Amazon: US tax on non-US developers! (Arrgh!)

john26 · January 2013

I noticed Amazon has recently introduced a "Tax Identity Interview" on their App Store. From now on you can't sell an Android app through Amazon without filling this in -- and it requires you to have a US Tax Identity Number even if you don't live in the US! Has anyone wrestled with this yet? It seems ridiculous that I have to contact the IRS when I don't live in America. One of the good things about not being American is not having to deal with IRS! Her Majesty's Revenue and Customs (HMRC) in Britain is bad enough!

BTW, I've submitted Nebula Retro on Amazon and it got published with no difficulties. They say you've got to recompile against Android 4.0.3 but I just ignored that and sent them the same APK as I use for Google (Android 4.1). But I've only submitted the free version as I am put off by this Tax business.

OZApps · January 2013

Getting an ITIN is a pain... download Form W7 from the IRS site and fill it in, it will be useful for a wide variety of situations... iTunes, Amazon, etc, etc...

OZApps · January 2013

... and you also have a London Office (I guess at the US Embassy) there is someone that can help you get that / with the documentation, etc.

john26 · January 2013

Thanks for the advice. Are you saying you need to go through this process for the iOS App Store as well?

I found this article quite useful. They recommend getting an EIN not ITIN

http://catherineryanhoward.com/2012/02/24/non-us-self-publisher-tax-issues-dont-need-to-be-taxing/

Why does Amazon do this but not Google?

SinisterSoft · January 2013

I've just done this myself from the UK. Just ring 00 1 267 941 1099, that's the International Business and Speciality line of the IRS. You need a EIN for W-8BEN purposes (I think it was option 4), it's free and they can ask you the questions and give your number over the phone after the conversation. No hassle at all.

I contacted Apple and they told me that they do not withhold tax as they are basically just a middleman and they take a commission (as it seems so do google), Amazon (and I think Nook) however class it as royalties, which is different.

For your UK accounts (I think) you have to treat each sale as individual sales for Apple and Google - (some have VAT, others not) - the actual sale is to you (direct to customer), but for Amazon and Nook I think you group them together as payments (no VAT as they are outside the UK) - the actual sale is from the customer to Amazon/Nook.

I can't find anywhere on the Apple site to sort out VAT rates though, so I either Apple are wrong on one thing, or they are wrong on the other (a confusing mess imho). With Google you sort it in the merchant section and it filters through to your pricing (clever and works well).

OZApps · January 2013

Thanks for the advice. Are you saying you need to go through this process for the iOS App Store as well?

Not the App store, but if you want to sell on the Books Store, they do not allow you that unless you have an ITIN.

I am not sure about the EIN/ITIN, I guess it must be about the exemptions/eligibility thing. I have to get the ITIN as part of being the Book Author.

SinisterSoft · January 2013

Re: Apple... I think that for books they might say you are paid a royalty, but for games they say they charge commission.

john26 · January 2013

@sinistersoft thanks for the advice. I guess I'll have go call uncle Sam like you did to get the number. I kinda object on principle as it seems like a form of American dominance. Wonder how the Americans would react if it was the other way round!

I haven't thought about vat yet. My understanding is that you only need to pay vat when you go over a threshold. My sales have been pitiful so far so I think I'm in no danger of doing that! Vat is extremely complex (not to say expensive) so I hope I don't need to consider it for a while.

For an amateur developer just dipping their toe in the water having to deal with international tax and vat is pretty intimidating. What's the minimum we should be doing would you say?

john26 · January 2013

http://developer.coronalabs.com/forum/2012/05/22/google-expects-us-collect-taxes-goole-playandroid-market

A discussion on vat over on corona forums. They seem to think apple sorts everything for you but Google leaves you go do it yourself. Anyway vat threshold seems to be £77000 per year something most android devs can only dream of.

SinisterSoft · January 2013

@john It's not that unfair, it's kinda like VAT reimbursement - where if you're outside the EU you can fill in a form to get the VAT back on purchases from the EU.

You can volunteer to register for VAT before the threshold. If you are VAT registered then your prices (unless you want to lose money) can be set 20% higher than normal (people pay more for your software). But, you can claim back VAT on your expenses and other purchases to do with your business.

The problem is that if you do start making a lot on your software then it looks bad if you put prices up. If you don't, then when you do make a lot then you will lose out 'cause you will have to absorb the VAT (and therefore make less money).

The Google way is clearer (believe it or not!)... If you're VAT registered just put 20% in there and then Google will let you know how much was TAX (they will automatically not charge TAX for those who shouldn't be charged it) was actually charged, so you know how much to the VAT man. Apple don't give you any clue what happened or how much tax was paid - you have no choice but to give 20% of whatever comes in to the VAT man. If you're not VAT registered then no need to charge any tax (if you're in the UK) as in the UK you don't add on a sales tax.

The minimum you should do is at least get the EIN from the US IRS, you should also declare any extra income via an annual tax return (if you're based in the UK and aren't putting the income through a company). If you don't do the EIN then you could lose out on 30% revenue from the US. If you don't fill out the tax return then you could lose a *lot* more (if you get caught).

john26 · January 2013

@SinisterSoft, thanks for your advice. I think I will put in a tax return as you say rather than going through the hassle of registering as self-employed. That will allow me to test the waters without any initial administrative burden. I suppose there is a threshold below which you don't need to declare tax. So far I've made about £1 from app sales!

What if you sell a game in a European country? Do you have to register for VAT there as well? Registering for VAT in dozens of countries is not feasible for small app developers it seems to me. I suppose it depends where the sale is considered to take place?

techdojo · January 2013

This is a real grey area and not one that Apple or Google (or even HMRC) seem that bothered to help you with.

I read before that Amazon do hold back the tax that would be paid for US sales and it's up to you to prove your a non-us Tax payer and (eventually) claim it back from them.

I looked and looked a while back to try and get this info but all I got was a lot of conflicting info. Given the ease in which international sales can be completed electronically all the different Government tax depts still seem way way behind on how tax is collected.

(I haven't submitted to ANY Android stores so this is only relevant to Apple). When I was a registered Apple Dev (I let my subscription slip until I've actually got another App finished and ready to sell), you'd get financial reports each month from each region. As far as I was aware VAT / Sales tax etc wasn't relevant (to me) as the agreement with Apple would appear to be along the lines of - I give them my software, they sell it on my behalf and pay me a 70% commission, I believe that VAT, sales tax etc is their responsibility as they are the seller and this is paid out of their 30% cut (which might have partially accounted for the increase when Tier 1 went from £0.59 to £0.69 a while back around the time VAT increased to %20.

If you registered as an individual then any monies earned (if you are a UK resident) had to be declared on a self-assessment form and any extra Tax and NI contributions would be calculated and you'd be liable for.

If you registered as a company then you go through the usual company accounting processes and either you can register for VAT voluntarily or once you pass the minimum threshold - however as stated before I don't think VAT can be claimed back on the money from Apple as it's just a commission and you are NOT the seller (however I could be wrong - I never got that far so it was never an issue for me), but VAT can be claimed back on other purchases.

This is a potential minefield for indies as I don't think this scenario was ever thought of when the rules were written, the best you can do (if a UK indie) is contact your local tax office and ask them for advice and if you can afford it - get a good accountant!
(if you can't afford a good accountant, then you probably haven't earned enough for it to be a problem - but caveat emptor and all that!

)

Just my $0.02 (+20% VAT, less 30% commission)

john26 · January 2013

@Techdojo. Thanks for that. Yes, no one seems to know if Apple collects VAT on your behalf or not. Should app developers register as self-employed or can they remain PAYE (assuming they have a day job)?

SinisterSoft · January 2013

With google the sale is made in the UK, they don't seem to withhold any tax. They will add the tax on if you like, or not - it's up to you. Amazon have a form you can fill in for the EIN number mentioned earlier, as do Nook. Samsung don't have anything about tax anywhere - crazy. Apple is complex and hard to figure out who pay what to whom - odd.

john: Once you do a tax return, be prepared to do one every year for a long time. Basically you have to write down ALL income (not just from games), then write down how much tax you have paid. They will figure out how much you owe - it's automatic and you should get a ballpark figure as you fill in the online form. You won't have to do a tax return (a personal one) in the UK until next January (you fill one in for the April to April in the next January). I'm also not too sure about the self-employment laws if the income gets large then you may have to pay some kind of stamp duty - I don't know. There may also be some kind of capital gain on the value of the IP if you ever eventually include it in a company (eg. it was worth nothing when you started, it was worth something else when you introduced it - so you may have to pay a tax on how much the value went up by).

techdojo · January 2013

@John26 - My advice (for what it's worth, I'm NOT an accountant or a lawyer so take from this what you will), would be to just stay as you are.

Assuming your fully employed then there's no problem you earning "money on the side" even if you remain PAYE and it's nothing to do with your current employer if you don't wish to tell them. Basically it would work the same as making and selling stuff on eBay (but apart from the rules on chattel - which is basically disposing of stuff you already own / brought and paid for in the past). If your a higher-rate tax payer (or the money you earn would make you a higher rate tax payer) the tax you pay will be at 40% (that's 40% of the 70% of 69p that Apple give you per sale!, basically you'd be looking at ~ 29p per sale!

As @SinisterSoft said - to do this you just register for an fill in a self-assessment form and declare all earnings, they'll tell you what tax and any NI contributions you owe.

This is the easiest way to do it, also more importantly DON'T DO ANYTHING NOW!, wait first until your app is finished and available for sale, you might go through a LOT of grief only to find you make £5 in sales in which case don't bother. IF you make an app that makes some money you've got the rest of the year to declare it, just make sure you keep all the emails / reports from Apple or whoever and if possible make sure any and all monies go in to a separate bank account, I'm sure (but don't quote me on this) that if you keep all the receipts for things like your Apple dev subscription and any hardware you buy to support this "hobby" then you there are ways to offset one against the other - but talk to a "good" accountant about that, remember if your already employed this is just a "hobby" and not a business - it can become a business in the future but for now it's just a "hobby".

I have no idea if you can claim to be self employed as well as being PAYE and fully employed with another company, but you CAN if you want set up a Limited Company (cost's about £30) and then the company earns the cash and you have to do all the accounting etc, there are pro's and con's for both ways, longer term a company might be a better bet, especially if you don't require access to the money straight away, but your liable for Corporation tax instead so it's swings and roundabouts.

So step 1. - Make a game
Step 2. - Make some cash selling it

Then worry about the other steps later - if you can keep the money separate and not spend it it'll make things easier at the end of the year, but for now just concentrate on steps 1 & 2.

john26 · January 2013

@techdojo, thanks that's great advice I'll do exactly as you say. I have published my first game now but it made <£5 so looks like tax is not something I need to worry about yet!

SinisterSoft · January 2013

john: If you decide (in the end) to setup a ltd then look around, I set one up for £4.99 with £50 cashback!!! Benefits of a company are that the profits don't affect you unless you want to take any out. The company pays corporation tax on profit, it's about 20%. Another benefit is limited liability, the most anyone (normally) can take is whatever the company owns, if you don't trade through a ltd then the most they can take is whatever you and/or your partner owns.

You should keep your receipt for GiderOS and any other things that cost you money to make/publish your game - eg if you go to any events to promote it or research more games... You can use these as expenses to offset against any profit.

If you do decide to go down the VAT route then it won't cost you any more money, but it will cost your customers 20% more. eg:

no vat:

You charge £1 for your game, google take 30p, you make 70p.

with vat:

You charge £1 + 20p for your game, google take 30p, you get 90p from google, 20p has to be set aside for VAT, you make 70p.

End result: your customer pays 20p more, you make the same, google make the same, hmrc makes 20p. A benefit to vat registration is that you can claim vat back on expenses (that have VAT included), etc...

I think in your accounts you should treat Google's fees as something like a bank charge (no vat, expense)?

techdojo · January 2013

100% agree with @SinisterSoft says about Ltd companies, I haven't heard of any cases where mobile game developers have been successfully sued by end user customers (but then I haven't set out to actively piss anyone off with any content or blatant copying of IP / ideas) - but I suppose in these heady days it could happen, so some form of legal protection might not be a bad idea.

john26 · January 2013

Thanks for your advice guys! I think this thread will be useful for others as well.

Tom2012 · November 2015

Sorry to bring back an old thread, but I hit this problem yesterday and wanted to add an update. For the Tax IN I had no idea what to put. I actually added my National Insurance number and the forms submitted fine. I also received and email from Amazon saying that they had verified the number and it was accepted.

A quick note for UK'ers like me.

SinisterSoft · November 2015

IMPORTANT...

You shouldn't put your NI number there, rather you should put your EIN there. You apply for one by ringing the IRS in the USA (see earlier post), it takes about 10 minutes.

The EIN will be a number in the format XX-XXXXXXX, you then tick the EIN box if available. If you don't provide a valid EIN, then you will have 30% withheld - even if Amazon say they have verified your NI number, they couldn't have done this correctly as they don't have access to that data (plus the IRS doesn't care about your NI number). You can re-fill in the form using the same link Amazon sent you if you get the correct number for the US IRS.

Tom2012 · November 2015

Ah good to know thanks. Will have to get that updated

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