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Heads Up: YouTube Will Now Be Taxing Creators Outside of the U.S.

That means you.
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Before governments caught up to how much money the internet was making, YouTube was one of the many democratized platforms where content creators could earn income on the side or as a full-time career. There are some YouTubers, even in the Philippines, that earn thousands of dollars every month, but that could all change.

YouTube has just announced that all monetizing creators outside of the U.S.A. will now be taxed by the U.S. government through YouTube due to American tax laws. What does this mean? It means that your income from YouTube will take a hit, especially if you have a large audience from the U.S.

Here the fast facts you need to know:

The income of Filipino YouTubers will be affected.

According to YouTube, the new policy is due to Chapter 3 of the U.S. Internal Revenue Code, which requires it to collect tax information from all monetizing creators outside of the U.S. If these creators are earning income from U.S. viewers, then Google must deduct taxes from these creators.

Why? Because Google is registered as a U.S. corporation and must follow U.S. tax laws.

Philippine content creators already pay Philippine taxes on YouTube, just as U.S. creators already pay U.S. taxes. But now, Philippine creators will have to pay another tax proportionate to the income and viewership they get from the U.S. If you have zero or a small number of viewers from the U.S., then you likely won’t be affected, but if you have a strong base in the U.S., then read on.

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Your U.S. taxes will depend on your tax form, U.S. viewership, and Philippine-U.S. tax treaties.

First, you’ll need to submit your tax information ASAP. According to YouTube, if you don’t submit your tax form, then the site will assume you are a U.S. taxpayer and will withhold 24 percent of your total earnings worldwide, not just your income from the U.S.

However, if you do submit your tax information ASAP, then you will only be taxed based on your U.S. viewership. The example presented goes as follows: If you earn $200 from U.S. viewers and your tax rate is 30 percent, then $60 will be withheld and you’ll be able to take home $140.

The exact tax rate will depend on the Philippines tax treaty with the U.S. According to YouTube, Google AdSense will automatically calculate your tax rate based on that treaty, but if you want to double-check, then we highly suggest asking an accountant friend to read through this. Based on the Philippines-U.S. tax treaty, your U.S. tax rate shouldn’t go over 15 percent.

However, YouTube creators in other parts of the world are luckier than we are. For example, U.K. creators will not have to pay extra taxes because of the U.K.-U.S. tax treaty, while Korean creators will only pay 10 percent tax due to the South Korea-U.S. tax treaty.

Why is this such a big deal?

YouTube’s new tax system is angering plenty of creators, and with good reason. The “second” tax rate on top of the taxes international creators are already paying to their home countries means that their income from YouTube could be drastically decreased. Some have argued that if they’re being taxed for U.S. viewers, there should be an option to stop their content from showing in the U.S. One YouTuber pointed out that if the U.S. tax will act as a withholding tax, then the U.S. government or YouTube should provide the content creators with something in return like regular employers.

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On another note, YouTube’s move to tax creators for U.S. viewers could influence other country tax systems to enact similar laws. The tax on U.S. viewers could extend beyond American borders, causing even more concern to content creators.

Overall, YouTube’s new tax policy is part of a much bigger picture of the tensions arising between governments and internet businesses. Earlier this year, a reverse situation occurred in Australia when the government passed a law requiring Google and Facebook to pay publishers/creators for news content that appears on their platforms. That is a whole other story, but it fits into the growing debate over where digital content stands when it comes to taxes, payments, and the like.   

After all, in capitalism, nothing is free.

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Anri Ichimura
Section Editor, Esquire Philippines
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