Google has recently announced that it may deduct up to 30% tax on YouTube earnings for revenue earned from viewers in the United States. With YouTube’s new tax update, creators in non-US countries can see a drop in revenue. However, there are other ways you can continue to earn a fantastic income through a YouTube career. Here’s what you need to know about this new update.
What’s Happening?
Google is asking monetized creators on the YouTube Partner Program to update their tax info on AdSense. Based on this info, Google is entitled to deduct up to 30% tax on your total earnings, based on the tax treaty between the US and the creator’s home country. Here are the various possible scenarios:
- Creator does not submit tax info: If the creator account is classified as a business account, the deduction will be 30%, while for individual accounts, it will be 24%.
- Creator submits tax info (without tax treaty): If the creator’s home country has no tax treaty with the US, 30% of earnings will be deducted.
- Creator submits tax info (with tax treaty): Based on the tax treaty between the two countries, this can go up to 15%.
Why Is This Introduced?
As per Google’s terms of service, revenue earned from viewers in the form of ad views, YouTube Premium subscriptions, channel memberships, super chats, etc. is considered royalty from a tax perspective. Under Chapter 3 of the US Internal Revenue Code, Google, the parent company that owns YouTube, has to report to the US Internal Revenue Service about royalty revenue contributed by viewers from the US.
Can This Affect You?
If you are a YouTube content creator with a monetised channel, this does affect you. While US-based YouTubers already pay taxes to the US IRS, creators from the rest of the year will be affected when the new update is enforced.
Should Creators From Non-US Countries Be Worried?
Depends. If your channel caters to a mostly local audience, then most of your earnings are from local viewers. This does not categorise as “royalty” from US viewership and thus won’t be considered for deductions.
For channels that do cater to a more global audience, their revenue could take a massive hit, especially if most of their foreign audience is from the US. While CPM is higher in these cases, the overall revenue too is higher, resulting in more deductions. As India has a tax treaty with the US, the tax rate would be around 15% of the revenue from US viewership.
When Does This Come Into Effect?
The new tax update will take effect as early as June 2021. Monetized creators in non-US countries will have to update their tax info in Adsense by 31st May 2021, failing which they might have to pay up to 24% of their earnings.
The new YouTube tax update might not affect you drastically. Nevertheless, you still need to update your tax info in Adsense and adhere to these guidelines. If your earnings are taking a hit, look into other sources of revenue such as brand partnerships, endorsements and affiliate programs so that you don’t have to rely on a single source of income.
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