International Streamers and the Withholding of 30% in the USA: How to RECOVER PART OF THE WITHHELD AMOUNT

If you're a successful streamer on YouTube, Twitch or Fortnite, you know that monetization of your content is a global reality. However, for streamers outside the United States, this often comes with a surprise: the withholding of 30% on your earnings by the platforms. This tax, required by the US government, can significantly impact your revenue. The good news is that, in many cases, it is possible to offset or even recover part of this amount by sending an American tax, U.S. Nonresident Alien Income Tax Return.

Why Retain 30%?

YouTube (Google), Twitch (Amazon) and Fortnite (Epic Games) are companies based in the United States. Under US tax law (IRS), they are required to withhold taxes on certain types of income paid to non-US resident individuals or entities, especially when that income is considered "US source". The standard withholding rate for non-residents is 30%. This applies to various forms of streamer earnings, such as ad revenue, subscriptions, competition payments, etc.

The Role of Form W-8BEN

Before we talk about U.S. Nonresident Alien Income Tax Returnit is crucial to mention the Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting). This form is your first line of defense. By filling it in and sending it to each platform (usually via the tax control panel), you declare that you are not a US tax resident and can claim benefits from existing double taxation agreements between your country and the United States.

Many countries have tax agreements with the US that aim to avoid double taxation, i.e. you paying tax on the same income in two countries. Depending on the specific agreement, the withholding rate can be reduced (for example, to 0%, 5%, 10%, etc.) or even eliminated for certain types of income. Always check whether your country has a double taxation agreement with the US and what the applicable rate is for royalties or services. Spain and Portugal are examples of countries that have agreements with the US. Brazil, on the other hand, has no agreement to reduce or avoid double taxation with the US.

Offsetting WITHHELD TAX

Even if your country doesn't have a double taxation agreement that zeroes out withholding, or if the agreement still results in some withholding, the U.S. Nonresident Alien Income Tax Return becomes your main ally. Because it is the tax return that non-US residents use to report US source income.

The big advantage is that it allows you to declare your expenses related to your streaming activity and use the tax withheld as a credit. Here's how it works:

1. Income Effectively Connected with a Business or Trade in the USA (ECI): Streaming activities (such as the sale of advertising, subscriptions and subsidies) can be considered as "income effectively connected with a trade or business in the United States" (Effectively Connected Income - ECI). When your income is classified as ECI, it is taxed at the progressive rates applicable to US citizens and residents.
2. Deduction of Expenses: The main advantage of treating your income as ECI is that you can deduct the expenses related to your streaming activity. This includes:
   • Equipment (cameras, microphones, computers)
   • Software and licenses
   • Cost of internet and electricity (a percentage of household use)
   • Subscriptions to streaming services
   • Marketing and advertising
   • Travel related to streaming events (if applicable)
   • Other legitimate business expenses.
   By deducting these expenses, your "taxable income" in the US decreases significantly.
3. Withholding Tax Credit: The amount of 30% (or the rate reduced by the treaty) that the platforms withheld from their earnings is not lost. It is considered a pre-paid "tax credit". When filling in the U.S. Nonresident Alien Income Tax ReturnThen you enter the amount withheld. If the tax calculated on your net income (after deductions) is less than the amount that has already been withheld, you will be entitled to a IRS refund.

In essence, you are declaring your income and expenses to the US government, and claiming back the amount that was over-withheld.

ITIN (Individual Taxpayer Identification Number)

To send the U.S. Nonresident Alien Income Tax ReturnYou will need an American tax identification number. As you are not a US resident and are not eligible for a Social Security Number (SSN), you will need one. Individual Taxpayer Identification Number (ITIN).

To obtain an ITIN, you must make an application to the IRS (Internal Revenue Service). Generally, you can send this application along with your first tax return (U.S. Nonresident Alien Income Tax Return). You will need to provide original documents or certified copies of your identity and foreign status (a passport is the most common and accepted).

Steps to Compensate for Retention:

1. Fill in Form W-8BEN on each platform: Make sure your tax information is correct for YouTube (AdSense), Twitch and Epic Games. If your country has a double taxation agreement, indicate it on the W-8BEN to reduce the initial withholding.
2. Get an ITIN: If you don't already have one, start the process of applying for your ITIN. This can be done together with the submission of your first U.S. Nonresident Alien Income Tax Return.
3. Gather your tax documents: The platforms (YouTube via Google AdSense, Twitch, Epic Games) will send you year-end tax forms (usually Form 1042-S) detailing your earnings and the amount of tax withheld. Keep these documents.
4. Record All Your Expenses: Keep a meticulous record of all expenses related to your streaming activity. This is crucial for maximizing your tax deductions.
5. Fill in the U.S. Nonresident Alien Income Tax Return: This form is where you report your streaming income, deduct your expenses and apply the withholding tax credit.
6. Send Your Statement: Send your U.S. Nonresident Alien Income Tax Return (and your ITIN application, if you are requesting one) to the correct IRS address. The deadline for most non-residents is June 15 of the year following the tax year in question.

Crucial Considerations:

• Complexity: International taxation is complex. Although it is possible to do it yourself, it is highly recommended that you seek the help of an expert. accountant or tax lawyer specializing in international taxes and for non-US residents. They can ensure that you are compliant, maximize your deductions and avoid mistakes that could lead to delays or penalties.
• Taxes in Your Country of Origin: Remember that you may also have tax obligations in your country of residence. The credit for tax paid in the US (or the amount refunded) may impact how this income is taxed locally. Consult a professional in your country as well.
• Keeping records: The importance of keeping detailed records of all transactions (income and expenses) cannot be underestimated.

By understanding the process and using the correct Forms, international streamers can turn 30% withholding from a burden into a tax optimization opportunity, recovering amounts that would otherwise be lost.

Need help with your refund request? Contact CR Accounting & Consulting and be assisted by our team of experts.