Hi, currently residing in Malaysia, and looking for ways to minimize the 30% withholding tax for Amazon KDP.
Here's the current setup I'm planning so far.
1) US C Corp.
- Receive the royalty from Amazon.
- Deduct advertising/editing cost etc to get nett.
- Transfer out the nett from C Corp as royalty, keeping the balance in C Corp as 0, doing the 30% withholding at this stage. I can accept that the US wants 30% tax, but the way it's now is like they are taxing 30% on gross revenue instead of nett profit. The C Corp is just to get the advertising cost out of the equation.
Tax impact: Malaysia income tax (~21%. Max income tax can go up to 30%.)+ 15% = ~36%? I read that there's foreign tax credit up to 1/2 of foreign tax paid. So, 1/2 of 30% = 15%. Double taxation on the income source.
If I want to further reduce it.
2) Estonian e- residency.
- Transfer from US C Corp to Estonia. 10% tax withholding.
- Pay royalty from Estonia @10% WHT. Will incur Malaysia income tax until progressive effective tax become ~20%.
- Remaining will be paid out as dividend @20% to Estonia. Malaysia doesn't tax foreign income/dividend.
Tax impact: Prob around 30%? 1 - (0.9 * 0.8)
Is this feasible? I'll probably do the accounting myself since it's just money in, money out. I'm not even planning to do deduction at the C Corp cause I don't want the IRS to come auditing around. Just trying to justify the legality of this, and whether it's worth the paperwork. Any other method that doesn't involve moving to other tax residencies? Though if the money is good, maybe I will.
Here's the current setup I'm planning so far.
1) US C Corp.
- Receive the royalty from Amazon.
- Deduct advertising/editing cost etc to get nett.
- Transfer out the nett from C Corp as royalty, keeping the balance in C Corp as 0, doing the 30% withholding at this stage. I can accept that the US wants 30% tax, but the way it's now is like they are taxing 30% on gross revenue instead of nett profit. The C Corp is just to get the advertising cost out of the equation.
Tax impact: Malaysia income tax (~21%. Max income tax can go up to 30%.)+ 15% = ~36%? I read that there's foreign tax credit up to 1/2 of foreign tax paid. So, 1/2 of 30% = 15%. Double taxation on the income source.
If I want to further reduce it.
2) Estonian e- residency.
- Transfer from US C Corp to Estonia. 10% tax withholding.
- Pay royalty from Estonia @10% WHT. Will incur Malaysia income tax until progressive effective tax become ~20%.
- Remaining will be paid out as dividend @20% to Estonia. Malaysia doesn't tax foreign income/dividend.
Tax impact: Prob around 30%? 1 - (0.9 * 0.8)
Is this feasible? I'll probably do the accounting myself since it's just money in, money out. I'm not even planning to do deduction at the C Corp cause I don't want the IRS to come auditing around. Just trying to justify the legality of this, and whether it's worth the paperwork. Any other method that doesn't involve moving to other tax residencies? Though if the money is good, maybe I will.
