Best offshore jurisdiction for collecting AdSense income?

[Zaki]

In your particular case, you can reside in a country that has no tax treaty since the revenue you take from the C-corp to your LLC is not considered royalties, right?

of course, they are not royalties because you file w-9 form
(meaning that you are a real US Entity paying taxes at end of the year like any other US corp so google treat like other US Entities)

So no 30% will be withheld.
Can't this structure be seen by IRS as a way to circumnavigate the 30% tax since you basically create a C-corp but take all the revenue of it outside of the company with your LLC and the C-corp is also managed outside US. Is this the solution you are using for your company?

1. the answer is No
2. even if IRS cares and wants to audit you, it's not you who will be on the hook(in that case Google will be)because like I told you before all forms will be submitted to the Payor(Google)not IRS.
3. IRS only cares about you paying taxes(in that case you need a US CPA to help you with that)

 

[startfleetio]

Thank you for your suggestions.

The problem is if the US C-Corp is managed and directed outside the US are we sure it can be seen as a US opaque entity even if it is a C-corp?
From what I understood the place of management and controls determine where the company resides.
In your particular case, you can reside in a country that has no tax treaty since the revenue you take from the C-corp to your LLC is not considered royalties, right? So no 30% will be withheld.
Can't this structure be seen by IRS as a way to circumnavigate the 30% tax since you basically create a C-corp but take all the revenue of it outside of the company with your LLC and the C-corp is also managed outside US. Is this the solution you are using for your company?

At this point the same may work for an LTD for example or any other opaque company that has a tax treaty with US and then you take out all the revenue as expenses before paying the corporate tax.

If you use the C-Corp to receive the royalties, you need to pay corporate income tax on the profits since Corporations are "US Persons" by definition.
And then when you pay dividends to you from the Corporation, the dividends are still subject to FDAP income withholding taxes.

I read the whole thread, I found a lot of mistakes, errors, misleading, misinterpreted information.
so I want to clarify some things here

let's break it down one by one:


first of all, we have to distinguish between Admob and AdSense :
Google AdMob is a mobile advertising company(it's an ad-networks like AppLovin..)while Google Adsense is for websites.

that's why we have to understand the difference between Admob and AdSense because each one has its own tax rules and regulations
AdSense POV: in that case, Google will deduct taxes when NRA creators earn income from viewers in the US.as you said:

that's correct only from AdSense perspective (if you are a YouTuber, blogger, content creator and you have a US audience)
But then you said :

so it appears that you are dealing with Admob, AppLovin.. Not Adsence
in that particular situation :
Admob POV: Google consider your earnings as Royalties (which is an FDAP, and FDAP Income is subject to US Taxes) that's why US Company(in that case Google) will deduct up to 30% as withholding tax; Meaning your earnings would be subject to a 30% withholding tax(it can be reduced(tax treaty)).

You are correct on many counts. There are a lot of wrong information regarding US taxes here.

Adsense indeed are not subjected to FDAP income and thus no withholding because Google treat it as "Services". If you are a non-resident alien providing services outside of the USA, it is regarded as foreign source income. This link from Google says it all. FAQs about submitting US tax info in AdSense - Google AdSense Help

Do you have the reference to where they treat Admob revenues as royalties? I can't seem to find it.

 

[rowena]

Apple IAP revenue is not considered as royalties and is not subject to any withholding tax.

 

[OffshorePhantom]

If you use the C-Corp to receive the royalties, you need to pay corporate income tax on the profits since Corporations are "US Persons" by definition.
And then when you pay dividends to you from the Corporation, the dividends are still subject to FDAP income withholding taxes.


You are correct on many counts. There are a lot of wrong information regarding US taxes here.

Adsense indeed are not subjected to FDAP income and thus no withholding because Google treat it as "Services". If you are a non-resident alien providing services outside of the USA, it is regarded as foreign source income. This link from Google says it all. FAQs about submitting US tax info in AdSense - Google AdSense Help

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Do you have the reference to where they treat Admob revenues as royalties? I can't seem to find it.

I think it count as royalties since if you do not provide a treaty to use they withhold the 30% tax.

At this point, if we use a C-corp and have to pay the corporate tax I do not see how it can be useful.
The only way is to create another business that takes out all the revenue of the C-corp as a business expense but I do not know if in some extent you are the owner of both the C-corp and the business which invoices the C-corp to take out all the revenue to pay no corporate tax this can be seen as an issue from IRS standpoint.

 

[Zaki]

You are correct on many counts.

Thanks

There are a lot of wrong information regarding US taxes here.

Such as ?.!.!

Adsense indeed are not subjected to FDAP income and thus no withholding because Google treat it as "Services". If you are a non-resident alien providing services outside of the USA, it is regarded as foreign source income. This link from Google says it all. FAQs about submitting US tax info in AdSense - Google AdSense Help

if google is a bit conservative about how they consider profits gained by NRA it doesn't mean they won't withhold.
in practice, you are obliged to fill tax information form on your AdMob/Adsense account

Do you have the reference to where they treat Admob revenues as royalties? I can't seem to find it.

yes of course
But you don't have to, Cos in practice when you fill your tax information; you either go with option 1: you are a US Persons(C-Corp) -->W-9
option 2: you are NRA-->W-8
there is no middle ground.

Contracting entity is Google Inc. - Google AdMob Help

Submit your US tax info to Google - Google AdMob Help

Depending on your location, we may be required to collect tax-related information from you. If you are required to provide your tax information to Google, you can do so within your AdMob account.&nbsp

support.google.com

At this point, if we use a C-corp and have to pay the corporate tax I do not see how it can be useful.
The only way is to create another business that takes out all the revenue of the C-corp as a business expense but I do not know if in some extent you are the owner of both the C-corp and the business which invoices the C-corp to take out all the revenue to pay no corporate tax this can be seen as an issue from IRS standpoint.

you don't have to create another business, you simply pay yourself from your corp as management fees.
but like I said before you need a US CPA to help you.

 

[startfleetio]

Such as ?.!.!

I'm not referring to you

 

[rowena]

If you have income from Apple, then there is no withholding tax. Does not imporant your residency or DTT agreements but I don't know why they require W8BEN. The official response below.

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.

 

[startfleetio]

If you have income from Apple, then there is no withholding tax. Does not imporant your residency or DTT agreements but I don't know why they require W8BEN. The official response below.

Because PSPs are obliged to keep a record of it if they pay more than $600 to an individual for the year

 

[badabums]

Now it's 2023 and someone from this thread might have try and see AppLovin, Meta, AdMob and Google Play IAPs/subscriptions in action with their withholding taxes and such. Could you please share your real world experience with the community?

@hireblade89 did you try any offshore jurisdictions or UAE? For instance, I was able to register a corporation in St Lucia + bank account there and now I see (too late to change anything) that St Lucia does not have tax treaty with the US, so at least all revenue from US users in all Google products is subject to the 30% withholding tax, right? It looks like an offshore dream cannot come true. I was so happy that I was able to establish an entity in the Carribean which is not blacklisted by the EU that now I can't believe that my dream is ruining because of the DTT. Unfortunately, a notable portion of my revenue is generated by users from the US. Also, the same s**t happens with my SMUSLLC - my country of residency does not have DTT with the US and it is being services by Google LLC (not Ireland), so Google will withhold 30% from my revenue generated by users from the US, right?

And one more question about SMUSLLC is still open: what tax will be applied by the IRS to money distributions from this LLC to my personal US accounts? I'm a non-resident alien in the US. Most CPAs told me that this type of distribution will be considered as US sourced income and is subject to the federal income tax - is it correct? Who did this type of business with 6-7 figure amounts?

 

[OffshorePhantom]

@hireblade89 did you try any offshore jurisdictions or UAE? For instance, I was able to register a corporation in St Lucia + bank account there and now I see (too late to change anything) that St Lucia does not have tax treaty with the US, so at least all revenue from US users in all Google products is subject to the 30% withholding tax, right? It looks like an offshore dream cannot come true. I was so happy that I was able to establish an entity in the Carribean which is not blacklisted by the EU that now I can't believe that my dream is ruining because of the DTT. Unfortunately, a notable portion of my revenue is generated by users from the US. Also, the same s**t happens with my SMUSLLC - my country of residency does not have DTT with the US and it is being services by Google LLC (not Ireland), so Google will withhold 30% from my revenue generated by users from the US, right?

Unfortunately, you have to establish your company in a jurisdiction that has a DTT with us in order to avoid the WTH on US purchases or ad views. You can then shift the profits to an offshore entity or UAE company using for example a management contract or something else.

And one more question about SMUSLLC is still open: what tax will be applied by the IRS to money distributions from this LLC to my personal US accounts? I'm a non-resident alien in the US. Most CPAs told me that this type of distribution will be considered as US sourced income and is subject to the federal income tax - is it correct? Who did this type of business with 6-7 figure amounts?

This really depends on the nature of the income, if it is US source income or not. Generally wherever a WTH tax is applied then if you are not a US resident alien no need to pay any federal tax and you can distribute profits without any problems. If there is no WTH applied then you have to check the nature of the income, if it is US-sourced income or not, and the true of the service provided.

In your case if the WTH is applied no need to pay any federal taxes. But also make sure that your country of residency does not see the US LLC as a local company since it is managed from there and tax it.

I am glad to discuss more in DM if you want.