Envato fees and author taxes - Argentina (split from older topic)

No, its not. I have the same situation filling the W8 form, this form only states that i’m a Non-US citizen

Isn’t there a space to enter your foreign tax ID number?

Yes, so ?

Well put your tax number in there and any applicable discount to the withholding rate will be applied. I’ve just checked and the W8 definitely has a space for entering your address.

Hi, there is no Tax Treaty with US and Argentina, so there will be no discount. The point is that the 30% cut is made from the hole price, not from the author fee, i think this is not fear

Well why didn’t you say that in the first place?

Ok, so you agree with me this is a very bad policy for contributors ?

No. I just believe that corporation tax was 35% back in 2016 when I said it was. And I also believe that the W8 form states a lot more then just whether you’re a US citizen or not. You’re best talking to a tax professional in your country of residence for the best way to minimise taxes… you may be able to write off the withholding tax as an outgoing.

Hi, there is nothing to do with talking to a tax profesional in my country, the problem is that envato should withold us tax from my income, take a look to the IRS text, it say’s clearly “Tax is generally withheld from the payment made to the foreign person”

Withholding On Payments of U.S. Source Income to Foreign Persons IRC 1441 to 1443 (Form 1042)

Generally, a foreign person is subject to U.S. tax on its U.S. source income. Most types of U.S. source income received by a foreign person are subject to U.S. tax of 30%. A reduced rate, including exemption, may apply if an Internal Revenue Code Section provides for a lower rate, or there is a tax treaty between the foreign person’s country of residence and the United States. The tax is generally withheld (NRA withholding) from the payment made to the foreign person.

I don’t know why they tax you on the entire item price. It probably has something to do with being taxed on your gross earnings not your net earnings. But they’ve done it this way for a good couple of years and they’re still in business, nobody has been sent to prison, and I’ve not heard of Envato getting a massive fine for tax evasion… so I’m going to assume that they’re doing what they should be.

If you feel that’s not the case, then you should get in touch with the IRS and see what they say.

Since Feb. 2014 Envato is no more paying out a commission, authors are sellers on this market and as a seller they have a gross income. The gross income of sale here is the item price (list price - buyer fee).

The US IRS says in their regulations:
Tax at a 30% (or lower treaty) rate applies to FDAP income or gains from U.S. sources, but only if they are not effectively connected with your U.S. trade or business. The 30% (or lower treaty) rate applies to the gross amount of U.S. source fixed or determinable, annual or periodical gains, profits, or income. Deductions and netting are not allowed against FDAP income.

Royalties are considered as FDAP income, that’s why Envato must use the gross amount of the sale for the withholding tax, deductions and netting are not allowed against FDAP income. Envato could consider to levy the author fee after withholding tax was deducted, but the amount of tax to the US IRS still remains the same.

For the calculation of income tax in your home country, the gross icome is also the base but here you are allowed to deduct your business expenses. The author fees are your business expenses and in most countries also the paid foreign taxes i.e. the US withholding tax, that’s why you should ask a tax expert in your country how to declare the US withholding tax as your business expenses when you file your annual tax return.

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