As a programmer I love bringing our designers’ ideas to life. As the owner of a small company I also spend a lot of my time doing admin tasks. But today someone ticked the “international taxation specialist” checkbox in whatever serves as my job description. So what is a W-8BEN, an EIN and is Yakuto fiscally transparent in the eyes of Uncle Sam?
Yeah, I’m not an international taxation specialist. I cobbled together enough information to achieve the task at hand by reading the IRS website. What I learnt will definitely be useful for someone stumbling across this post but please do your own research too. Don’t take my word as gospel!
As a non-US company, selling apps on the Apple App Store is relatively straight forward. From an administrative perspective, the Apple setup process has been the simplest of those we’ve undertaken. They present us with incredibly long legal PDFs, which of course we read, then we electronically sign away. Apple market and supply our app to the end user, and this is the crux of the simplicity: because we supply directly to Apple, in most jurisdictions we don’t need to consider tax. But with Microsoft and Amazon (at least), the story is slightly different.
Taking Amazon as an example: when you register for a developer account to submit paid apps you have to complete an online “tax interview”. As you’d expect, the Amazon web-based experience is pretty slick; much friendlier than Microsoft’s. The purpose of the interview is to determine whether Amazon should withhold tax for the US Internal Revenue Service (IRS), on goods you sell in the US. This is a royal pain in the arse, but after several confused hours it actually proved fairly simple. But it did include phoning the IRS, and if movies have taught me anything, this should be a thoroughly stressful experience. It wasn’t.
Tax and Treaties
No one wants tax withheld, especially at a rate of 30%. Even less so to a scary TLA foreign government agency. Fortunately the US has entered into various tax-related treaties with other countries, the UK being one of them. (Very) simply put, if you can prove you’re a tax paying entity in a signatory country, Amazon, Microsoft et. al. don’t need to withhold tax for the IRS. But at first glance, the proof seems a little daunting to provide.
Ultimately, the Amazon tax interview and Microsoft’s equivalent result in a completed soft-copy of an IRS form called W-8BEN. This is your “don’t withhold my tax” application to the IRS. The jargon associated with the form is tricky enough, for example, is Yakuto fiscally transparent? (No, it’s opaque, I think.) But the real annoyance is tucked away in Part 1.6: U.S. taxpayer identification number. We don’t have one nor do we want one. We’re scared.
TIN (Tax Identification Number)
The form offers you three types of Tax Identification Number to choose from, SSN (Social Security Number), ITIN (Individual Tax Identification Number) and EIN (Employer Identification Number). If you don’t have a TIN of some kind, you aren’t known to the IRS and 30% of your (US-based) earnings will be withheld; you’ll have the devil’s own trying to get it back.
This is incredibly dull material, so cutting to the chase: if you’re a UK company then get yourself an EIN. Here’s how I did it in less than 10 minutes – but after several hours of research.
Getting an EIN (Employee Identification Number)
You can apply for an EIN online, but not if your business is located outside the US. Bummer. You can complete IRS formSS-4 and then either post or fax it to the IRS. I read of forms getting lost, incredibly slow replies and a complete lack of transparency. So if you’re in a hurry for your EIN you might prefer the following option: just phone the IRS. They’ll give you your EIN at the end of the call!
I hate phoning US companies. I’m not your archetypal English gentleman but I always feel like Edward Fox OBE when I call, and I’m rarely understood. My first attempt at calling the IRS was such a case, mainly because I called a series of wrong numbers. But finally I struck gold with:
1-267-941-1099 then option 1
Their operating hours are 07h00 – 22h00 EST. My first attempt had a queue length of 60 minutes; that was at 15h00 EST but calling again at 07h05 EST got me straight through to Jim, a fantastic man.
Jim asked me the following questions and then read each answer back to me, spelling each one. It seems he was actually completing form SS-4 for me over the phone.
|Are you based in the US||No|
|Legal name of entity||Yakuto Limited|
|Is that also the trading name||Yes|
|Mailing address||blah blah|
|What type of entity are you||Limited Company|
|How many people in the company||3|
|Country of incorporation||United Kingdom|
|Reason for applying||To complete W-8BEN, tax withholding regulations|
|Date business started||blah blah|
At the end of the call he gave me our EIN, told me the documentation would be arrive in the post after about four weeks and wished me to have a good day. The whole call took less than ten minutes (7’28”) and cost less than 30p with Skype.
Armed with the EIN I then quickly completed the Amazon tax interview and our W-8BEN application to escape the 30% withholding tax was submitted.
This process worked for us but real money, tax and the US Federal Government are important stuff so don’t just take my word for it. But if you’re looking to complete W-8BEN and need a TIN, calling the IRS seems a very efficient way to get one.