AMA: I've made a mobile app (App Store & Google Play) with in-app purchases and it's anonymous

[Asterion]

Hello!

I wouldn't want to overestimate my experience, but I thought about giving something back to this fantastic community.

I have at last managed to publish a mobile app for iOS and Android through App Store and Google Play. The app has in-app purchases, which have already been paying revenue and it's run through a US SM LLC while being a Non-Resident Alien to the US and it's anonymous to the lay person with a normal brain and an internet connection.

I don't imagine this will be the most popular thread, but I thought I'd put it out there and answer questions as they come.

Again, thanks to the abundant advice I have received on this pages, without which I wouldn't have been able to get where I am (or it would have been much harder).

 

[Marzio]

Congrats for your app.

One thing that i would love you to clarify for me is if there are any US withholding taxes on your in-app purchases.

Some say yes, like this guy, some say no, so i would like to understand how things work from real experience

 

[Asterion]

How can you be the one asking me that? You're the master of it all!

Doesn't it all come down to your interpretation of that passage of the US-[country of choice] tax treaty?

Regarding the link: the guy doesn't specify whether he is a person or an organization on Google Play/App Store. Also Australia might come into play (and I'm not based there).

From my experience:
App Store is quite nonchalant. You have to submit an (erroneous) W9 and then supersede it with a W8BEN filled in manually and sent as a PDF to a specific e-mail address for Tax Vendors.

Google Play is very specific. First you need a payee to own the payment account (payments.google.com) tied to the dev account, and they have to be in the same jurisdiction as the company. See this comment here, if it's available to a non-dev account at all. And, realistically, they have to be the name on the dev account that publishes the app. So it's nearly impossible to publish through the US without a "person of capacity" that can have the payments and dev account in their name and for which you have to document a "reasonable written explanation". BIG CAVEAT: if you are going through an organisation, of course.
Following this, the bots of the Google Dev Console will almost certainly request further documentation in the most occult and hermetic ways. In particular, there was ZERO explanation of what was unsuitable in what I provided, which I solved only by managing to get a call back from the Payments team (which in turn is not exactly the tax team, so they can't advise on many things), which you can only get in very rare moments without getting the "our people are too busy bla bla bla.

So in the end you submit something that doesn't get refused by the bots straight away, and after a few days you get an overall approval. Whether this is from the Google tax team as they send your W8BENs and documents to the IRS (so she said on the phone) or if this approval is already the IRS's, I don't know. I'll probably investigate further soon. This is my situation. I'll ask about that lower "W8BEN: Default" and whether I should resubmit the whole thing (i.e. some 15 mins worth of forms through which your input populates a W8BEN which then you can download).

 

[avalanche]

Doesn't it all come down to your interpretation of that passage of the US-[country of choice] tax treaty?

No, it does not come down to your interpretation , it comes down to whether you'll be investigated for reporting incorrect amounts. You need to clarify whether *your* US entity needs to pay withholding taxes from payments to *you* at any point, not Google or Apple.

 

[Asterion]

I have consulted with both a US tax specialist and one in my local jurisdiction and there is no problem from the US.
This said, Marzio had previously argued that according to Article 4 of the DTT that the free lunch you get fromt the US does not apply if you are only liable to tax sourced in that jurisdiction.

id est: if the type of income that the US won't tax you on "when it leaves the US" is not taxed in your jurisdiction either, then the US will want its tax.

More to my point: I started to have revenue just in Q4 of 2023. Anonymity was a much higher priority for me than tax efficiency. I'll keep investigating my status and make sure I'm in line with any tax owed.

 

[Marzio]

You're the master of it all

How can you be the one asking me that?

My question wasn't about US WHT but instead was about which items of income are subject to WHT.

In Apple's App Store i know in-app purcahses are considered "service income" and service income isn't subject to US WHT.

On the Google's side of things things are more complicated as some items of income are subject to WHT and other don't.

My question was about finally get a clear picture on which items of income are subject to US WHT and which not.

First you need a payee to own the payment account (payments.google.com) tied to the dev account, and they have to be in the same jurisdiction as the company

Are you saying that a Georgian company with a Georgian dev account will not be accepted if the shareholder lives in Singapore? That's crazy!

 

[Asterion]

On the Google's side of things things are more complicated as some items of income are subject to WHT and other don't.

I have subscriptions only as in-app purchases, no ads or purchase of items, and judging from the greenlights I got, they are not subject. The way their W8BEN adapts to your situation is impressive and I think leaves little room for doubt.

Are you saying that a Georgian company with a Georgian dev account will not be accepted if the shareholder lives in Singapore? That's crazy!

The person owning the Google Payments account used for the app must prove residency or maybe nationality to be the same of the legal entity used as the Developer Organisation used to create the Dev account. In the case you mentioned, a Georgian passport might be enough for the person to be "close enough" (location-wise) to the company used as Developer Organisation.
If that condition cannot be met, you'll have to rely on an external person that is resident/national of the location of your company and somehow demonstrate their connection to the business.

 

[Marzio]

The person owning the Google Payments account used for the app must prove residency or maybe nationality to be the same of the legal entity used as the Developer Organisation used to create the Dev account.

So for example a Georgian company with a Georgian nominee director would work then.

 

[Asterion]

Yes, the UBO of the company can be from anywhere else. Their identity must be disclosed when submitting tax information for the US, and the nominee payment person must show that they have the necessary power of attorney to submit that info on behalf of the UBO.

 

[Jay9]

I just posted this related thread. Can I ask what you are doing with the Apple side of things. Im doing App Sales (not in app purcases or subscriptions) as an individual not an organisation, and started late last year as well. (I have no connection to the US at all except some people who buy the app are in the US) The app itself does not much income.

Im in Apples W-8BEN category (no servers or connection to the USA) and as far as I can tell, Apple appears to not be witholding any income from App Sales. It's not clear to me if that no income tax is due to the US government, or simply that Apple isn't required to withold anything. It seems to me that a non-US resident no-US citizen shouldn't need to pay tax on income sourced from apple (that is based on underlying "book/app sales") but its not 100% clear to me if that is the case.

What filings are you making with the IRS, if anything?

 

[Asterion]

Hi!
Apple is not withholding, and neither is Google as far as I have analysed the payouts. If you want to do the same, watch out because Apple looks like they pay you at the end of the month or in the first days of the following, but they actually have an average delay of 33 days.
Apple fiscal calendar year and payment dates (updated for 2024)
Google pays on the 15th of each month and for the calendar month before.

Last US tax year I had the company already, but no income. My accountant filed 5472 and 1120. We might have to add 1040NR this year, as I have income. For this one year I plan to throw more development and zero the profit of the LLC anyway. So whilst the LLC's accounting will have figures, I want to make sure there isn't something left that will pass through to me. For this year.

I had reliable advice from an American tax consultant and accountant that my specific situation is not liable of US taxation. It's likely the same for you, but you'll have to check for yourself.

Also, make sure you do the admin to have Apple and Google's cut (after VAT) to be 15% and not 30%. It's not the default, especially not for Apple.