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