Today, I’ll walk you step-by-step through the Amazon Tax Interview. If you sell on Amazon – whether it’s FBA, Kindle, CreateSpace – you will have to take this interview at some point.
If you’re a non-U.S. individual or company, Amazon will withhold 30% of your royalty payments by default. Say you earn $1,000 on Amazon – the actual payout will only be $700.
The rest ($300) is the withholding tax that – as the name suggests – will be withheld.
If you don’t go through the Amazon Tax Interview properly, you end up paying more in taxes than you need to any time Amazon sends you a royalty payment.
Non-US Amazon Sellers ONLY
This video is for non-U.S. individuals and companies. If you’re from the U.S., the steps you have to go through are slightly different and you’ll also end up filing out a different form.
Specifically, I’ll show you how to go through the tax interview for an Estonian company. The process will be almost identical even if you have your company in another country elsewhere outside of the U.S.
This video will NOT show you the steps you need to take if you sell as an individual/sole proprietor on Amazon. The default withholding tax rate for you will be 30%.
To lower that rate, you’ll have to call the IRS (+12679411099) and request a Employer Identification Number (EIN).
You get that number (EIN) instantly during the phone call and once you enter it during the Amazon Tax Interview, the reduced withholding tax rate will be effective immediately.
Whether you run a company or operate as an individual, the tax rate you end up with depends solely on the country of residency of the beneficiary.
In this example, my company is based in Estonia, so that’s the country of residency that applies. NOT where I live myself. The U.S. has a tax treaty with Estonia that effectively lowers the withholding tax to 10%.
Amazon Withholding Tax
I urge you to pay particular attention to the following section of the tax interview. You must select “Yes”, otherwise your withholding tax rate will remain the same!
Limitation on benefits (LOB) select “Company that meets the ownership and base erosion test”, click the checkbox and continue!
On the following page, the updated tax rate should appear!
For additional details, please refer to the video at the beginning of this article!