Foreign companies dealing with USA withholding tax on royalties

Web publishing my books has brought me up against the US IRS. Both Lulu and CreateSpace need a US tax number before you get paid your royalties, and a W8-BEN which is the form to declare that you are not a US entity for tax purposes. (Interestingly Google need nothing of the sort for Adsense advertising revenues).

To fill out the W8-BEN you now need a US tax number, TIN. There are various flavours. You either need to get an ITIN as an individual, form W-7, or an EIN as a business entity, form SS-4. Individual ITIN form W-7 needs to be accompanied by proof of identification and an IRS federal income tax return (or proof of exemption). Processing time 5-6 weeks. (and imagine trying to track down where it has gone by phone from overseas when you have heard nothing for a couple of months - shudder). You can get more "information" at http://www.irs.gov/businesses/small/international/article/0,,id=96690,00...

Another good source of info is http://www.irs.gov/pub/irs-pdf/p515.pdf

Much easier if you are a business. You can get an EIN over the phone!! Even foreign entities can, and with our own number, and the phone number works! No form SS-4 required (though they do like you to fill it out before you call). What is the number? For me to tell you, send $100 to ... just kidding. Call 7am-11:30pm USEST 215 516 6999. (or fax the form to 215 5161040). This info came from http://www.irs.gov/file/article/0,,id=111138,00.html, but within a week of me calling the info had changed and the number had disappeared. Must have been me thanking them for being so helpful - can't have that! But try the number anyway - I bet the service is still there and they just don't advertise it.

Don't get excited when you see you can apply for an EIN online - that is US entities only though you dig deeper to learn that.

It is worth forming a company just to get a US tax number by phone instead of going the ITIN route, especially if forming a company is as easy for you as it is for me in New Zealand.

Once you have your tax number you can file a W8-BEN with the company you are doing business with, not with the IRS! Print the W8-BEN from a number of sources, including

The process is awful - the USA truly does have the worst taxation system on earth. There is no doubt the IRS, if an individual, would be certifiable as insane. Look at this as helpful guidance for filling out the W8-BEN:
An entity (but not an individual) that is claiming a reduced rate of withholding under an income tax treaty must represent that it:
Derives the item of income for which the treaty benefit is claimed, and

Meets the limitation on benefits provisions contained in the treaty, if any.

An item of income may be derived by either the entity receiving the item of income or by the interest holders in the entity or, in certain circumstances, both. An item of income paid to an entity is considered to be derived by the entity only if the entity is not fiscally transparent under the laws of the entity's jurisdiction with respect to the item of income. An item of income paid to an entity shall be considered to be derived by the interest holder in the entity only if:
The interest holder is not fiscally transparent in its jurisdiction with respect to the item of income, and

The entity is considered to be fiscally transparent under the laws of the interest holder's jurisdiction with respect to the item of income. An item of income paid directly to a type of entity specifically identified in a treaty as a resident of a treaty jurisdiction is treated as derived by a resident of that treaty jurisdiction.

If an entity is claiming treaty benefits on its own behalf, it should complete Form W-8BEN. If an interest holder in an entity that is considered fiscally transparent in the interest holder's jurisdiction is claiming a treaty benefit, the interest holder should complete Form W-8BEN on its own behalf and the fiscally transparent entity should associate the interest holder's Form W-8BEN with a Form W-8IMY completed by the entity.

Or this: "For Paperwork Reduction Act Notice, see separate instructions"

Anyway, to get royalties, careful reading of http://www.irs.gov/pub/irs-pdf/p901.pdf shows you fill out W8-BEN 1,2,3,4,5,6,9a,9b,9c and sign it - that's it!

To find out what the tax rate will be for your country, read http://www.irs.gov/pub/irs-pdf/p901.pdf. If your contry has differing tax rates for differing types of royalties (columns 11 and 12 of table 1) I think you need to fill out line 10 of the W8-BEN too. Good luck with that.

Then you need to find out how the company you are dealing with wants to receive the W8-BEN....