by a government on workers' income and businesses. In the video, the discussion revolves around the tax implications for authors who earn royalties from Amazon KDP, emphasizing the importance of understanding tax brackets and the potential for double taxation.

💡Double Taxation

Double taxation is a situation where the same income is taxed more than once. In the video, it is used to describe the potential issue authors face when they earn income from Amazon KDP and then have to pay taxes on that income in their home country, even after Amazon has already deducted a portion as tax.

💡Royalties

Royalties are payments made to the creators of certain types of work, such as authors, for each copy sold. The video emphasizes that authors on Amazon KDP are not selling books but are instead receiving royalties for the works they have created.

💡Accountant

An accountant is a professional who deals with the management of financial records, including taxes. The video script advises authors to seek advice from an accountant to understand their specific tax situation and how to deal with the tax implications of their Amazon KDP royalties.

💡Tax Information

Tax information refers to the details required to file taxes, such as income, deductions, and tax identification numbers. The video provides a step-by-step guide on how to update tax information on an Amazon KDP account, which is crucial for managing tax obligations.

💡Employer Identification Number (EIN)

An EIN is a unique identification number assigned by the U.S. Internal Revenue Service to businesses for tax purposes. In the video, it is mentioned as part of the tax information that authors may need to provide to Amazon KDP, especially if they have a non-U.S. tax identification number.

💡Tax Bracket

A tax bracket is a range of income that is subject to a certain income tax rate. The video discusses the importance of understanding one's tax bracket when dealing with tax obligations from Amazon KDP royalties, as it affects how much tax one may owe.

💡Print on Demand

Print on demand is a publishing technique where books are not printed until an order is received. This is mentioned in the video to highlight that authors using Amazon KDP are not dealing with traditional book sales but are instead earning royalties from works that are printed and sold as needed.

💡Claiming Back Tax

Claiming back tax refers to the process of seeking a refund for taxes that were overpaid or not due. The video discusses the challenges authors may face when trying to claim back the 30% tax deducted by Amazon KDP, especially when dealing with international tax laws and double taxation.

💡Tax Allowance

A tax allowance is the amount of income that is not subject to tax. The video uses the concept of tax allowance to illustrate how additional income, such as royalties from Amazon KDP, may become taxable once an individual's tax-free allowance has been exceeded.

Highlights

Amazon KDP takes a 30% tax on earnings for authors outside the US, and possibly even those within the US.

This tax issue is related to double taxation, where authors may be taxed twice on the same income.

Authors should seek advice from an accountant to understand their specific tax situation and potential deductions.

Authors receive royalties, not income from selling books, which affects how their earnings are taxed.

Amazon KDP allows authors to update their tax information to potentially reduce the 30% tax.

Authors can claim certain business expenses like home office costs to offset their tax liability.

It can be challenging to claim back the 30% tax already deducted by Amazon due to double taxation agreements.

Authors may only have to pay tax on their earnings after a certain threshold, depending on their country's tax laws.

If an author's total earnings are below the tax threshold, they may be able to claim back some or all of the 30% tax paid to Amazon.

Authors need to declare their Amazon KDP earnings to their tax authorities, even if they have been taxed by Amazon.

It is generally recommended to handle tax matters through an accountant rather than letting Amazon deal with it.

Authors should inform their accountant of all their Amazon KDP earnings, even those that have been taxed by Amazon.

Authors may be able to claim deductions for business expenses like office equipment and utilities to reduce their taxable income.

Dealing with tax matters directly with an accountant can be less of a hassle than trying to reclaim the 30% tax from Amazon.

Authors should update their tax information with Amazon KDP if they want to avoid the 30% tax deduction.

It's important for authors to understand the tax implications of their Amazon KDP earnings and seek professional advice.

Transcripts

thank you for subscribing to the channel

it's much appreciated and for those who

haven't subscribed yet it would be much

appreciated thank you let me tell you a

second hit the notification Bell as well

um right what we want to talk to you

about today is that 30 tax that Amazon

KDP likes to take off most people living

outside of the United States

and maybe even those people in the

United States and what we can do about

it do we have to pay it

let's talk about it

[Applause]

well there's a thing called the double

taxation

and it's an unfortunate kind of thing

really now I've got a couple of

qualifications in accountancy but uh my

advice to you is that you seek an

accountant because I don't know your

circumstances I can only give you some

information on how I see it

and the rest is down to you I don't know

what your tax bracket is what uh before

you actually start paying tax

um what your business actually is

and while we're on that subject you

don't sell books

you actually get royalties from things

you've already made

so that's the way to look at it so when

you're talking to an accountant you're

not a box seller you're not a book

publisher you're living on royalties

you've made something you've created

something

but there's been no outlay well unless

you want there to be outlayed unless you

want to say well okay look you know it's

cost me this much I want to claim back

my computer

um or whether you do that or not you've

only got so many things you can actually

um claim for because everything's print

on demand while you're self-publishing

and if you give your book to a a

publisher to publish it for you again

you're living on royalties you've not

actually

you're not actually selling anything

and that makes a difference to your

accounts so bear that in mind when you

speak to your accountant say they're not

sell anything

I live on my royalties and I get

royalties from things I've already done

but again that's the choice is yours

um so all about this 30 tax

well you if you've already agreed to

that and you don't want that anymore so

we go to your account

you go to your tax information click on

that view provide tax information

continue without saving take the

interview now you have to do this again

you see your tax information has been

validated if you need to provide updated

information please click take interview

all right okay we go through here

individual yeah

whether I'm a business or not I'm going

to click individual that's just my

preference

are you a US citizen no are you acting

as an intermediary agent or other person

receiving payment on behalf of another

person or as a flow through entity no I

have non-us10 or I have a us10

well I have a non-us 10. now an e i n is

an employer identification number

and individual tax identification number

is the tin if you're in the UK you can

add or if you have a National Insurance

number or whatever tax code you have

from another country

um it could be your

benefits tax code or whatever it is uh

sorry you might have that in Australia

for instance enter it here so for

National Insurance number put it in

there that's your tin value and then

continue it's time to sign and submit

now a lot of countries don't have that

relief they don't give you the 30 off

they don't make allowances for that but

it could be you may only get taxed 10 or

5 depending on which country you're in

now I've been asked can I claim that 30

back

or do I have to pay tax on what's left

unfortunately

it can be a bit of a job trying to claim

that 30 back and there's a thing called

double taxation

and what that means is let's say for

instance you're in the UK or Australia

whatever country you're in

and you're allowed to learn so much

before tax so that it may be 10 or 12

000 of whatever it is

and anything after that you get taxed on

so let's say for instance you've got a

job or a part-time job and you earn that

10

000 let's keep it at ten thousand you

earn that ten thousand

the tax

and then on top of that

you've now got another five thousand

which you earned through Amazon KDP for

that year let's just say

after they've taken the 30 tax off that

five thousand

now you've already had your 10 000

allowance at 5 000 is now taxable

it's unfortunate being taxed twice

basically and that's what they say at

Double taxation

now on the other side of things

if

um you can claim tax back so let's say

for instance you're not earning

up to the allowance before tax

and you've just paid 3 000 in tax to

Amazon

now you could claim that back your

accountant will have to deal with that

because you're now dealing with an

overseas entity and it's not going to be

easy for you

to try to claim some of that back if not

all of it depending on how much you have

earned besides that if anything if

you've not owned anything you may be

able to claim the Whole 30 back

and but that's down to your accountant

to deal with

so it's not gone completely

but like I say you have to declare it

you can't just say okay I've been taxed

on that let's forget about it to go into

my account doesn't work that out

unfortunately

um if I have a ten thousand pound here

and that's my limit before tax and I

earn another 10 or 20 000 pound on top

of that

that 10 or 20 000 pounds is taxable

even if I've paid

even if it was um thirty thousand on

Earth and they've taken 33 off or 30 off

and I'm now down to twenty thousand

that's still taxable and it's

unfortunate it's um it's just the way it

is but that's business and that's the

way things work so there's not a lot you

can do about that unfortunately

but leave it to your accountant speak to

your accountant about it so whatever

earnings you've had

let him know you do have to declare

these earnings even if they've been

taxed unfortunately and

um yeah I hope that helps

it's not it's not the best sort of

situation is it better to just

um

let your accountant deal with the whole

thing yeah I think so

so if you can do away with that 30 if

you can stop Amazon taking that 30 you

may as well let your account reveal with

all of it maybe let's add a few things

you may be able to say okay I'm putting

this computer down I'm putting this

table down I'm putting these chairs down

I'm putting this whole office down

um my gas and electric at home my uh

Power in an office if I'm renting one

there may be things you can claim and

then you've not got to really mess about

having to try and get that money back

from the US uh before doing all that

uh it can be a bit of a nuisance you

might not get it back

this these things can happen it might be

too much of an argument

so yeah I would recommend dealing with

the tax yourself and not letting Amazon

deal with it so I hope that helps as

well and that's it