Question Low tax setup for self-pub Amazon royalties? EU citizen options?

[alexx999]

Hello,
I am Self-Publishing Non-Fiction Books on Amazon, I am making 5000$/month but my income is doubling almost every month and I am scaling very fast, I think I will reach 10k in the next 2 months and 20k by the end of the year since I found a scalable brand.
I am an Italian resident, and my taxes right now would be 40% of my Income + I am paying 22% VAT on the Advertising, I am willing to move, what are my options for Low Taxes? Possibly Low-cost setup and headache?

I have done my research and I would be taxable where my residency is. Therefore I need to change residency, my long-term goal is to travel and move around with tourist visas in the Caribbean or South East Asia, spending only a few months per year in Europe between Spain and Italy. I own a house split at 50% with my mother.

I have a contact in Portugal where i can have the personal address for the NHR easily, but, the problem with Portugal is that, i'd still need to pay 23% VAT on ADS ( I am projecting to spend tens of thousands of $$ on ads in the US market in the next few months/year, so the optimal setup would allow me to avoid VAT, BUT I am still willing to pay for it if the overall taxation is favorable).

Is there a VAT Refund for Maltese LLC?

Opening a US LLC would allow me to avoid paying VAT, but then i still would pay taxes in Italy right now, so i was looking for the LLC + NHR option, and that would be optimal BUT, it is a grey area since there are no strict government rules for determining if a LLC is a transparent entity or a Opaque entity, someone says that in Portugal they are NOT going after Expats in Portugal, especially i think for people like me that would 100% remain at 100k-200k$ per year MAXIMUM.
Other Options I am aware of:

Malta LLC with a director + NHR in Portugal = Total Tax Rate of 5%

Cyprus + NHR = 12,5%

UK + NHR = 19%

UAE i think it is too expensive for my business right now, not only setting the company but the headache to move there once every 6 months, it is not appealing to me....

What other options do I have? Of course since my business will likely remain small, i prefer low cost set-up, but i am willing to embrace difficulties and learn about all the alternatives to optimize my taxes!
thanks

 

[thedirtyteller]

It's actually called a double tax treaty only to determine how double tax will be treated, it does not necessarily mean there will not be tax in two countries. It is only the resolution of that double tax. If you read the treaty between Romania and USA in regards to royalties, it clearly says it can be taxed in both countries. Whereas the treaty with Georgia clearly states it will be taxed only in one country, same as the United Kingdom etc...

Portugal is another example where double tax is allowed on Royalties, it is simply capped at 10% for the country that applies WHT depending on the direction of the exchange.


Further more, it actually says in the treaty between Romania and USA that Royalties will be treated as income in the contracting state.

So, those royalties he is receiving should be taxed as income in Romania.

https://www.irs.gov/pub/irs-trty/romania.pdf
Source: Article 12, sections 1 & 6.

Just answering what you questioned above as well. I don't have a company or any setup. I receive the royalties on my bank account and file in a form each year, only paying social contributions and no income tax.

I don't know what you mean by "should be taxed". If you also live out of royalties you can ask this question to any Romanian accountant and they will give you the same information. I have a friend who's been doing this for five years, and I just submitted my first form a month ago, which I got help from an accountant to fill in. Obviously, accountants here know better than IRS how you're supposed to be taxed in Romania, and I did not pay any income tax since it was already taxed in the US, only social contributions/pension

If you have a SRL or a company, you will pay corporate tax and dividend tax so 20 percent in total, because you don't get a tax credit on those 10 percent withheld, plus you have to deal with bureaucracies and headaches. I'm not sure if that's what you're referring to.

 

[SmartestSmarty]

Just answering what you questioned above as well. I don't have a company or any setup. I receive the royalties on my bank account and file in a form each year, only paying social contributions and no income tax.

I don't know what you mean by "should be taxed". If you also live out of royalties you can ask this question to any Romanian accountant and they will give you the same information. I have a friend who's been doing this for five years, and I just submitted my first form a month ago, which I got help from an accountant to fill in. Obviously, accountants here know better than IRS how you're supposed to be taxed in Romania, and I did not pay any income tax since it was already taxed in the US, only social contributions/pension

If you have a SRL or a company, you will pay corporate tax and dividend tax so 20 percent in total, because you don't get a tax credit on those 10 percent withheld, plus you have to deal with bureaucracies and headaches. I'm not sure if that's what you're referring to.

Thank you, you’re best placed to answer and I’m glad you can confirm. So the set up in Romania is not so bad.

Do you pay any VAT on advertising in countries outside of Romania? Just wondering.

Hello,
I am Self-Publishing Non-Fiction Books on Amazon, I am making 5000$/month but my income is doubling almost every month and I am scaling very fast, I think I will reach 10k in the next 2 months and 20k by the end of the year since I found a scalable brand.
I am an Italian resident, and my taxes right now would be 40% of my Income + I am paying 22% VAT on the Advertising, I am willing to move, what are my options for Low Taxes? Possibly Low-cost setup and headache?

I have done my research and I would be taxable where my residency is. Therefore I need to change residency, my long-term goal is to travel and move around with tourist visas in the Caribbean or South East Asia, spending only a few months per year in Europe between Spain and Italy. I own a house split at 50% with my mother.

I have a contact in Portugal where i can have the personal address for the NHR easily, but, the problem with Portugal is that, i'd still need to pay 23% VAT on ADS ( I am projecting to spend tens of thousands of $$ on ads in the US market in the next few months/year, so the optimal setup would allow me to avoid VAT, BUT I am still willing to pay for it if the overall taxation is favorable).

Is there a VAT Refund for Maltese LLC?

Opening a US LLC would allow me to avoid paying VAT, but then i still would pay taxes in Italy right now, so i was looking for the LLC + NHR option, and that would be optimal BUT, it is a grey area since there are no strict government rules for determining if a LLC is a transparent entity or a Opaque entity, someone says that in Portugal they are NOT going after Expats in Portugal, especially i think for people like me that would 100% remain at 100k-200k$ per year MAXIMUM.
Other Options I am aware of:

Malta LLC with a director + NHR in Portugal = Total Tax Rate of 5%

Cyprus + NHR = 12,5%

UK + NHR = 19%

UAE i think it is too expensive for my business right now, not only setting the company but the headache to move there once every 6 months, it is not appealing to me....

What other options do I have? Of course since my business will likely remain small, i prefer low cost set-up, but i am willing to embrace difficulties and learn about all the alternatives to optimize my taxes!
thanks

Have you found any solution to the VAT on ad spend? I’m thinking it will only be waived if you have a company and a VAT number.

Let me know if you have found any solution to this, royalties are paid net of VAT, and VAT is a heavy expense if not reclaimed.

Also, with LLC you'll avoid paying VAT.

Quick question in regards to this, the LLC will avoid VAT in the US, but do you know if it will have to pay VAT on UK advertising spend?

 

[thedirtyteller]

Thank you, you’re best placed to answer and I’m glad you can confirm. So the set up in Romania is not so bad.

Do you pay any VAT on advertising in countries outside of Romania? Just wondering.


Have you found any solution to the VAT on ad spend? I’m thinking it will only be waived if you have a company and a VAT number.

Let me know if you have found any solution to this, royalties are paid net of VAT, and VAT is a heavy expense if not reclaimed.



Quick question in regards to this, the LLC will avoid VAT in the US, but do you know if it will have to pay VAT on UK advertising spend?

I don't pay for advertising. If you are publishing consistently, writing to a market and writing good content, word of mouth is all you need. Just look what E. L. James accomplished

Although I would imagine you'd be paying VAT. I don't see why you shouldn't as a physical person.

 

[SmartestSmarty]

I don't pay for advertising. If you are publishing consistently, writing to a market and writing good content, word of mouth is all you need. Just look what E. L. James accomplished

Although I would imagine you'd be paying VAT. I don't see why you shouldn't as a physical person.

Fair enough. I found that advertising only amplified my sales. I'm in the UK with a VAT number so I do not pay VAT in the USA, however a move to Romania and a switch of structure would mean VAT has to be paid and that is a fat 20% on spend.

It looks like what has been suggested is the best option so far, a US LLC disregarded entity, and then tax residency in Georgia.
However, I am not too sure that the tax rate will be zero due to the LLC, rather than receiving the royalties directly as an individual.

 

[Marzio]

it does not necessarily mean there will not be tax in two countries.

Nobody said that.

I said that the purpose is to avoid being double taxed so you are only taxed once.

So, those royalties he is receiving should be taxed as income in Romania.

Royalties received should be taxed as income in Romania but since he already paid 10% US WHT he only pays social contributions.

https://taxsummaries.pwc.com/romania/individual/income-determination

Just look what E. L. James accomplished

Did she became famous through word of mouth?

 

[thedirtyteller]

Did she became famous through word of mouth?

She became famous because she wrote to her market/audience, choosing all the right tropes a woman could possibly want. After that, her readers talked and shared that book with their friends, social media, etc, so basically spreading through word of mouth.

It was very little advertisement behind the success of fifty shades of gray, especially taking into consideration it was self-published at first.

Not many can spend a year or two on something, with little to no costs, end up a multi-millionaire and never have to lift a finger ever again.

Props to her.

 

[SmartestSmarty]

I'm also a self-published writer and moved to Romania. If you are living solely out of royalties, you don't need a company or any other entity. You just fill in a form once a year and that's it. The US will withhold 10 percent and then you will pay a fixed pension and social contribution of 350 EUR each month, so 4200 EUR a year and that's it, no bureaucracies or dealing with accountants. Life here is cheap and relaxed too, you don't have to worry about getting your driving license taken from you. You also do not need to stay here for a certain amount of time, just prove that your center of interest is here.
I saw you're from Italy too, so learning Romanian will be quite easy.

I am considering this as an option, can you clarify which form is required each year?

 

[thedirtyteller]

I am considering this as an option, can you clarify which form is required each year?

It's called Form 212. It cost me 50 euros for an accountant to do it for me.

 

[SmartestSmarty]

It's called Form 212. It cost me 50 euros for an accountant to do it for me.

Thank you.

In regards to the mandatory social contributions, do you happen to know how this is calculated, or a website you can point me to?

 

[Worldler]

It's called double tax treaty because the purpose is to avoid being double taxed.

This means that if there's 10% US WHT on royalties the same item of income can't be taxed again in Romania.



Because he is not using a company.

You instead will need to form a company because you don't have a EU passport.

Hi. Sorry to jump in. I was reading this, are we sure that the 10% WHT tax is not treated like a credit that get considered when calculating the Romanian taxation? It seem strange that is gonna cancel completely the Romanian taxation. I could be wrong, but I dont think that is the way DDT treaties works, but someone else could probably enlighten this matter more than me

I have 3 question connected to the all theme that I would like to share with you guys.

In case of US LLC do not you have to elect it to be treated as a C Corporation to bypass the non-resident withholding tax?

Can you use a 1065 partnership and file a W9 being a United States entity and not a disregarded entity, to avoid WHT taxes? In this case can you deduce marketing expenses?

Can anyone explain better the set-up with the UK company?

 

[SmartestSmarty]

You are not self-publishing if you have a KDP account on Amazon. AMZ is your publisher.
You self-publish if you print your own book and sell it through Amazon, in which case AMZ is your distributor.

You optimize your tax setup in completely different ways for the two scenarios.

Thank you.

What would be your suggestion?

 

[SmartestSmarty]

I'm also a self-published writer and moved to Romania. If you are living solely out of royalties, you don't need a company or any other entity. You just fill in a form once a year and that's it. The US will withhold 10 percent and then you will pay a fixed pension and social contribution of 350 EUR each month, so 4200 EUR a year and that's it, no bureaucracies or dealing with accountants. Life here is cheap and relaxed too, you don't have to worry about getting your driving license taken from you. You also do not need to stay here for a certain amount of time, just prove that your center of interest is here.
I saw you're from Italy too, so learning Romanian will be quite easy.

I'm just coming back to this, just to confirm with you, because I am still interested in this set up. Why does the IRS treaty with Romania say the royalties can be taxed in both.

I need to be fully confident Romania wouldn't want to tax me as well. It does say it's allowed to be taxed in both countries in the agreement.

Have you confirmed this with an accountant there?

 

[JohnnyDoe]

Thank you.

What would be your suggestion?

Look at royalties withholding taxes in DTAs