30% withholding tax on US income, best solution

Which steps to take to reclaim 30% WHT withheld by Amazon on royalties

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Hi all

My client (UK Ltd) creates apps for Amazon and receives royalties from Amazon on a monthly basis.

This income has 30% withholding tax withheld by Amazon, which I believe is due to Amazon not having enough information on the company (no W-8BEN-E filled out).

My understanding is that this WHT can be reclaimed and the steps to take are as follows:

  1. Try to reclaim from Amazon by filing a W-8BEN-E
  2. If Amazon have already paid over to the IRS then try to reclaim from the IRS using forms 1120-F, W-8BEN-E and 1042-S
  3. At this point, when the steps to reclaim have been made, the WHT can be treated as a tax-deductible expense for the purposes of CT
  4. If/when the WHT is reclaimed it is no longer an expense and HMRC must be contacted within 12 months to notify of correction.

Is this correct? Does double taxation relief apply?

Thanks in advance.

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By Matrix
29th Aug 2018 14:34

3 I expect you would Dr Foreign Tax reclaimable and Cr Royalty income if you think there is a good chance it will be repaid.

4 No need to contact HMRC, these are just accounting entries.

There is no tax credit since the treaty rate is nil.

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