Amazon KDP Withholding Isn’t What Most Non-U.S. Sellers Think

How I Helped an International Amazon KDP Author Recover Withheld U.S. Royalties — and Stay Fully Compliant

One of my recent clients came to me with a problem I see again and again: significant tax withholding on their Amazon KDP sales in the U.S., and no idea how to minimize it while staying fully compliant.

They were a non-U.S. person selling digital books through Amazon’s U.S. marketplace, and Amazon was automatically withholding 30% of their royalties every month. They had heard about structures like U.S. LLCs and ITINs but didn’t know which, if any, would actually save them money — or get them into trouble.

My job at YAVAKI was to separate fact from myth, craft the right strategy for their situation, and help them recover withheld tax rather than leave it on the table.

The First Truth: Withholding Isn’t About ITINs or LLCs

Many international creators assume that:

• Getting an ITIN
• Or forming a U.S. LLC

will automatically stop Amazon’s withholding.

Unfortunately, that’s not how U.S. tax rules work.

Amazon’s withholding is based on the tax residency of the income’s beneficial owner, not simply the presence of an ITIN or a corporate wrapper.

So unless the income is paid to a U.S. taxpayer, Amazon will treat the royalties as foreign-owned U.S.-source income and withhold 30% by default — even if the payee has an ITIN or uses a foreign-owned U.S. LLC. This is the case whether the payment goes to the individual or to a disregarded U.S. entity that the IRS still treats as foreign.

What an ITIN Really Does

My client did obtain an ITIN, and that was a game changer — but not in the way most people expect.

Having an ITIN doesn’t stop tax withholding — but it does allow you to:

• File a U.S. nonresident tax return (Form 1040-NR)
• Report your U.S. KDP income correctly
• Claim refunds for excess tax withheld
• Apply tax treaty benefits when available

In other words, an ITIN lets you put the withholding situation into the correct legal context and recover money that Amazon has already taken, instead of letting it sit unrecovered.

Structuring Matters — But Only When Done Right

I also walked the client through the most common options:

Paid as an Individual (with ITIN)

• Amazon issues Form 1042-S
• Withholds 30% or treaty rate
• You can file Form 1040-NR to claim refunds or apply treaties

Paid via Foreign-Owned U.S. LLC

• Still withholding as if paid to a foreign person
• Same IRS treatment unless you elect U.S. corporation tax status
• Additional reporting (e.g., 5472) with no additional withholding benefits

The key lesson here: structures alone don’t fix withholding. What matters is how the IRS classifies the recipient for tax purposes — and whether you take advantage of treaty positions and proper filings to reduce or recover taxes.

Sometimes the simplest path — paid directly with a tax treaty claim and the right IRS filings — ends up being the most tax-efficient.

The Outcome

Thanks to the right combination of:

• Tax status analysis
• ITIN application
• Proper IRS filings (1042-S + 1040-NR)
• Strategic use of U.S. tax treaty provisions

We were able to recover a significant portion of the tax Amazon had withheld, legally and without unnecessary structures that don’t change the underlying tax treatment. My client walked away fully compliant and financially better off.

What This Means for You

If you’re a non-U.S. entrepreneur earning cross-border income — whether from Amazon KDP, coaching, SaaS, or any other digital platform — the rules that apply to withholding, tax residency, and reporting matter. Getting them wrong can cost you thousands of dollars every year.

That’s where we come in.

Ready to Stop Leaving Money on the Table?

At YAVAKI Consulting, I help international entrepreneurs like you:

✔ Build tax-efficient global structures tailored to your actual business model
✔ Stay fully compliant with U.S. and foreign tax rules
✔ Recover excess withholding taxes using treaty benefits and IRS filings
✔ Avoid costly mistakes that arise from generic advice or half-baked “solutions”

Whether you’re selling digital products in the U.S., opening a U.S. LLC, optimizing international tax structures, or simply unsure how to report income across borders — you don’t have to navigate this alone.

Book a strategy call today to review your situation, uncover compliance risks, and discover opportunities to save money legally and sustainably.