App Store Tax Setup For Canadians and Other Non-US Residents

The tax setup for monetizing apps can seem daunting for non-US residents. It doesn’t need to be, so if you are struggling to sort through all the information online, this post is for you.

The process is relatively the same whether you sell apps or other digital products. The crucial factor is understanding the proper setup to be exempt from the IRS 30% withholding tax on your revenue.

Jan 9, 2017: I’ve added one recent update that came in as a comment from a reader. Please see the bottom of the post for that information.

My experience is based on what I’ve encountered as a Canadian, but I believe the process is analogous for many other countries, provided there is a treaty in place regarding tax collection as there is between Canada and the US. Please research based on your local laws.

There are essentially two main steps involved.

  1. A US Taxpayer Identification Number (TIN), which can take several forms depending on whether you are an individual or company.
  2. W-8BEN-E form, which individual vendors, such as Apple and Amazon, typically present to you as an online form.

Let’s take a look at both steps, and for the second, I’ll address it from the perspective of the tax setup with Apple for monetizing your apps.

US TIN Requirement

The crucial piece of data you need to get setup is a US TIN. This can take one of several forms, including ITIN, SSN, and EIN. For a non-US resident, the applicable number is based on whether you are an individual, or corporation.

Individual: You used to need to apply for an ITIN and you’ll see that talked about a lot when you research this topic. Forget about the ITIN as you will not need it. Today, all you need is a foreign income tax identification number, which means the tax identification number for your country. For Canadians, this is your SIN. Some other examples are NI number in the UK, PPS number in Ireland, and HKID for Hong Kong. You should check the specifics for your country.

Corporation (Company): In Canada, if you are a corporation, you need an EIN (Employer Identification Number). This is the part that has changed for the better. Obtaining an EIN is now very simple. Follow these steps and you should have an EIN in a short time, depending on the wait times when you call.

  1. Call the IRS at +12679411099 and tell them you need an EIN for your company.
  2. They will ask what your business is, and you can tell them you are selling software or whatever digital products you will sell.
  3. You may be asked if you’ve filled out the SS-4 form. It is OK to say no, but tell them you have it open on your computer (and do open it). The process to obtain the EIN is that they will ask you a bunch of questions, and these questions are from the SS-4 form, so having it open means you can follow along and more easily interpret what they are asking.
  4. The agent will actually lead you through the required questions, so it is super easy. When they ask for an answer to step 10, the answers seem flexible, but you can tell them to check either of these two boxes:
    • Compliance with IRS withholding regulations
    • Other (then state “For Tax Treaty Purposes Only” as the other data)
  5. After a few minutes of you answering the SS-4 questions, the agent will do a search for company name uniqueness, and then you’ll be given your EIN number. It is as simple as that!
  6. Store that number in a safe place.

W-8BEN-E and Vendor Specific Setup

Now that you have either your a) tax identification number for your country, or b) an EIN, depending on whether you are an individual or company, you need to fill out a W-8BEN-E form, which is the new version of the W-8BEN.

This is generally very easy as well, because major vendors, such as Apple and Amazon, walk you through it online as part of their tax setup, so you barely know you are even filling out a “form”.

For Apple, take note of what you see on this screen when you go into Agreements, Tax, and Banking on iTunes Connect.

Screen Shot 2016-02-20 at 10.23.53 AM

I assume this screen will reflect your country of residence based on your developer membership data. For myself as a Canadian, it is necessary to click Setup, download the Canada Tax Forms, fill the form out, and send it to Apple. Instructions are included when you download. If you are not a GST/HST registrant, then you can leave the business number blank, otherwise you can fill in your GST/HST number.

There is plenty of confusion as to how GST/HST is handled by Apple and yourself as the developer. It is actually quite simple. The form you fill out is agreeing that Apple will charge GST/HST on your behalf, and remit it to the CRA. Instead of actually charging the GST/HST for your customer, Apple absorbs this amount from their commission. The makes it easier for you, because Apple pays CRA the GST/HST on your app sales, and therefore you do not remit GST/HST on the income earned.

Once you send off the GST506 E form to Apple, don’t sit and wait for it to arrive back, as it can take a number of months to be sent back. Proceed to filling out the U.S. Tax Forms online.

In my case, I did the US forms about a month after the Canadian one, and after filling out the US forms the Pending Tax status was removed within a day. Prior to completing the US forms online, you will see no status update even if Apple has processed your Canadian (or other country) tax forms.

The US form you are filling out is actually the W-8BEN or W-8BEN-E. On the form, if you are not a company, you can just use your personal tax identification number (SIN for Canada) for the Foreign tax identifying number. At the time of writing this post, this was section 6.

If you are a company and have obtained the EIN, leave Foreign tax identifying number blank. For U.S. taxpayer identification number enter your EIN, and also click the EIN radio button.

Update March 26: I’ve come to the conclusion that W-8BEN is not replaced by W-8BEN-E, but instead, the W-8BEN is for individuals, whereas W-8BEN-E is for “entities, ie. corporations. If you are filling out the latter, it is section 14 that you check off the first two items, and then leave section 15 blank if you are after the standard elimination of the IRS 30% withholding tax. They don’t make this ultra simple, and to add to any uncertainty, there are many companies that will still present and accept the W-8BEN form online even for a corporation. The reference below to Section 9 is assuming the W-8BEN form.

Check off the Section 9 box, and select only the Income from the sale of applications in Section 10. Check off the Certification box, ensure your name is there as Beneficial Owner, and enter your Capacity (something like Owner, Director, President, etc.). Click Submit, and within about a day you’ll see the status change, which means you can begin earning income from your apps.

Disclaimer: This is for entertainment purposes only. OK, that part is not true 🙂 … it is not for entertainment. This post is to help others. What I do need to say is that I am not a lawyer or an accountant, so please remember that this post summarizes my personal experience from going through this process in Canada. There may be differences in other countries, and the procedures could change over time, so just be sure you are aware of the specifics for your country, and that you understand the forms and procedures.

If there is something you think could be added to this post to benefit others, please feel free to leave a comment.

I hope this post helps to simplify the process for you.

January 9, 2017 Update
Nathan Vogel kindly contacted me to comment on this post (host platform was preventing leaving the comment). Here is Nathan’s comment below.

You should update this article, I contacted Apple and they replied with this :

“Under our current model, application sales by non-U.S. developers on the App Store are not subject to U.S. tax withholding or reporting. Therefore, completion of Part II – Claim of Tax Treaty Benefits, is not required in order to certify your foreign status. In addition, you are not required to provide a U.S. taxpayer identification number (TIN) in Part I (line 8) when when certifying foreign status.

For more information regarding this, you can reference the Tax FAQ in iTunes Connect”.

Most of the information out there seems to confirm that there’s no need to fill Part II and get a TIN, but filled Part II as described here : https://forums.developer.apple.com/thread/52583 by thomas.pintaric just to make our intention clear.

Thanks for your comment Nathan. I’ve not had time lately to look into details on tax setup, so hopefully with this added data, it will help others on the tax setup process.

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