Google is obligated under Chapter 3 of the U.S. Internal Revenue Code to withhold tax from YouTube earnings generated from viewers in the United States. But what exactly is this chapter 3?
Chapter 3 withholding is a type of withholding tax that’s subjected to foreign persons when they receive payments from U.S. income. The foreign persons here include non-US residents as well as nonresident alien individuals, foreign entities, and governments.
With regard to YouTube and this law, Google is required to withhold tax from the earnings creators from other countries make from viewers in the United States. This is in part facilitated by the creators who have to submit their W-8 BEN tax forms in AdSense by going to Payments > Settings > United States Tax info.
The percentage of tax withheld from the earnings is determined by a withholding rate (WHT) set by the Internal Revenue Service (IRS) which varies with the country of residence of the creator. Countries with a tax treaty with the U.S. are however eligible for a reduced WHT rate.
YouTube Withholding Tax Rate
According to the Publication 515 (2021), Withholding of Tax on Nonresident Aliens and Foreign Entities by the IRS, the withholding tax rate for most income originating from the U.S. that is received by foreign persons is 30% unless where a tax treaty specifies a reduced rate.
In Chart C of the document, various types of incomes are listed and their corresponding rates as follows:
YouTube earnings fall in the other income category where the specified rate is 30% unless a reduced tax treaty rate exists.
More specifically, income from YouTube falls in the Royalties Income category as defined by the IRS. To quote the IRS on this:
If the royalty income is from a U.S. source and paid to a nonresident, then it is reportable for any amount in excess of zero. Withhold at 30% or lesser tax treaty rate, if applicable (see Chart C, Withholding Tax Rates for Purposes of Chapter 3, in IRS Publication 515 as well as IRS Publication 901). The beneficial owner of the income may claim the benefit of the tax treaty article which deals with “Royalties Income.” The beneficial owner may claim the lesser tax treaty rate by filing Form W-8BEN with the withholding agent.
Source: Federal Income Tax Withholding and Reporting on Other Kinds of U.S. Source Income Paid to Nonresidents (IRS)
The latest tax treaty rates were last revised on 2019 and can be found on Table 1 (PDF) of the Tax Treaty Tables page on the IRS website.
In the PDF document, you can find the WHT rate of your country by checking the Royalties – Copyright column. We’ve however included the rates in a much easier to read table in the next section.
If your country is not listed in the above document, then it means that the U.S. currently doesn’t have a tax treaty agreement with your country. We’ve likewsie listed these countries in a section below.
Countries with Tax Treaties
A few countries have tax treaty agreements with the United States for the purpose of reducing the tax burden or in order to eliminate double taxation.
YouTube creators that are residents of these countries can claim tax treaty benefits to reduce the tax withheld from their earnings, as quoted in the previous section.
Creators can claim this benefit using the AdSense tax tool which will identify details of the treaty when filling the W-8 BEN tax form.
The tax treaty WHT rates range from 0% to 15% depending on the country. Creators that are residents of countries with a rate of 0% such as Canada, UK and France will have no tax withheld from their earnings provided they have submitted their tax info on AdSense.
If no tax info is submitted, Google will use a maximum withholding tax rate of 24% on the total earnings and not just those from U.S. viewers.
The tax treaty rates for countries eligible for the YouTube Partner Program are as follows:
| Country | Tax Rate |
|---|---|
| Australia | 5% |
| Austria | 0% |
| Azerbaijan | 0% |
| Bangladesh | 10% |
| Belarus | 0% |
| Belgium | 0% |
| Bulgaria | 5% |
| Canada | 0% |
| Czech Republic | 0% |
| Denmark | 0% |
| Egypt | 15% |
| Estonia | 10% |
| Finland | 0% |
| France | 0% |
| Georgia | 0% |
| Germany | 0% |
| Greece | 0% |
| Hungary | 0% |
| Iceland | 0% |
| India | 15% |
| Indonesia | 10% |
| Ireland | 0% |
| Israel | 10% |
| Italy | 0% |
| Jamaica | 10% |
| Japan | 0% |
| Kazakhstan | 10% |
| Latvia | 10% |
| Lithuania | 10% |
| Luxembourg | 0% |
| Malta | 10% |
| Mexico | 10% |
| Morocco | 10% |
| Netherlands | 0% |
| New Zealand | 5% |
| Norway | 0% |
| Pakistan | 0% |
| Philippines | 15% |
| Poland | 10% |
| Portugal | 10% |
| Romania | 10% |
| Russia | 0% |
| Slovakia | 0% |
| Slovenia | 0% |
| South Africa | 0% |
| South Korea | 10% |
| Spain | 0% |
| Sri Lanka | 10% |
| Sweden | 0% |
| Switzerland | 0% |
| Thailand | 5% |
| Tunisia | 15% |
| Turkey | 10% |
| Ukraine | 10% |
| United Kingdom | 0% |
| Venezuela | 10% |
Countries without Tax Treaties
Majority of the countries eligible for the Partner Program don’t have a tax treaty with the U.S. Therefore, as earlier mentioned, a WHT rate of 30% will be subjected to the U.S. earnings of creators in these countries.
Creators of these countries should likewise submit their AdSense W-8 BEN tax form to ensure this rate is used. Otherwise, Google will use a maximum WHT rate of 24% on their total earnings and not just from that earned from U.S. viewers.
The list of countries in this category are as follows:
| Algeria | Argentina |
| Aruba | Bahrain |
| Bermuda | Bolivia |
| Bosnia and Herzegovina | Brazil |
| Cayman Islands | Chile |
| Colombia | Costa Rica |
| Croatia | Dominican Republic |
| Ecuador | El Salvador |
| French Guiana | French Polynesia |
| Ghana | Guatemala |
| Guadeloupe | Honduras |
| Hong Kong | Iraq |
| Jordan | Kenya |
| Kuwait | Lebanon |
| Libya | Liechtenstein |
| Macedonia | Malaysia |
| Martinique | Mayotte |
| Montenegro | Nepal |
| Nicaragua | Nigeria |
| Oman | Panama |
| Papua New Guinea | Paraguay |
| Peru | Qatar |
| Reunion | Senegal |
| Serbia | Singapore |
| Saudi Arabia | Taiwan |
| Tanzania | Tunisia |
| Turks and Caicos Islands | Uganda |
| United Arab Emirates | Uruguay |
| Vietnam | Yemen |
| Zimbabwe |
