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Adsense users pay 67% tax?
The pitfalls of paying tax in two countries

 10:17 pm on Nov 20, 2003 (gmt 0)

Tax problems with the US - I'm posting this from Australia but I wonder if the UK and other countries have similar issues..

I developed and run a site here in Australia that uses American servers (bandwidth here is ridiculously expensive) and most of my income comes from Google Adsense.

Now Google comes along and says it will withhold cash unless I put in some forms with the IRS. I saw my accountant about it and he has some concerns about it. Even though I can be exempt from withholding and the US and Australia have a tax treaty and the Australians will generally reimburse the amount I pay to the Americans, there are problems.

Firstly it seems there's little point minimising tax in one jurisdiction and not another, because (if I understood him correctly) I wouldn't be able to claim more credit here than I pay here. This means, if I want to minimise tax, I've got to get a US accountant to do more than just adapt my Australian tax statement.

Secondly, and more worringly, it may be that when I want to take profit out of my company in the form of dividents, I'll end up paying 67c in the dollar! In Australia the highest marginal rate is about 48c and company tax is about 30c. The problem arises because Australia doesn't recognise tax credits from paying US tax when it comes to paying dividends - they become unfranked again.

Suddenly Adsense is not looking like a good deal at all. But my accountant and I would love to know what other people are doing.



 10:58 pm on Nov 20, 2003 (gmt 0)

Do you own the servers or employ anyone in the US connected to your site?

United States (U.S.) Activities involve having employees or owning equipment in the U.S. that are involved in any way with revenue earned through the AdSense program. U.S. Activities include, but are not limited to, owning a web server or owning a hosting service in the U.S., or having employees in the U.S. who are involved in either:

Or are you just leasing or renting?

Generally, using an unrelated third-party United States (U.S.) web hosting service to host your web pages, renting web servers that are located in the U.S. from an unrelated third party, or having your payment sent to a U.S. Post Office Box or mail forwarding address, do not of themselves constitute U.S. Activities.


 11:09 pm on Nov 20, 2003 (gmt 0)

I agree with msgraph, the key difference is whether you own the servers, or simply renting them. If you contacted your accountant prior to the day Google began asking for tax information, then the two paragraphs that msgraph posted are key - they cleared up the question over US presence for most publishers whose only US presence was the hosting.


 11:19 pm on Nov 20, 2003 (gmt 0)

I've had an entirely different issue. I talked ot my accountant, and by the end of it not just mine, but his head spun too.

Appearantly, I may be liable to collect VAT from google who should collect from advertisers from my country, IF people in my country advertise with google and show on my site (which they do).

Of course I don't think Google is going to do this for me.

Furthermore, how do you explain to an accountant that I neither write invoices to google, nor do htey expect reciepts from me?!?



 12:15 am on Nov 21, 2003 (gmt 0)

I suppose I'm the only one around here to fill out my own tax return then and not tangle myself up with accountants.


 1:42 am on Nov 21, 2003 (gmt 0)

I'm just renting the servers in the US. Where does this leave me?


 2:49 am on Nov 21, 2003 (gmt 0)

Trumble: If I remember correctly there is a wizard that helps you choose. Run the wizard.... I would do it and see what the steps are, but wouldn't want to end up changing my status by mistake.

Personally, from what has been posted here and what I read in other threads, I think Google will not report you to the IRS, and you are not liable for US taxes.

I am not a tax advisor and my advice in tax matters is next to worthless. Use at your own risk


 3:56 am on Nov 21, 2003 (gmt 0)

I think you're right.. That's excellent news! Thanks to everyone for their help.


 4:24 am on Nov 21, 2003 (gmt 0)

67c is just the start and assumes you are paying full corporate rate. Adsense income goes into your taxable income like all your other income, then deductions are made for expenses and many other areas.


 11:34 am on Nov 21, 2003 (gmt 0)

Hmm... on the other hand, is it just me, or who will go and check 100s of 1000s of websites for the geography of their hosting without even havign access to the database?

Why do I feel a lot of this is based on trust,and really impossible to audit fully...?!?!


PS: I got NO presence of ANY kind (including but not limited to hosting) in the US (Unless you count an ex-girlfriend from 6 years ago ;)


 12:50 am on Nov 22, 2003 (gmt 0)

Appearantly, I may be liable to collect VAT from google who should collect from advertisers from my country, IF people in my country advertise with google and show on my site (which they do).

Adwords do already collect VAT (or business VAT number) from all advertisers from EU countries (required under the EU rules that came in on July 1st).

But I would have thought that when you sell adspace to Google the customer is outside the EU, so not subject to VAT.

The Google office in Dublin may mess this up (inside EU), but even then all they need to do is give you their VAT number (it's a business to business sale where the buying business accounts for the VAT, same as when a business purchases from Adwords).


 8:16 am on Nov 24, 2003 (gmt 0)

I am not American, but live in the US with a work visa.
My sites have adsense. I don't own any server just rent space on a shared host. But I own a computer.
What sould be my situation in relation to the new tax thing with google?


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