Hi all, here’s the first round of Q&A. We’ll collect new questions as they come in and aim to post another batch of answers in the next day or so. Thanks!
That’s correct. The rate and process to claim back your tax credit (if eligible) is different from one country to the next. Please check out the help center article (particularly the FAQ section at the end) for more info and consult a local tax advisor for country-specific details.
Yes. The restriction of one withdrawal destination per month is at the Envato user account level, not the PayPal account level.
For countries with a 0% royalty withholding tax rate, authors who submit a validly completed W-8 form will see no reduction of income on Envato Market (and no tax credits).
The tax is applied to the Item Price that an item sells for. A specific example might help in this case.
Take a Magento theme, that has a List Price of $100. In this example, $20 of the list price is Envato’s Buyer Fee. The Author is charging an $80 Item Price on that Magento theme, and if sold to a US buyer, then US RWHT tax will be applied on this item price.
In the case of an author in a country with no tax treaty, then RWHT is 30% if the sale is to a US buyer. So $24 will be withheld and remitted to the IRS. For a non-exclusive author, $44 is charged by Envato as our Author Fee. The Non-exclusive author will receive $80 - $44 - 24 = $12 in this example sale.
Only sales to US buyers will have this tax applied. But I agree, it’s not great for non-exclusive authors, and something we’re reviewing.
If you don’t complete a W-8 form, we’re required by the IRS to apply something called the Presumption Rules. They are a series of complex rules, and the upshot is that we presume that you are a US author who has not completed a tax form, and therefore Backup Withholding of 28% of all sales is applied.
In order to lodge Form W-8 we do not require you to register with the IRS the form will be accepted with your local tax identification number.
Not quite, WaveNebula. If your country doesn’t have a tax treaty with the US and you’ve completed a Form W-8, you will be charged 30% on the Item Price to US buyers only. If you don’t complete a Form W-8, then we are required to follow a set of rules that defaults to assuming you are a US author who has not completed a W-9 form, and are therefore subject to Backup Withholding tax of 28% applied to all of your sales on Envato (irrespective of where the buyer is based).
For countries with a 0% royalty withholding tax rate, authors will see no reduction of income (and no tax credits) on Envato Market, provided they submit a valid Form W-8.
Our analysis indicates authors should expect around one third of their sales to have US RWHT applied.
Our approach to author collaboration hasn’t actually changed. We’ve had this Help Center article about author collaboration up for some years which sums up our approach on this subject. You are correct however that our withdrawal system will be a lot less flexible. This does mean some authors will need to rearrange their cashflow practices.
Because there is so much variation from country to country, it’s best to speak to a tax advisor or accountant to work out what is the appropriate number to use in your country.
Here in Australia for example we have a system called the Tax File Number (TFN) which individuals or businesses can have, and you have to go to the tax office to apply for one. Different countries will vary.
As per the IRS Form W-8 instructions (see Line 6), if you don’t have a foreign tax identity number, you are not required to provide one and you can leave this question blank.