Changes to Split Withdrawals from January 1st 2016

Envato Announcements
1

Hi All,

When we announced the changes around Envato’s US expansion, many authors were concerned about losing the ability to withdraw their earnings to different places. After a lot of careful work going through all of the options and issues, we’ve got a solution to allow split withdrawals with some extra requirements for identification of the account holder.

Split withdrawals are temporarily extended, but there are new requirements for withdrawals to multiple countries

For the time being, we’ll be continue to provide the option for splitting your earnings withdrawal. To withdraw to a country other than the nominated country on your completed tax information, you’ll need to provide extra information.

Here’s how it will work:

  • Every account owner must still complete one Form W-8 or W-9.

  • If you are a non-US author and you wish to withdraw funds to a country different to the one stated on your Form W-8, you must provide documentation to support your residence or your company’s presence in the country declared on your Form W-8. For an individual, this documentation might be a copy of your passport that shows the country of residence or citizenship. For a company, this would be a certificate of incorporation issued by the government that the company was established in. So if you complete a form listing Germany as your country, but need to withdraw for some reason to Austria, you’ll need to provide extra documentation about your residence in Germany (and we’ll apply tax treaty rates for Germany).

  • If you are not able to provide such documentation, and need to withdraw to a different country to the one stated on your form, then the US Royalty Withholding Tax (US RWHT) that will be applied on your account will be the maximum rate of 30%.

  • If you are a non-US author, who has provided the relevant documentation, all revenue will be subject to US RWHT based on the country in your Form W-8 and reported on your annual 1042-S form with the account holder’s details.

  • If you are a US author who has submitted a valid Form W-9, you can withdraw funds to a non-US country without having to provide documentary evidence. However, we will be reporting all revenue on your Form 1099.

Copies of your documentary evidence should be sent to financesupport@envato.com.

Split Withdrawal Examples

Example 1

An author who is a citizen and resident of Canada submits a Form W-8 declaring their country of residence as Canada. The royalty withholding tax rate that would be applied is the Canada - USA treaty rate. However, the author has requested that their withdrawals be paid to a bank located in the United Kingdom. In this case, the author is required to provide documentary evidence such as a copy of their Canadian passport that shows they are a resident of Canada. If evidence to support the Canadian residence is not provided, they will still be able to withdraw to the United Kingdom, but no longer benefit from the Canada - USA treaty rate (we will have to apply the maximum royalty withholding tax rate of 30% on all sales to US buyers).

Example 2

An author that is a company established in France submits a Form W-8 declaring their country of residence as France. The royalty withholding tax rate that would be applied is the France - USA treaty rate. However, the author has requested that their withdrawals be paid to a bank located in Singapore. In this case, the author is required to provide documentary evidence such as a copy of the company’s certificate of incorporation that has been issued by the French Government that shows the company was incorporated or established in France. If evidence to support the French residence is not provided, they will still be able to withdraw to Singapore, but no longer benefit from the France - USA treaty rate (we will have to apply the maximum royalty withholding tax rate of 30% to all sales to US buyers).

Example 3

An author who is a US person submits a Form W-9. The author moves to Brazil and takes up residence there and establishes a bank account in Brazil. No documentary evidence is required to be provided as all sales will be reported on their Form 1099.

Example 4

An author that is a citizen and resident of Australia submits a Form W-8 declaring their country of residence as Australia. The author’s bank account is also located in Australia. No documentary evidence is required to be provided. The royalty withholding tax rate that will be applied on US sales is the Australia - USA treaty rate.

Example 5

An author that is a citizen and resident of Australia submits a Form W-8 declaring their country of residence as Australia. After several years, the author decides to take up residence in New Zealand. The author decides to retain their bank account in Australia. Upon becoming a New Zealand tax resident, the author is required to submit a new Form W-8 that declares New Zealand as the new country of residence, and provide evidence that demonstrates this. In the absence of this documentary evidence, the author will not be able to benefit from either the Australia - USA treaty rate or the New Zealand - USA treaty rate; instead, the maximum royalty withholding tax rate of 30% will be applied to all sales to US buyers.

Example 6

An author that is a citizen and resident of Australia submits a Form W-8 declaring their country of residence as Australia. The author’s bank account is located in USA. If evidence to support the Australian residence is not provided, they will still be able to withdraw to USA, but no longer benefit from the Australia - USA treaty rate. We will have to treat the author as a US person and apply backup withholding tax rate of 28% to all that author’s sales (to US buyers and non US buyers). The author will also be issued a Form 1099 at the end of the year, which will be lodged with the IRS.

As always, please consult a tax advisor in regards to your personal situation.

Questions

Based on the forum discussion, these updates are not a silver-bullet solution for all situations. Hopefully they do improve the situation for some authors who were concerned about the changes coming.

We have created a new thread in the forums for questions on this topic, and as we have in the past, will be providing batches of answers every few days.

8 Likes
2

Means Who are author of partnership items They all need passport ? - we are not traveling the world we (i) don’t have it.

same country partnership authors multiple withdrawal works without any extra documents ?

envato will spilt partnership earnings on each partnership item sale ?

Thanks :smile:

3

  1. You can provide any documentation which shows the country of residence or citizenship. Example: Passport or any other Govt. issued document.

  2. Author who has partnered in same country is not required to provide any documentation.

  3. Envato will not split earnings based on your partnership. You (author) have to split the earnings during withdrawal at each month end.

2 Likes
4

Hi @Colins, thanks for this update really nice that you will continue to allow multiple withdrawal.

Just one question. We have few withdrawal example :
2 x withdrawal via swift to diffrent accounts but to the same country where we live (I guess no document is required only W8)
4 x diffrent withdrawal to Skrill (what do we need to provide for this withdraw)

Thanks for answers.

1 Like
5

Hey Collis,

how about he following scenario:

I am a Bulgarian (EU country) resident and it’s clearly stated in my tax details. However, I would still prefer to keep withdrawing my earnings using my Payoneer account and if I am not mistaken, Payoneer is registered in Belize. Could you please, shed some light on this situation.

6

Thanks for that. Much awaited.

Questions :

  1. How do you know that one user is submitted the document & its valid or not? Is there any indication in the profile where we can see our document is valid ?

  2. Can we send multiple payments at the same month? Any restriction for this? Suppose some authors have 10+ partnerships in 10 countries. Will they able to withdraw to 10 + 1 times to paypal / payoneer / bank ?

  3. Who will get the benefit of Tax Treaty? The Author sending or the Author Receiving? To whom will you send the Form of the Tax Paid at the end of an year?

  4. When will you deduct the %? Suppose when sending $100 to a partner, do the other author receive $100 or $85 (assuming 15% tax rate)

  5. If so, the receiving author already paid tax for the earnings, will you provide the same tax paid form to that author at the end of the year? (Otherwise there will be a double taxation for receiving author)

  6. The Tax deduction is only for US sales, when an author sends $100, it may contain sales from other countries as well. Suppose $70 from US sales & $30 from Non US sales, So You should only deduct tax from $70 right? How will you know the US sales % when an author withdraw money?

Expecting clear answers for all questions.

1 Like
7

Hi @collis thank you for your update!

How about this idea: the ability to transfer credit to a different Envato account. A lot of authors partner with each other on different items and would like to split their earnings at the end of the month. A developer takes a PSD template from another author, gets to an agreement with him on the percentage of profit which they should split and converts it to a WordPress theme. It would be super useful to allow the developer to send each month’s profit (for that item) to the designer without using PayPal, SWIFT, etc… All in all, transfer credit from one Envato account to another and let the other person deal with extra details like taxes in his country.

I would appreciate your thought on this and fellow authors, please let me know if this would be a good option for you as well. Thanks.

Edit: a form in the settings panel for uploading the proper documents is a must have!

6 Likes
8

Hey, Collis!

Ahmad Awais here. Thanks for taking this initiative and providing us with a solution.

9

Ok and how about withdrawing to payoneer ? Is it considered as withdrawing to another country ?

I live in Lithuania and I am resident of Lithuania but I want to withdraw to payoneer sometimes which is registered under my Lithuanian address.

EDIT: As I am aware , payoneer is somewhat using the actual bank accounts of that same country in which the account holder resides. So maybe payoneer is all ok ?

10

Thank you for this update @collis!

However, even if we can withdraw to multiple countries now I think it still doesn’t solve partnerships. All sales are credied to one account which lists and sells an item and it would be illegal to withdraw funds to a partner account. At the end of year only one person will receive Form 1042-S https://www.irs.gov/pub/irs-pdf/f1042s.pdf and will have to provide it for one local tax office. This form will include earnings of the author and the partner and will be sent only to the author (as if they performed all the sales). To make it legal it should include only earnings of the author and the partner should receive their own Form 1042-S for their share of earnings.

Example 7:
A partnership of two people, one (person A) from New Zealand (5% withholding tax), the other (person B) from Germany (0% withholding tax) created an item and sells it using the account of the person from New Zealand. Each sale is now recorded by the US government and local tax authorities on the account of that New Zealand person. If they withdraw 50% of funds to themselves and 50% to the partner then at the end of year:
PROBLEM OF PERSON A: their tax office will say “Hey, you have tax credit for 1000 sales but you only received money for 500 sales and claim that you will pay tax for 500 sales - are you trying to steal our tax?”.
PROBLEM OF PERSON B: their tax office will say “Hey, you want to pay tax for 500 sales but you didn’t perform them. You don’t have any agreement with Envato or any items for sale there. You technically received money from PERSON A for their sales (even if Envato sent it). You need to open up a company and perform work for PERSON A and invoice them. Then they can send you money. Or they have open a company which will manage your copyright.”

This is what we are asking for:
I’ve heard that http://store.steampowered.com/ has a system in which one person lists a game and after each sale appropriate percentage of income is credited to proper accounts of their choice (multiple partners). When a $100 item is sold on Envato marketplace we would like 50% of the sale to be credited to PERSON A and 50% to PERSON B. Each with their own withholding tax rates. Purchaser can receive either one or two invoices for this single purchase. PERSON A will receive one Form 1042-S. PERSON B will receive their own Form 1042-S. I think only this will be legal.

Any other legal mechanism to transfer money from one Envato account to a partner Envato account is welcome too.

2 Likes
11

If two partners are from the same country, can they withdraw split earnings to their accounts? Or all withdrawals must be made to the SAME and only ONE person, whose information in provided in Tax form?

12

Third possible solution for partnerships is to split items like this:

image
partnership.jpg1019×1670 124 KB

So, instead of PERSON A listing $100 item, both PERSON A and B should list 50% of item. Purchaser must necessarily buy both parts to use an item (of course they would be buying it only once and they would never see “part 1 of 2” and “part 2 of 2” messages but Envato’s behind-the-scenes mechanism would be calculating and crediting proper partner accounts. The items would not be ever physically separated. I’m only showing the idea on how to credit proper accounts.)

Purchaser will either receive one invoice (including Envato’s fee, Person’s A goods and Person’s B goods) or two invoices (first: Envato + Person A; second: Envato + Person B).

I know this is a ridiculous solution but I’m just saying that Envato has an option to solve this and it depends solely on Envato’s willingness to do it. Just like you allow adding more “support people” for account (they have special badges) you should allow adding “partner people” in the same way.

13

This seems very complicated. Many writers can be forced to give up. You must provide this issue by creating a team management in a more simple way.

1 Like
14

Up. Probably should make thread sticky?

15

Liviu, this is an exelent ideea and it could really work in this case. What Envato is proposing is so complicated and in the end it is also creates new problems as Oisaug mentioned in his comment.

16

This lifts the payment country restriction as in authors will now be allowed to withdraw money anywhere once provided the additional documentation, which is good news.

However, since whole earnings amount will still be reported via the 1042-S form for the account owner only, the split payment option won’t be usable from 1st Jan 2016.

After 3 weeks, we where expecting something more about partnerships, this solves none of our problems but being able to withdraw the whole amount to a different country.

Can we have an official confirmation that for December sales multiple withdrawals can be set up and will be paid in January without withholdings whether W-8 modules have been submitted or not ?

1 Like
17

I came up with the perfect solution :

You can add a new system for author send money so they can send money to each other. I think this is perfect solution and you’ll profit from in many ways.

You can build a new system from the authors, this is exciting! :sunglasses:

4 Likes
18

That’s probably the answer of this problem

19

Yes, nice one. I think the best way is to allow authors to send money from one to the other account (to users on his team). @collis Can you allow only one transfer to one team member per month? (this is all we need)

3 Likes
20

4 days, no official response? @natman Are you in to the game?

3 Likes