Royalty tax: how songwriters, film producers, inventors and brand owners can legally pay 0% US tax on royalties

What US collecting societies, studios and licensees withhold from songwriters, film producers, inventors and brand owners outside the US, how a sale of rights is taxed and how overwithheld tax comes back, in 2026.

Songwriters, composers, film producers, inventors and brand owners outside the United States receive royalties from US collecting societies, studios and licensees. The US guide for nonresidents reads: "Other items of income, such as royalties, may also be subject to the 30% tax." At that rate, the tax is $2,400 on $8,000 of performance royalties, $75,000 on a $250,000 license to show a series and $36,000 on a $120,000 patent license.

Which royalties count as US income

Section 861 of the US tax code treats as US income: "Rentals or royalties from property located in the United States or from any interest in such property, including rentals or royalties for the use of or for the privilege of using in the United States patents, copyrights, secret processes and formulas, good will, trade-marks, trade brands, franchises, and other like property."

The model tax treaty of the United States uses the same test: "Royalties shall be deemed to arise in a Contracting State when they are in consideration for the use of, or the right to use, property, information or experience in that Contracting State."

Performance royalties: ASCAP and BMI

ASCAP and BMI license public performances of songs in the United States. The US Department of Justice says that performance rights organizations such as ASCAP and BMI "monitor for unlicensed uses, enforce copyrights against unlicensed users, and administer copyright royalties".

BMI asks songwriters and publishers outside the US for Form W-8BEN, or Form W-8BEN-E for a company. The instructions for Form 1042-S set the rule for payees without valid documents: "For purposes of sections 1441 and 1442, a withholding agent must withhold 30% of any payment of an amount subject to withholding under chapter 3 (defined earlier) made to a payee that is a foreign person (or is presumed to be a foreign person) unless it can associate the payment with documentation to treat the payment as made to a foreign person entitled to a reduced rate of or exemption from withholding."

BMI applies the treaty rate to future royalties once it has processed the new tax details. The instructions for Form W-8BEN read: "Submit Form W-8BEN when requested by the withholding agent, payer, or FFI whether or not you are claiming a reduced rate of, or exemption from, withholding."

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Mechanical royalties: The MLC

The US Copyright Office says the Music Modernization Act "updates the copyright law to make statutory licensing more fair for creators and more efficient for digital music providers". The Office designated The MLC "to collect and distribute mechanical royalty payments under Title I of the MMA". It describes that title: "Title I establishes a blanket licensing system for digital music providers to make and distribute digital phonorecord deliveries (e.g., permanent downloads, limited downloads, or interactive streams)."

A mechanical rights society in the songwriter's home country can also collect that share from The MLC. For songwriters who claim it themselves, the Copyright Office page reads that since January 1, 2021, "songwriters and music publishers must register with The MLC using its online claiming portal to receive royalty payments under the new blanket license."

Digital radio: SoundExchange

SoundExchange collects royalties for recordings played on satellite radio and internet radio in the United States. The Copyright Office names it in its summary of the law: "Title III allows music producers, mixers, and sound engineers to receive royalties collected for uses of sound recordings by codifying a process for the designated collective (SoundExchange) to distribute those royalties under a “letter of direction.”"

SoundExchange requires Form W-8BEN from every registrant outside the US and withholds 30% from payees without a completed form. The instructions for Form W-8BEN read: "If you are completing Form W-8BEN to claim a reduced rate of withholding under an income tax treaty, you must determine your residency in the manner required by the treaty."

Film, TV and sync licenses

The US guide for withholding agents lists film and TV royalties under income code 11: "This category refers to royalties paid for the use of motion picture and television copyrights." The model tax treaty of the United States counts a sync fee for a song in a film, an advertisement or a game as a royalty: "The term “royalty” as used in this Article means payments of any kind received as consideration for the use of, or the right to use, any copyright of literary, artistic, scientific or other work (including cinematographic films); any patent, trademark, design or model, plan, secret formula or process; or for information concerning industrial, commercial or scientific experience."

Screenwriters and composers

A screenwriter or a composer can be paid for the writing and separately for the rights. Section 862 of the US tax code counts as income from outside the United States "compensation for labor or personal services performed without the United States". The US guide for withholding agents adds: "Income is also from U.S. sources if the property that produces the income is located in the United States, the services for which the income is paid were performed in the United States or the income is a dividend equivalent."

Patents, trademarks and franchises

The US guide for withholding agents calls payments for patents and trademarks industrial royalties: "This category of income includes royalties for the use of, or the right to use, patents, trademarks, secret processes and formulas, goodwill, franchises, “know-how,” and similar rights." The same guide extends the category to equipment: "It may also include payments for the use of, or right to use, industrial, commercial, and scientific equipment, when this is included in the treaty definition of royalties." Murblz experts have described endorsement fees that brands pay to creators in the guide to Instagram tax.

Selling rights outright

A song catalog, a patent or a trademark can also be sold outright. For a price that does not depend on later use, the US guide for nonresidents reads: "If the income is not contingent on the productivity, use, or disposition of the property, the income is sourced according to your tax home (discussed earlier)." Murblz experts have described the tax on gains from US shares in the guide to Form W-8BEN.

The US guide for withholding agents reads: "Generally, FDAP income excludes most gains but includes certain gains from the disposal of timber, coal, and iron ore, or from the sale or exchange of patents, copyrights, and similar intangible property." Its list of items that carry 30% withholding or a treaty rate includes: "Gains on contingent payments received from the sale or exchange after October 4, 1966, of patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other like property."

Where rights holders lose money

The instructions for Form W-8BEN reserve line 10 for special treaty claims: "Line 10 must be used only if you are claiming treaty benefits that require that you meet conditions not covered by the representations you make on line 9 and Part III." Royalties are one such case: "Persons claiming treaty benefits on royalties must complete this line if the treaty contains different withholding rates for different types of royalties".

For a form signed by a manager or a label, the instructions for Form W-8BEN read: "If Form W-8BEN is completed by an agent acting under a duly authorized power of attorney for the beneficial owner or account holder, the form must be accompanied by the power of attorney in proper form or a copy thereof specifically authorizing the agent to represent the principal in making, executing, and presenting the form." They add: "The agent, as well as the beneficial owner or account holder, may incur liability for the penalties provided for an erroneous, false, or fraudulent form." For forms signed online, the same instructions read: "Simply typing your name into the signature line is not an electronic signature."

For a rights holder who moves to the United States, the US guide for nonresidents reads: "Self-employment income you receive while you are a resident alien is subject to self-employment tax even if it was paid for services you performed as a nonresident alien." Its example of an author reads: "Bill’s 2025 self-employment income includes the royalties received after becoming a U.S. resident even though the books were published while still being a nonresident alien."

Getting back what was withheld

For a payer that withheld too much, the instructions for Form 1042-S read: "A withholding agent may make adjustments to overwithholding using either the reimbursement or set-off procedures until the extended due date for filing Form 1042-S (unless the Form 1042-S has already been filed or furnished)."

After that date, the rights holder claims the money back on a US return. The instructions for Form 1040-NR read: "You must attach acceptable proof of the withholding for which you are claiming a refund." Murblz experts have described the deadlines and the time a refund takes in the guide to US tax on YouTube, KDP and app store income.

The statement from the payer has to carry a tax number. The instructions for Form 1042-S read: "TIN is also required on a Form 1042-S used by a recipient to claim credit for (or a refund of) the withholding."

What decides the rate

The instructions for Form 1040-NR set two conditions for a treaty rate: "If you’re claiming a reduced rate of, or exemption from, tax based on a tax treaty, you must generally be a resident for income tax purposes of the particular treaty country within the meaning of the treaty and you can’t have a permanent establishment or fixed base in the United States." The instructions for Form W-8BEN add: "Generally, only a nonresident alien individual can use the terms of a tax treaty to reduce or eliminate U.S. tax on certain types of income." Murblz has a tax residency calculator and a guide on how to become tax resident abroad.

0% is possible, but not for everyone

Royalties for rights used outside the United States are not US income. Section 862 of the US tax code treats as income from outside the United States "rentals or royalties from property located without the United States or from any interest in such property, including rentals or royalties for the use of or for the privilege of using without the United States patents, copyrights, secret processes and formulas, good will, trade-marks, trade brands, franchises, and other like properties".

Tax treaties can free US royalties from tax. The model tax treaty of the United States reads: "Royalties arising in a Contracting State and beneficially owned by a resident of the other Contracting State shall be taxable only in that other Contracting State." Treaties in force differ from the model, and some keep a US tax on royalties.

Without a tax treaty, US royalties carry the full 30%. The US guide for nonresidents reads: "Tax treaty benefits also cover income such as dividends, interest, rentals, royalties, pensions, and annuities. These types of income may be exempt from U.S. tax or may be subject to a reduced rate of tax."

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