YouTube will start deducting U.S. taxes of up to 24% from creators… even if they don’t live in the U.S.

Google has just sent out an email to creators on YouTube, one that will have significant financial ramifications for many users who use the platform to make a side-income, or even a full-time living. We received the email ourselves, and the following excerpt explains the gist of it:

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.

– YouTube

The email looks to have been sent to YouTube creators who live outside of the U.S., and Google is now set to deduct taxes from creators under its obligations as an American-based company. These tax deductions, as a result, will even affect creators who don’t live or work in the U.S.

According to Google, this is because of Chapter 3 of the U.S. Internal Revenue Code, which mandates that the company deducts taxes from creators when they generate revenue from U.S.-based viewers. Consequently, YouTube will soon update its Terms of Service, and creator earnings—which are typically earned via ads and views, among other revenue streams—will now be considered as royalties.

I’m a creator. What should I do?

If you missed out on the email, Google has set up a support page to clear some of the confusion up. In essence, you’ll need to submit your relevant tax info via AdSense by the 31st of May 2021, so that Google can correctly calculate your tax deductions (if any). If you fail to provide this info by the stipulated date, you may be subject to a higher tax of 24 percent for your total YouTube earnings.

You can also read the full instructions on the process here. Meanwhile, the support page also contains a sample calculation, using an India-based creator as reference:

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Example: A Creator in India earns $1,000 in revenue from YouTube in the last month. Of the $1000 in total revenue, their channel generated $100 from U.S. viewers. Here are some possible withholding scenarios: 

  • Creator doesn’t submit tax info: Final deduction is $240 because the withholding tax rate if you don’t submit a form is up to 24% of total earnings. This means that until we have your completed tax info, we’ll need to deduct up to 24% of your total earnings worldwide – not just your U.S. earnings. 
  • Creator submits tax info and claims a treaty benefit: Final tax deduction is $15. This is because India and the U.S. have a tax treaty relationship that reduces the tax rate to 15% of earnings from viewers in the U.S. 
  • Creator submits tax info, but is not eligible for a tax treaty: Final tax deduction is $30. This is because the tax rate without a tax treaty is 30% of earnings from viewers in the U.S. 

Google maintains that the changes here will not affect U.S. creators, with a similar change already made to the Terms of Service back in November 2020. As a result, U.S.-based creators won’t see any new taxes if they have already completed their AdSense information, although they can check on this here.