Why Google withholds US taxes?
Google has a regulatory responsibility under Chapter 3 of the US Internal Revenue Code to withhold tax and report where non-US payment beneficiaries receive certain types of US sourced income. It also has obligations under Chapter 61 and Section 3406 of the US Internal Revenue Code to perform backup withholding where applicable. The tax information submitted to Google during enrollment is used to identify the correct rate of withholding on future payments made to you, where applicable. If reporting is applicable, Google provides a reporting form (Form 1042-S or Form 1099) annually.
What types of US withholding may be applicable?
Chapter 3 US tax withholding
If you've been validly documented as a non-US business or individual, only the portion of your revenue earned from US users is subject to US withholding taxes and reporting. These are revenues (such as professional services, content licensing, subscriptions) that are generated from usage in the United States. US suppliers should provide a valid US tax identification number to indicate exemption from US tax withholding (including under Chapter 3 of the US Internal Revenue Code). The US withholding tax rate that applies is based on the tax documentation you’ve provided to Google.
If a valid US tax form (W-8 / W-9) isn't provided, Google may apply backup withholding at 24% or chapter 3 withholding at 30% on applicable payments. This rate may only be reduced if you're a tax resident of a country or region that has an income treaty with the US and you provide a valid tax form with a valid treaty claim. You can find the finalized amount withheld in the remittance advice issued with your payment.
In some cases, Google may be required to withhold 24% from payees on all eligible earnings, including:
- If the tax information entered on your US tax form (W-8 / W-9) is found to be incorrect or inaccurate, and you’re presumed to be a US person under the US tax withholding presumption rules.
If you've had earnings withheld from a payment, it's because our records indicated that you were subject to tax withholding at the time of payment.
If you don't believe that you're subject to tax withholding, please update the tax information you have on file with us.
When is US tax withholding applicable?
Generally, a documented non-US person (i.e., valid Form W-8 on file) is subject to US tax on income that is earned from US sources. For example, if a non-US person performs services in the US, then the payments related to the services performed in the US are subject to US income tax withholding. The withholding rate depends on the type of income received, whether the payee is eligible for treaty benefits and if eligible, a validly completed claim for treaty benefits on a Form W-8. The IRS requires the party making the payment to a non-US person to withhold, and if applicable, deposit the amounts with the IRS, and complete certain information returns at the end of the calendar year in which payment was made.
What’s the rate of withholding and can this rate be reduced?
If a valid US tax form (W-8 / W-9) isn't provided, the default withholding rate is generally 30% on applicable payments. This rate may be reduced if you're a tax resident of a country or region that has an income treaty with the US, if the type of income you receive is eligible for a treaty benefit, you meet all the treaty requirements and make a valid claim for treaty benefits. In some instances, the default withholding rate is 24% where an undocumented supplier is presumed US.
How is US tax info submitted to Google?
All suppliers doing business with any of our US entities, regardless of their location in the world, are required to provide US tax information during enrollment. For our suppliers located outside of the US, you will be asked to perform an additional step during the registration process to provide your Form W-8 within our MarkIT application. Please submit your tax information as soon as you receive this link during the enrollment process to expedite your enrollment.