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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7220
Experience:  15years with H & R Block. Divisional leader, Instructor
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My company in South Korea is going to sell our software, which

Customer Question

My company in South Korea is going to sell our software, which could be downloaded from AppStore of Apple inc. We have no business experience in the US. As we register our company and tax information on AppStore, Apple asks us to hand in the W-8BEN form.

My Question is whether we need to fill in EINs in the W-8BEN form.

Apple says we do not need to fill in the EINs if we have no EINs because the contract is not on "royalty" but "sales/commission." Here is a reply from Apple.

On the contrary, the instruction about filing W-8BEN says if we do not fill in EINs, withholding agency may withhold tax of 30%.

I heard that Korean developers who filled in EINs on the form have received their revenue from Apple after withholding of tax (10%), and those who did not filled in EINs have earned their revenue without any tax being withhold.

Could you please explain why Apple is withholding tax even though they said that they do not withhold tax?
Submitted: 4 years ago.
Category: Tax
Expert:  Robin D. replied 4 years ago.
HelloCustomer

The rules for software say that it is delivered where it is downloaded, and taxed accordingly, as if it was a physical product. Other types of download may be treated equivalently to software, but may instead be treated as generating royalty income, which would be taxable regardless of whether or not there is a permanent establishment in the US. The normal rate of tax (to be withheld by the US buyer) would be 30% on royalties, which could be partly reclaimed by the seller if in a treaty jurisdiction.
You need to obtain a U.S. Employer Identification Number (EIN) in order to qualify for any applicable Tax Treaty benefits. The EIN is a nine-digit number assigned to Sole Proprietors, Corporations, Partnerships, and other Representative entities for tax filing and reporting purposes. The information you provide on the W-8BEN form will establish your business tax account. When you fill in the treaty info your withholding could be lowered abased on the treaty with S Korea.

Just in case you need the Tax Treaty with US and Korea here is a link:

http://www.irs.gov/pub/irs-trty/korea.pdf

I sincerely XXXXX XXXXX information is helpful,

Customer: replied 4 years ago.

Thank you very much for your reply.

 

I have a follow-up questions to be more clear.

 

1) If downloaded software is regarded as physical product, what is the tax rate for the sales of downloaded software under tax treaty between ths US and Korea?

 

2) What is the reason that Apple says Korean developers do not need to hand in EINs in W-8BEN form and does not withhold tax when Korean developers do not fill in EINs?

 

Thanks for your help!

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