Videos sharing platforms YouTube has helped many content creators to create and share some videos and manage to make some cash based on the number of views those videos rake in.
But this year many content creators may face reduced income after YouTube announced it will deduct tax fees for the US government for all creators, including those living outside the US.
Youtube, in an email to content creators living abroad, notified them of a change to YouTube’s payments, with Google now required to take taxes for US from all channels, local and abroad.
The email from Youtube reads:
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 31st, 2021, Google may be required to deduct up to 24% of your total earnings worldwide.
The changes in how YouTube handles taxes is as a result of directions from the US government based on Chapter 3 of the US Internal Revenue Code.
Google is expected to collect taxes info from all creators monetizing their content outside the US and withhold those taxes when they earn income from viewers within the US.
Essentially, this means that not all income by content creators will be affected, but only those earned from viewers within the US.
A short video from YouTube explained the changes as well as a support page, in which Google clearly outlined an example of this impact.
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 probable withholding scenarios:
Creator does not submit tax information: Final subtraction is $240 because the withholding tax rate if you don’t submit a form is up to 24% of your 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.
However, the changes will not affect creators in the US, but will affect all others in the rest of the world.
YouTube requires updated tax information from creators by the end of May, otherwise a default 24 per cent deduction will be made, which will significantly reduce creators’ earnings.