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

[EFEKT_Studio]

@collis - is envato going to be sold?

[FalconFX]

Let’s cut to the chase !!!

[starfaII]

Yea we asked ourselves the same question, why didnt they deduct the 30% for the IRS after they have got their part of the item’s price. This way we pay their part of the tax for that “$4.5(12.5%)”, if im not mistaken.

[SpaceStockFootage]

You’re confusing ‘royalty free’ with ‘tax free’. Income is income.

[Frantic-Sounds]

thnaks for response

I need to consult,

1- because envato takes us as marketers? as I understand we have a problem in concept.

2- I want a practical example of tax (envato oficial) deducted taking a song AudioJungle price of 19 usd for a exclusive author and one not exclusive. I could see and understand more.

3- are evaluating some kind of change in the wake of the complication that this creates many “foreign” authors?

thanks\

[simonswiss]

+1 - this seems like the logical reason behind this. Move to world’s biggest tech market, optimise company profit by pinning tax on hard working authors.

I miss the big family, where the most popular threads would be What I'm doing 99% of the time in the dashboard or Show us your workspakce…

One big thing: If a couple of months after implementing paid support, you have a large chunk of authors leaving the marketplaces - how do you think buyers will respond? They paid for a support service, and then their item gets disabled and author goes MIA…

I guess if you’re selling, you better sell quick before the turd hits the fan.

[Opal_WP]

I only care about how Envato know that customers are US people.

[EcoAudio]

I did the calculation also for the case of a sale of $ 19. With the 30% tax, as I do too.We would charge $ 4.94 when a sale to the US. At $ 15.20 for one side it is subtracted 30% for IRS and $ 37.5% (depends on your sales) for envato, that results in a sale of $ 19 would charge $ 4.94 …

[Mega-Music]

And we pay the tax for unreal income.

[AurusAudio]

…and this is for an exclusive author?

Honestly, that’s a little embarrassing and an insult to authors who devote their work to be sold solely on this marketplace.

[VF1]

@collis

Will these new US tax rules affect our December 2015 payout?

Thank you

Can we get official answer for this?

[GoodLayers]

@collis @natman Could you clearly explain why we have to pay tax for author fee part? It’s not our income. It’s Envato’s income… This doesn’t make sense at all

[Theemwiz]

Any way to save partnerships? Or they are dead after 1st Jan?

[VF1]

why we have to pay tax for author fee part? It’s not our income. It’s Envato’s income… This doesn’t make sense at all

I guess we are facing the after effects of official statements like “authors are direct sellers - Envato acts as seller for VAT purposes only”. Just my guess.

Btw, the entire announcement could have made with some obvious FAQs. As long as staffs can’t post an announcement like this with a dozen FAQs, I would say they completely lost looking things from author perspective. I don’t mean the changes are wrong but the system lost its direct connection with authors.

[Bedros]

Let’s hear about this please. Thanks.

[SteelThemes]

ya u right, All authors are asking the same question. Please Envato Explain us

[natman]

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!

@collis @natman - Hi, If an individual is running multiple accounts do they need to fill out their respective W form under each account? Thnks.

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

Will these new US tax rules affect our December 2015 payout?

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.

“Partners must nominate one partner to submit a W-8 or W-9. Withdrawals will only be made to the nominated partner.”

Does this mean that all withdrawals can be made under only one person’s name for ever??Can’t we change this sometime? Now that we can only withdraw once per month, can’t we at least withdraw to a different account/person every month?

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).

Hi, one question and I think the simplest one…: @natman

Do we have time until 1 Jan to fill the form for Non-USA authors?

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.

Few questions:

1, Will Envato still be the VAT MOSS authority for EU sales after this changes? I mean will Envato keep the invoices for EU buyers as it was before?

2, Will Envato use my credentials from the W8 form for filling sales invoices?

Thanx

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.

Why it is necessary to write my foreign tax id? May be I misunderstood something, but in official instruction (this one - https://www.irs.gov/pub/irs-pdf/iw8ben.pdf) for W8-BEN form is written that I can write my date of birth in 8th line instead of writing my tax id at 6th line.

I’am also an author on other marketplace which also was requiring from me W8-BEN form and there I didn’t provided my tax id and had no problem with it.

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.

@collis @natman Hello, there must be something wrong with the information you’re getting on the foreign tax ID number. I called the IRS yesterday and to them it was clear that the field must be left blank if I live in a country that does have a tax treaty (France in my case, 0%) AND does not deliver foreign tax identification numbers to their citizens. I quote the IRS :

“If your are providing this Form W-8BEN to document yourself with respect to a financial account that your hold at a US office of a financial institution, provide the tax identifiying number (TIN) issued to you by your jurisdiction of tax residence unless : you have not been issued a TIN OR the jurisdiction does not issue TINs. If your have not provided your jurisdiction of residence on line 6, provide your date of birth in line 8.”

We do have a tax treaty, we do not have to see these 30% held, and we do not have to ask for an ITIN because the “not provided” case is clear : no TIN + tax treaty = blank.

The W-8BEN is a personal declaration that I live in a certain country. It is based on honor in order to claim a tax treaty benefit. It is never written in the W8-BEN instructions that I have to ask for an ITIN if my country does not issue a TIN, it is written to leave the space blank.

In short, the TIN or ITIN or EIN (for companies) is NOT required to claim a tax treaty benefit. This is the job of the W8 form.

If you withhold 30% it means you consider that I did not filled the W8. So you’re not applying the IRS rules correctly when you state that “not provided” for the TIN = 30% held.

Thanks for reading this!

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

How much time we have to complete tax form in account? Until 31 december of 2015?
Can we change submitted form details later (and in 2016?), for example if we want to move and change Country of citizenship in form and change payment method to another country bank for example (the same as citizenship)? Will we be able to do this?
All non-us authors can continue use Payoneer account with no matter what country of citizenship we have? (if payoneer account holder name is the same as in submitted form)?

Also what will happen to Author Account if it’s country will be listed in US sanctions list in future for some reason? This list expanding every day. This Themeforest account with all themes will be disabled or author can change account country and move business to another country?

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.

Dear @collis ,You actually explained a lot in your previous answers, and thank you for that. But there is no answers from you or anyone else from Envato team on one major question which everybody is concerned about:

Why the author must pay the tax on the total price including the Envato Fee? It doesn’t make sense to all of us. Please explain us.

The second thing you mentioned in your answer is about the story with the Apple store and them not applying a tax on items sold there. You said:

So for example, purchasing a tool such as a Photoshop add-on doesn’t create a royalty payment because of how the software regulations work in the US tax code.

I don not know about other stuff which sells here on Envato, but let’s look what’s the situation about the themes. Well, all of our themes are bundled with the GPL licence? Am I right? WordPress is an open source software released under the terms of the General Public License as published by the Free Software Foundation.

Theme or a Plug-in is nothing more than a add-on to a WordPress (or Drupal, Joomla…), and we must include the GPL license in all of our themes. So there is a catch. We as authors are not the owners of the PHP code, CSS or whatever inside. And we got taxed for what in this case? Copyright? How we can even have a copyright over WordPress add-on, and why we need to include the GPL license in our themes then? I’m not an expert in this, so excuse me if I’m wrong, but this is something which is really interesting for the people here, especially theme authors.

Thank you

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.

[R_GENESIS]

I still have confusion for TAX apply on item price.

As per article mention on below URL

We’re Expanding to America. Important Tax and Withdrawal Changes for All Authors...

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.

[chilly_orange]

@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?

[Frantic-Sounds]

@scottwills I referred to this when I was comment my Situation of my frustration at the lack of answers to some questions formulated