YouTube announces today through email that they are starting to deduct U.S. taxes on all content creators outside of the United States (U.S.) for all income generated in the United States of America (USA). Content creators are also asked to fill-up the form before May 31, 2021, or else YouTube will deduct up to 24% in all earnings, not just in the U.S. but worldwide.
Table of Contents
- Tax Treaty (US and Philippines)
- How to fill up Adsense tax info
- Tax info Calculation
The content of the email states the following:
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.
The changes affect all content creators who have viewers from the United States in which their earnings from this country will be reduced by up to 30% depending on the countries’ tax treaty. In the Philippines, you can reduce the tax from 0% up to 15%.
Tax Treaty (US and Philippines)
There are some misinformation circulating on YouTube from other content creators that we don’t have tax treaty with the US, but we have since 1976 – such treaty will prevent “double taxation”, the best example is from the case of Manny Pacquiao in 2003.
If you are a content creators in the Philippines, you can avail of the tax treaty discount by having a BIR (TIN ID) and filling up the W-8ben form. If you’re already paying taxes in the Philippines, this is very helpful to avoid double taxation. Take note that when you avail tax treaty, you are encourage to report your earning to the BIR.
For those who does not have TIN yet and wish not to avail the reduced tax using Tax treaty. You can do so, but it will automatically set the taxes to 30% for all earning generated in the United States. This is very bad if most of your viewers are from US. You can get your TIN by signing up on the BIR website or from the nearest BIR branch in your area.
Using the tax treaty between the U.S. and the Philippines, the taxes will be reduced to 0% for Adsense. Other services like Google Play Apps and Movies are down to 15%.
You can check the Tax treaty between US and Philippines here. The mentioned Article on the tax treaty that is applicable for YouTube channels and ads are in Article 8 which is the Business Profits.
“Business profits of a resident of one of the Contracting States shall be taxable only in that State unless the resident has a permanent establishment in the other Contracting State. If the resident has a permanent establishment in that other Contracting State, tax may be imposed by that other Contracting State on the business profits of the resident but only on so much of them as are attributable to the permanent establishment.”
“Where a resident of one of the Contracting States has a permanent establishment in the other Contracting State, there shall in each Contracting State be attributed to the permanent establishment the business profits which would reasonably be expected to have been derived by it if it were an independent entity engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the resident of which it is a permanent establishment.”
While for other services like Movies, rent TVs and apps are in Article 13 which is the Royalties.
How to fill up Adsense Tax info
To provide your tax information, you need to go to Payments > Settings > Manage tax info. From here, click the Add Tax Info (A window will pop-up, and you need to sign-in to your Google account again).
The first question will be What type of account are you using. If you are a content creator without a business name, you may use Individual (This is ideal for personal YouTube channels like vlogs, etc.). But if you already have a business registered in the country, you can use a Non-individual / entity.
Next is, you will be asked if you are a citizen or a United States resident. Since this guide is for Filipino content creators, pick No.
You will then be asked to fill up the W-8 tax form. For an individual, you need to pick W-8Ben, and for business, you need to pick W-8ECI.
Here, fill it up with your name (FIRST_NAME LAST_NAME). For business, you need to fill up the DBA. Then you have to select the country of citizenship, which in our case, its the Philippines.
To avail of the tax treaty discount, you need to fill up the Foreign TIN, which is your 9-digit BIR TIN. If you don’t have TIN and don’t want to avail the tax treaty, you can leave this blank.
In the Address form, you have to fill in your permanent residence address. Basically address shown on your I.D.s, electric billing, etc. If your address is the same as the mailing address, check the checkbox in the middle.
To claim a reduced rate for Philippine and U.S. tax treaty, you need to pick Yes here. Then check the “Resident of country claiming treaty with the U.S.” then select the Philippines as a country. If you wish not to avail the Tax treaty, just select No.
There will be special rates and conditions populated once you have selected Yes. You have to pick the Article paragraph and the withholding rate you want to apply to your account. The following are the explanations:
- Service (Adsense) – This checkbox is for YouTube ads and other ad services of Adsense. The maximum reduced rate you can get here if you’re in the Philippines is up to 0%.
- Motion Picture and T.V. (YouTube, Google Play) – This is for YouTube movies and Google App. The maximum reduced rate you can get in the Philippines is up to 15%.
- Other copyright (YouTube, Google Play) – This is for other YouTube content and Google App as well, the maximum reduced rate is up to 15%.
It is important that you need to download the documents’ preview for your references and make sure to review the document before proceeding on the next page. This is in PDF format for Form W-8Ben: (Motion picture and T.V., Other copyright, services, and default).
Once you have reviewed all of the documents, you can proceed to the next section.
In this part, you need to sign the form by filling up with your full name, which includes your middle name (e.g. FIRST_NAME MIDDLE_NAME LAST_NAME). (If you have an legal attorney, guardian, etc. You can use their name as the beneficial owner). Then select preferences of your signature.
Activities and Services performed in US and Affidavit
Then lastly, since we are in the Philippines and we have no actual establishment in the U.S., You can pick No.
For the Status change affidavit, since this is your first time filling up the form, you need to pick “I am providing tax info for a new or existing payments profile that hasn’t received payments”.
In case you need to change something in your tax info and already receive a payment, you need to pick the other one “I am providing tax info for an existing payment profile that has previously received payments”.
Submit the form and you’ll be receiving the final tax calculation for your account.
Tax info calculation
When you go to Payments > Settings Manage Tax info. You will see here how much withholding rate you need to pay for U.S. income.
The following are the rates you will get once you have fill-up the form with Tax Treaty.
- Adsense Services: 0%
- Motion Picture and T.V.: 15%
- Other Copyright: 15%
The following are the rates you will get once you have fill-up the form without Tax Treaty.
- Adsense Services: 30%
- Motion Picture and T.V.: 30%
- Other Copyright: 30%
That’s it guys! I hope this guide helps you fill-up the new tax changes on YouTube. Continue creating more content Filipino peeps! You may also watch the brief information about Tax changes in YouTube.