Authors in the Maldives Face Unique Banking Hurdles for U.S. Royalties
Authors in the Maldives receiving book royalties from U.S. publishers encounter a specific challenge: establishing a U.S. bank account to receive funds efficiently and avoid excessive withholding taxes. Unlike U.S. residents, Maldivian authors are non-residents, which immediately flags them for stricter scrutiny by financial institutions. Large U.S. banks often have policies that decline non-resident applicants entirely, creating a significant roadblock. This situation is compounded by the lack of a U.S.–Maldives income tax treaty, meaning that without proper documentation, royalty income can be subject to a standard 30% U.S. withholding tax. To mitigate this, obtaining a U.S. bank account becomes not just a convenience, but a financial necessity to comply with U.S. tax law and ensure more of their earned income reaches their pockets.
When a U.S. Bank Account Becomes Essential
For authors in the Maldives, a U.S. bank account is typically triggered by the need to receive royalty payments directly from U.S. publishing houses or distributors. These entities often prefer or require a U.S. account for direct deposit, simplifying their payment processes and reducing international transfer fees on their end. Furthermore, to benefit from reduced withholding tax rates on U.S.-sourced royalty income, authors must file a Form W-8BEN with the payer. This form certifies foreign status and, crucially, allows for the application of reduced tax rates if a tax treaty exists between the U.S. and the author's country of residence. Although the Maldives does not have a specific income tax treaty with the U.S., filing the W-8BEN correctly, often in conjunction with an Individual Taxpayer Identification Number (ITIN), is a prerequisite for any potential tax treaty benefits and for avoiding the default 30% withholding. Without a U.S. account, authors may be forced to accept payments via check, which can incur significant cashing fees and delays, or through international wire transfers with high fees and unfavorable exchange rates.
Required Documentation for Non-Resident Applicants
Opening a U.S. bank account as a non-resident author from the Maldives requires specific documentation. The exact requirements vary by bank, but generally include proof of identity and address. You will need a valid passport, which serves as primary identification. Proof of residential address in the Maldives is also mandatory; this can often be a utility bill or a bank statement from your Maldivian bank, dated within the last three months. If you are applying for a U.S. business bank account, you will also need an Employer Identification Number (EIN) confirmation letter and formation documents for your U.S. business entity, such as Articles of Organization if you form a U.S. LLC. The bank's application will include its own Know Your Customer (KYC) and Anti-Money Laundering (AML) forms. For authors seeking an ITIN to reduce tax withholding, the Form W-7 application is a separate but related process. The IRS issues an ITIN via Form CP-565. Once you have your ITIN, you can use it when filing your U.S. tax return, which is often necessary to claim treaty benefits or refunds.
The Remote Application Process and Timeline
The process of opening a U.S. bank account remotely from the Maldives typically involves an online application followed by verification steps. You will start by selecting a bank or fintech provider that explicitly accepts non-resident applicants. Many traditional U.S. banks do not offer this service. Fintech solutions like Mercury, Relay, or Brex are often more accommodating. After submitting the initial application with your documentation, the bank will conduct its due diligence. This usually involves identity verification and assessing the risk profile of the applicant. If approved, the bank will open the account. You will then receive your account details and eventually a debit card. The entire process, from submitting a complete application to having an active account and receiving your debit card, generally takes between 5–10 business days. Delays can occur if documentation is incomplete, unclear, or if the bank requires additional information to satisfy its compliance obligations.
Common Pitfalls for Maldivian Authors
Authors in the Maldives applying for a U.S. bank account often fall into predictable traps. A primary mistake is applying to banks that do not serve non-residents, leading to wasted time and effort. Many national banks have strict policies against opening accounts for individuals without a U.S. physical address and Social Security Number. Another common error is attempting to open an account without first obtaining an ITIN, which is often required by payers and for tax purposes. Missing required documentation or submitting incomplete forms is also frequent; banks are very strict about KYC/AML requirements. For authors, failing to correctly complete Form W-8BEN can lead to the maximum 30% withholding tax on royalties. Understanding the implications of the lack of a U.S.-Maldives tax treaty is also key; without proper filings, you cannot claim any reduced rates. Finally, attempting to use a P.O. Box as proof of address is typically not accepted for U.S. banking.
The Certified Acceptance Agent (CAA) Path for ITIN Applications
For authors in the Maldives needing an ITIN, the application process can be streamlined by using a Certified Acceptance Agent (CAA). The IRS designates CAAs, such as itin.net, to assist individuals in applying for an ITIN. When you apply for an ITIN through a CAA, they verify your original identification documents (like your passport) on behalf of the IRS. This means you do not have to mail your original documents to the IRS, reducing the risk of loss or delay. The CAA reviews your Form W-7 application for completeness before submitting it to the IRS. This pre-screening significantly increases the chances of your ITIN application being approved without delays. While you can apply for an ITIN directly to the IRS, using a CAA like itin.net can offer a more secure and efficient experience, especially for non-residents who may find the direct application process daunting. The ITIN application itself is free; only the services of the CAA for their verification assistance would incur a fee.
Next Steps After Account Opening
Once your U.S. bank account is successfully opened, you can provide the account details to your U.S. publishers or royalty distributors. Ensure you have also submitted the appropriate tax forms, such as Form W-8BEN, to your payers to minimize withholding taxes. If you haven't already obtained an ITIN, consider applying for one, as it is often necessary for reporting royalty income and potentially claiming tax refunds or reduced withholding. For authors in the Maldives, this often involves working with a Certified Acceptance Agent to verify identification documents for the ITIN application. Review the pricing for itin.net's banking setup services and ITIN assistance to understand the costs involved. If you have specific questions or require personalized guidance, contacting itin.net for assistance is the recommended next step.
Practical tips
- Use the same legal name across all U.S. applications (bank, W-8BEN, ITIN) as it appears on your Maldivian passport.
- Ensure your proof of address from the Maldives is recent (less than 90 days old) and clearly shows your name and residential address.
- If you are setting up a U.S. business entity like an LLC, obtain your EIN before applying for the U.S. bank account.
- Understand that without a U.S. tax treaty, a correctly filed W-8BEN is your primary tool to reduce the 30% withholding tax on royalties.
- When applying for an ITIN, use a Certified Acceptance Agent (CAA) to avoid mailing original identification documents to the IRS.
Frequently asked questions
Can I open a U.S. bank account from the Maldives without visiting the U.S.?
Yes, many fintech companies and some traditional banks allow non-residents to open a U.S. bank account remotely from the Maldives. The process involves online applications and document submission.
What is the typical withholding tax on royalties for non-residents without a treaty?
Without a specific tax treaty, U.S.-sourced royalty income is generally subject to a 30% withholding tax. Filing Form W-8BEN correctly is crucial to potentially reduce this rate, though the Maldives does not have a treaty with the U.S.
Do I need an ITIN to receive U.S. book royalties?
While not always strictly required by the publisher to receive funds, an ITIN is often necessary to file Form W-8BEN and claim reduced withholding tax rates. It's also required for filing U.S. tax returns, which might be needed for treaty benefits or refunds.
How long does it take to get an ITIN?
The IRS processing time for an ITIN can vary significantly, typically ranging from 7 to 11 weeks when applying directly. Using a Certified Acceptance Agent can help ensure your application is complete, potentially speeding up the process.
Can I use my Maldivian business registration for a U.S. bank account?
Generally, U.S. banks require documentation for a U.S.-based entity (like a U.S. LLC with an EIN) if you are applying for a business account. Your Maldivian business registration alone is usually insufficient for a U.S. business bank account.
What if my U.S. publisher insists on a U.S. Social Security Number (SSN)?
Many publishers or royalty platforms prefer U.S. payees with SSNs for ease of reporting. As a non-resident without an SSN, you will likely need an ITIN and must submit Form W-8BEN to certify your foreign status and claim any applicable tax treaty benefits (though none exist between the U.S. and the Maldives).
