One of the most common groups of questions I get asked are around setting up a
KDP account. Things like, should I do this as an individual or a company?
What tax information do they need?
Or can I even do this in the country where I live?
And these are very important questions because if you don't get it right then
KDP may not even allow you to set up an account or it could have significant
financial implications for yourself.
Now this is going to be important information whether you've not yet set up your
account or you may have even set up your account but not quite sure whether
you've done things correctly. So we're going to look at this in three sections.
One is the personal information.
KDP requires the bank account information they require and the tax
information that they require. And this is going to be dependent particularly
on the country you live in.
And I'm going to do this from the perspective of what I did when I set up my
account. Now you may have guessed I'm not a financial advisor,
I'm not an accountant nor a tax advisor.
So what I would suggest doing is listening to the information I'm going to give
and then taking advice from a qualified accountant,
financial advisor, tax advisor, whatever.
So you do get this correct from the start.
So if you've not yet set up an account,
go to kdp.amazon.com and click on signup and it's completely free of charge
to set up a KDP account.
And the first lot of information they're going to require is the author slash
publisher information.
And the first thing they're going to want to know is whether you're going to do
this as an individual or a corporation,
which is a company. And there's pros and cons to both.
Now if you do this as an individual, the advantage is it's pretty easy.
There's no real extra paperwork you need to do,
you just need to put down your personal information into those boxes.
The disadvantages of doing it as an individual is that depending on
your current employment status,
you may end up paying more tax on the royalties that you receive from
Amazon.
That is if you are currently working a job and you're a high tax rate payer than
any extra income you receive is most likely going to be also
taxed at that higher rate.
Also as an individual there's less expenses that you can write off for
tax on the income that you receive.
So the other option is to do this as a company.
Now the advantages of doing it as a company is as often or could be less
tax to pay. Again,
that would more come in if you are a high rate tax
payer in a job.
Now the tax rate or the corporation tax rate that you're going to pay is going
to be dependent on the country you live in.
Now in the UK it used to be 19%.
Now it currently is 19% in the UK,
if you earn less than 50,000 pounds,
anything above that increases up to 25%
maximum. Now I said I'm not an accountant,
but that's what I've interpreted from the information that I've read.
In Australia corporation tax rate is a standard
25% for most companies.
And so you would have to weigh up whether that would be an advantage to you.
The other thing is setting up as a company does look more professional,
it may be useful for instance, if you are setting up a brand,
you also in a lot of cases have limited liability. So we
mostly on this channel publish low content, no content, medium content books.
But if you were thinking about publishing content that may be a bit
controversial where you may be for instance say doing a book on
something medical where you may be giving medical advice where there may be a
chance that someone could come along and sue you,
that it may be an advantage to you to be set up as a company so that you do have
limited liability. Again,
this is not something I'm an expert on and you would need to seek legal advice
on that. Also, if you do this as a company,
you could create something that you could sell in the future.
And also as a company there may be more scope for writing off
expenses on your tax.
The disadvantages of setting up a company are there's extra paperwork you
need to set up the company in the first place and that could cost money. And
also there are ongoing paperwork requirements for the company
and there's ongoing obviously tax requirements for the company.
So this is also going to cost more in terms of fees and
also you'll find that there's extra accountancy fees as well.
Now I do find a lot of people spend a lot of time
thinking and going back and forth on whether they should do this as an
individual or a corporation and can sometimes waste
weeks if not months on this thinking whether they, you know,
should set up this company because they're gonna be earning all this money from
Amazon, yet they've not even created a single product to sell.
Now what did I do? Well, I actually started off as an individual.
I was in the UK at the time and this was turned a soul trader
and it wasn't until I started earning a regular income on top of
my job that I thought, okay,
it's now worth it for me to spend some money on getting some account the
advice on setting up a company and overall it was going to save
me money in the long term with the slightly lower rate of
tax I was paying at that time compared to the higher rates of tax I was paying
from my job. So the take home from this is look at what your current financial
situation is and whether it's going to be worth your time
and money and hassle in creating a company whether you're actually going to
get a financial benefit from it. If you've not yet created a product,
you're not even earning money,
then I found for myself it was better just to
start up as a sole trader,
as an individual and then see what actually happens.
I didn't want to waste money upfront going creating all this account when I
hadn't even, you know, brought in any money from the business at all.
So the next lot of information they're going to need is this section here on
getting paid. That is the bank account information.
So a lot of people do ask me, you know, can I do this in the country?
Wherever you know you you're living. And it basically
comes down to whether you have a bank account in that country that
Amazon accepts. Now there is a help page here,
I'll leave a link to it down below in the description on the KDP payment
options.
Now they say they can pay direct deposit into a bank while transfer into a bank
or send a checkout and they give information here on the
different areas around the world.
But I find a lot of people ask me with regards to situation of not
having a bank account.
Now obviously I don't know in detail because I've
not been in that situation myself,
but what I can tell you is experience from others that they've told me.
And I know some people have managed to receive payment into a pioneer account
and also into a wise account.
So if those are options that are available to you,
that may be something that might allow you to provide bank details and
open up a KDP account. Now the third area of information that KDP
requires is the tax information.
And this is where things get a a little bit more complicated because it's going
to depend on the country that you live in.
Now if you're in the US I think things are a bit more simple,
but KDP is, as far as I'm aware,
going to require your TIN or tax identification number.
So what happens if you are in another country?
Well you have to supply the equivalent of the TIN.
Now I don't know what this is in all the different countries that there are out
there in the world. I don't know how many countries there are.
Is it a hundred ninety two, a hundred ninety three?
But I can tell you from the perspective of the UK,
that'd be the equivalent of your unique tax reference number which you would get
from the HMRC.
Here in Australia it's a TFN or tax file number again,
which you get from the Australian Tax Office.
Now if you decided that you're in a country,
you don't have a tax number and you don't want to provide a tax number
to kdp,
what I think think would happen is that KDP or Amazon would
then withhold tax from the royalties that they pay out to you.
And that rate at the moment,
from what I understand is 30%.
Now if you are in a country where you can provide a
tax number,
your country may have a tax treaty with the us,
which means the amount of tax that Amazon withholds
may be a lot less and maybe even zero.
And you can get an idea of what this would be by going to a website.
And here we have an example of such a website from deloitte.com.
So in step one you would type the the jurisdiction,
which is the United States and then you would choose which country you're in.
So we'll tick none and I will tick Australia.
And then you select the treaty status.
So I would click active and then the income type.
And so we can choose royalties,
which is what we're going to be receiving from Amazon and then click on submit.
And here you can see it says five which is 5%,
which means living here in Australia any royalties I receive
Amazon was would withhold 5% of that.
Now again,
discussing with an accountant that may then affect the amount of tax that you
actually pay on the royalties you receive.
Let's look at a different situation again,
United States this time we'll choose United Kingdom active. Again,
royalties update and you can see this is zero.
So if you are living doing KDP in the UK and you
provide your tax number,
then Amazon shouldn't be withholding any
royalties. So you can play around on this site and just pick which country you
are living in and see if Amazon would withhold any, um,
taxes from the royalties that you receive from the sales of your books.
So when you're setting up your account and you click on this view slash provide
tax information,
if you are overseas from the us then you're going to have to fill
out what's called a W-8BEN form,
which looks something like this. It looks quite complicated but it's not.
Basically what they want is your name,
address and your foreign tax identifying number,
which is that number that I've just discussed.
And it's going to be different depending on where you live in the world.
And when you're filling this out,
KDP or Amazon makes it very simple cause they just asked you for those relevant
areas of information and it automatically fills out the form for you and it will
tell you straight away whether it's all done correctly
and whether your tax information submission is successful.
So once.
You've done, you should be good to go.
You can start creating books and any royalties you receive,
you should receive without problem into your bank account with or without
any withholding taxes removed from that amount. Again,
it's something that I would really recommend discussing with an accountant or
tax advisor at some point to make sure you have got all this
correct,
especially if you are starting to earn significant amount of money from
KDP. Now,
if you are a complete beginner to this business of publishing, medium,
low, no content books on Amazon,
then what I suggest to is starting with this playlist here where I go through
all the steps of creating, uploading and publishing no content,
low content books on Amazon. Thank you much for your time.
It is very much appreciated.
Don't forget to hit that subscribe button and until next time, goodbye.