From June 1st, 2021, YouTube will be implementing a new tax policy that applies to creators outside of the US who monetize their channels. It’s crucial that you understand the new requirements and take appropriate action. If you don’t, it could mean that you lose out on a significant chunk of your YouTube revenue. We’ve set out who is affected and what steps you need to take, but it’s important to remember that we are not legal or tax advisors, and you should always consult with an accountant to ensure that you are doing the right thing.
Who do these changes affect?
The June 1st, 2021 changes to YouTube tax policy apply to anyone who monetizes their channel and is resident outside the USA. If you’re inside the US, you don’t need to worry. If you’re outside the US but aren’t monetizing your YouTube channel, you don’t need to worry, either.
What are the changes?
Starting June 1, 2021, the IRS says that you must pay tax on your YouTube earnings that are generated by viewers from within the USA. This revenue can come from ad views, YouTube Premium, Super Chat, Super Stickers or channel memberships.
You don’t need to worry about dealing with the IRS directly; YouTube is set up to hand over these taxes on your behalf. But for this to work properly, you have to submit your information. Without your information, YouTube will assume that you are a US taxpayer, and you’ll be taxed 24% on all of your YouTube earnings, not just those generated by views from within the US.
How will these changes affect my YouTube income?
If the IRS and YouTube aren’t sure of your tax status, then a blanket 24% will be deducted from all of your YouTube-generated income. If you earn $200 a year from YouTube, you’ll pay $48 to the IRS.
By declaring that you are resident outside of the US, you will only have to pay tax on the income generated by views from within the US. If you generate $200 in total from YouTube, and $50 of that comes from US-based viewers, then you only have to pay tax to the IRS on those $50.
How much tax you will pay on those $50 depends on where you live and if your country has a tax treaty with the US. If you’re in Canada or the UK, then the tax rate can be as low as 0%. If you’re in Mexico, it can be 10%. It can be as much as 30% in other countries. Still, paying $15 in tax is better than paying $48! And if you’re a full-time YouTuber with a much higher YouTube income than $200 a year, these changes will have a significant impact on your earnings.
Please don’t forget, though, that you will still be liable for taxes on your YouTube income in your home country. Just because you have paid tax in the US, or are not required to pay it there, doesn’t mean no tax is due where you live.
Furthermore, YouTube’s tax policy handles taxes to the IRS from the income it pays to you. If any other US-based companies pay you money directly for something associated with YouTube–maybe you’re sponsored to use a particular kit in your YouTube videos–you are responsible for managing these tax liabilities, not YouTube.
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When does the new YouTube tax policy come into effect?
YouTube’s new tax policy comes into effect on 1 June 2021, and you need to submit your information by then. To reiterate, if you don’t monetize your channel, this element of YouTube’s tax policy doesn’t apply to you. And you don’t have to worry if you live inside the US, as you should already be within the US tax system.
If you’re thinking of starting a YouTube channel, we anticipate that the new taxation requirements will be built into the monetization sign-up process.
Why the changes are being made
Under Chapter 3 of the US Internal Revenue Code, Google–YouTube’s parent company–is obliged to collect information on anyone outside the US who monetizes on YouTube. In certain circumstances, Google will have to deduct taxes from YouTubers’ monetization income and pay it to the IRS on behalf of YouTubers. It might feel like an information grab or invasion of privacy by Google, but there are legal implications for both the powerful corporation and you, and it does seem as if Google is trying to make life as easy as possible for anyone who makes money from YouTube.
Where to go to submit and manage your YouTube tax information
You can submit your YouTube tax information through the AdSense account linked to your YouTube channel:
- Go to Payments, and then Manage Settings.
- Here, you have an option to complete US tax information. A series of questions will determine the correct form for you to submit, which will be brought up for you. The chances are it will be the W-8BEN if you are an individual or the W-8BEN-E for a business.
As you go through the process, AdSense will detect if you can benefit from a tax treaty between your country and the US. In order to claim a tax treaty benefit, you will need to submit your non-US tax identification number, so do have that information on hand.
When you have completed and submitted the form via AdSense, Google will be able to calculate how much of your US-derived income is due to the IRS and make the payment on your behalf.
We advise you to act as soon as possible to complete your YouTube tax information. And if you have any doubts at all about the new YouTube tax policy or anything about the tax, consult with a financial advisor.