Important Changes for Non-US Authors/Affiliates/Service Providers

Hi everyone, here is the latest round of Q&A. It’s Friday evening here in Australia now, so this will be our last post until we return to work on Monday. Thanks to everyone who has helped point people in right direction, clarify misunderstandings and keep the discussion on track. See you next week!

Yes, you must complete a W form for every account.

No, the December 2015 payout will be processed as per normal in January. Taxes will apply on sales made after January 1st, and forms (like the 1042-S) will reflect that.

The account owner (i.e., the person who created the account and agreed to the terms and conditions) needs to be the same person who completes a W-8 or W-9 and receives the withdrawal funds. Note: This person can be an individual or a representative of a business/company that complies with all our usual terms (be registered in a country, put forward its tax details, receive funds to its payment accounts, and so on).

However, provided the account owner and owner of the withdrawal destination is the same, you can update your payment details each month (e.g. if you have a new bank account, or are managing your accounts in a particular way).

You have until January 1st, 2016 to fill out the form, however, we encourage all authors to complete their form as soon as possible to make they’re ready well ahead of the deadline and avoid any unnecessary withholding. Starting early is particularly important if you don’t have a Foreign Tax ID and need to apply for an ITIN - the IRS estimates the application process can take between 4 and 6 weeks. If you are concerned you may miss the deadline, you should complete a W-8 form with whatever information you have, and then resubmit a fresh one when you have an ITIN (to prevent the US presumption rule kicking in and Backup Withholding applying).

After January 1st, authors who have not completed a W-8 form will be presumed to be a US author who has not completed a form, and we will apply Backup Withholding tax of 28% on all sales. We will remit this tax to the IRS frequently, and once it’s gone, you will need to take it up with the IRS, and we won’t be able to assist much.

Hello! Good questions:

  1. Yes, this won’t change the system for sales to EU buyers in any way. It applies purely for sales to US buyers.

  2. Yes, from January 1st, 2016, the information you enter in your W-8 Form will overwrite any information you had previously entered in the billing information fields in your account settings. It’s worth noting, though, that invoices will continue to display to the buyer only select details (not the full address) as per the current system.

It’s incredibly confusing - we agree! The instructions to use date of birth in place of a Foreign TIN only apply to owners of accounts held with financial institutions such as banks.

Unfortunately, Envato doesn’t fall into this category, so if you’re in a treaty country, don’t have a Foreign Tax ID and want to take advantage of the reduced tax rate, you’ll need to obtain an ITIN.

This is stated on page 6 of the official instructions as follows:

If you are claiming treaty benefits, you are generally required to provide an ITIN if you do not provide a tax identifying number issued to you by your jurisdiction of tax residence on line 6.

It’s really tricky when you’re dealing with complex rules like these and different tax systems around the world. Our latest instructions are based on what our US tax advisors have said as well as the official instructions (see above). The date of birth option appears to only exist for owners of accounts held with financial institutions such as banks, not companies like Envato. In the quoted response from the IRS you added, it says “at a US office of a financial institution”.

I’m sorry about the confusion :frowning:

Lots of important questions! Here are your answers:

  • As mentioned above, you have until January 1st, 2016 to fill out the form, however, we encourage all authors to complete their form as soon as possible to make sure they’re ready well ahead of the deadline and avoid any unnecessary withholding. Starting early is particularly important if you don’t have a Foreign Tax ID and need to apply for an ITIN - the IRS estimates the application process can take between 4 and 6 weeks. If you are concerned you may miss the deadline, you should complete a W-8 form with whatever information you have, and then resubmit a fresh one when you have an ITIN (to prevent the US presumption rule kicking in and Backup Withholding applying).

  • If your country of residence and/or citizenship changes, you can update your information by submitting a new W-8 Form.

  • You can change your withdrawal details once a month as long as the destination country and account owner always match the information contained within the W-8 Form.

  • If the Payoneer account holder’s country and owner information match the information contained within the W-8 Form, non-U.S. authors should be able to continue to use this service.

  • Should a new country have full-scope US sanctions imposed on it, then the same rules will apply for as long as the sanctions are in place. It’s worth noting that the US imposes varying levels of sanctions on different countries. Just because a country has some sanctions against it, doesn’t necessarily mean it will fall into the list of countries that Envato can’t do business with.

You’re welcome, themezkitchen! :slight_smile:

So on the first question - US RWHT applies on an author’s total revenue. The portion of the sale which is Envato’s revenue directly from the buyer (i.e. our Buyer Fee) is separate. The remainder of the sale constitutes the sale by the author, and has tax applied. It’s an unusual income tax because it’s a gross-based income tax (i.e. applied on the sales, not on profit). We looked into whether we could apply the tax after our author fee, but it turns out that’s not how the RWHT system works.

On the second question - The intersection of GPL, Envato’s proprietary license, copyright, royalties, and US tax law is extremely complex unfortunately, so there isn’t an easy answer here. On Envato Market US RWHT will be applied on sales of open source based items.

I still have confusion for TAX apply on item price.

As per article mention on below URL

Information under
++++++++++++++++++
When will Envato not apply US RWHT?
US RWHT won’t be applied on service income including Item Support extension purchases and freelance/service work you provide via Envato Studio. The portion of item support which is embedded in the Item Price will have US RWHT applied.
++++++++++++++++++

Our statement page clearly bifurcate 6 months included support price.
So tax apply only on bifurcated item price not with 6 months included support price.

@collis and @natman

I see that yet again, my questions remain unanswered. Posting these for the third time now… If you’re not willing to discuss the motives for this drastic move, please be up front about it and let me know (so I can stop wasting my time repeating myself).

  1. Which additional payment options/gateways are you planning to implement?
  2. Why do these additional payment options require a physical presence in the US?
  3. What exactly indicates that having these payment options/gateways will in fact lead to an increase in sales?
  4. How is “being closer to buyers” going to boast sales?
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@scottwills I referred to this when I was comment my Situation of my frustration at the lack of answers to some questions formulated

@natman @collis thanks a lot for answering the rounds of question. As said in the latest edit of my post, to be able to fill out a W7 form we need to provide a certain number of documents including :

Your original, valid tax return(s) for which the ITIN is needed. Attach Form W-7 to the front of your tax return. If you are applying for more than one ITIN for the same tax return (such as for a spouse or dependent(s)), attach all Forms W-7 to the same tax return. After your Form W-7 has been processed, the IRS will assign an ITIN to the return and process the return.”

If you still chose to ask for an ITIN as advised by your advisors, are you able to provide us with this document within days so that we are compliant on january first? I read somewhere that this could be an official letter from you saying that the ITIN is required in “my” case (the case of all authors with a tax treaty and no TIN).

Could you please solve this point with your advisors? Thanks a lot for answering this important question :slight_smile:

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Hi. I’m non-US author. My country allows me to claim a 0% rate of withholding (Yes, I’m lucky :-)). In the W8 form I can put U.S. Social Security Number. Can I still claim a 0%? I’m a bit confused after reading this natman’s post. It says I can put either Foreifner TIN or ITIN (and nothing about SSN). Please clarify.

Hi ,

If I provide the W-8 form with “I will not or am unable to provide a Tax ID Number”. Do I still have to pay 28% of all my sales? or I will be taxed only if someone from U.S bought my item?

Thank you!

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If you’re non-US then you shouldn’t have a US SSN. Well, you might do if you were born in the US and have moved somewhere else, but even so, you should be putting in your tax ID for the country where you are currently paying tax.

They will withhold 30% of all your US sales only regardless of where you live.
So if your country doesn’t have tax treaty with the US, it doesn’t matter, go ahead and choose not to provide a Tax ID number.

Only US sales from what I can tell. Don’t fill in W8… get taxed on all sales. Do fill in W8 but don’t add tax id… get taxed but only on US sales.

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@OsamaSayegh @SpaceStockFootage Thank you

What to use as a foreign TIN, seems to be much of the confusion, so citing w8ben form:

Line 5. If you have a social security number (SSN), enter it here. To apply for an SSN, get Form SS-5 from a Social
Security Administration (SSA) office or online at www.socialsecurity.gov/online/ss-5.html. If you are in the United States, you can call the SSA at 1-800-772-1213. Complete Form SS-5 and return it to the SSA.

If you do not have an SSN and are not eligible to get one, you can get an individual taxpayer identification number (ITIN). To apply for an ITIN, file Form W-7 with the IRS. It usually takes 4-6 weeks to get an ITIN. To claim certain treaty benefits, you must complete line 5 by submitting an SSN or ITIN, or line 6 by providing a foreign tax identification number (foreign TIN).

More information gathered from the internet, where some have contacted the IRS regarding lines 5 and 6 (TIN and foreign TIN), and got an official response. Note while this is specific to Italy, it should hold true for a EU country with a TIN:

In response to your question regarding Form W-8BEN, lines 5 and 6, when this form refers to a foreign tax identifying number they are referring to, in your case, a tax number from Italy (assuming this is your tax residence). According to the instructions for this form you generally would be able to use your foreign tax identifying number in order to claim a tax treaty for the type of income you indicated. For more information please see the instructions for Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals).

http://ec.europa.eu/taxation_customs/taxation/tax_cooperation/mutual_assistance/tin/index_en.htm

Most EU countries use Tax Identification Numbers (TINs) to identify taxpayers and facilitate the administration of their national tax affairs. TINs are also useful for identifying taxpayers who invest in other EU countries and are more reliable than other identifiers such as name and address.

You can look up your TIN by country in the link below:
https://ec.europa.eu/taxation_customs/tin/tinByCountry.html

Not an expert on the subject and some of this info was already gathered by others and posted on separate replies :+1:

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What if after sometime we want to change this person (account owner). I assume that we need to fill out a W8 form again under the name of new individual. Is that right?

Hi @natman @collis Paypal Question:

I’m not an US resident, but I do have an US paypal account, because at the time I started selling items at Envato paypal where unavailable on my country, so my brother (who lives in the US) open a US paypal account for me, with my name, etc. So I currently withdraw my earnings from AJ to my US paypal account and normally I spend my earnings paying for online services with paypal ( I don’t do withdraws to physical bank or ATMs)

So if I now fill the IRS form for non-US authors I still be able to withdraw AJ earnings to an US paypal account ? Or in other words…will Envato block withdraw earnings from non-US accounts to US paypal accounts ?

Thanks

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In Germany we have 2 TAX numbers (IdNr. and Steuernummer). I’ve used the IdNr. for the W8. Hope that was the right one. Anybody from Germany who can verify this?

Another thing: I’ve already sent the W7 and W8 to the IRS last year and both got rejected because of negligible reasons. The form Envato offers is an simplified form of the W8 and doesn’t even require a copy of my ID. Can you (Envato) assure me that, after I have completed your W8 Envato form correctly, no taxes will be withhold by the IRS?

I got US SSN when I worked in US 4 months. Why do they have US SSN field in W8 form?

Hi, go there and check what’s said for germany : https://ec.europa.eu/taxation_customs/tin/tinByCountry.html?locale=fr

@Typps it depends on the country you’re in. Some consider tax numbers as IDs, other don’t. See link above :smile:

BTW, what is deadline to fill out W8 form?

@mattosada I see what you mean. France does not appear to have a TIN. Seems you may need to apply for an ITIN, which takes time ( a couple of weeks from what i’ve read around) :persevere:

I believe this is January 1st after which a % of US sales will be held until the form is filled out