(Locked) Authors, VAT and a Global Marketplace


#1

Hi all, I’ve closed the last thread on these topics, and am opening a fresh one to discuss the blog post:

Authors, VAT and a Global Marketplace


#2

I don’t get it, now the customers from Europe countries such as Germany would have to purchase pay 19% more for a product? So if a theme costs $50, they will pay $59,5?


#3
Pricop said

I don’t get it, now the customers from Europe countries such as Germany would have to purchase pay 19% more for a product? So if a theme costs $50, they will pay $59,5?

Have you never shopped somewhere online and had the Vat added on top of the price shown? Sounds like it will be like that.


#4
Since our launch in 2006, our terms and licenses have expressed Envato Market as a platform with direct transactions between buyer and author, and we’ve had a general attitude of letting buyers directly communicate with sellers to ask questions, follow them and receive updates.

Fortunately, in my country the most important is how the money flow, not what you write, because someone here doesn’t understand term “direct”.


#5

Hi pricop, thanks for the question. Broadly yes, but with the important exception that business buyers won’t have VAT added, as they can use something called the reverse charge procedure to account for their VAT. Our user base has a heavy make up of business buyers (freelancers, agencies, entrepreneurs, small enterprises, and so on).


#6

It sounds to me like you are doing the right and legal thing. Thanks for the post, Collis.

I hope we get more clearance on all the parts that are still unanswered in your post soon, but the VAT issue does get the right treatment: Charge it from the right person (the buyer), only if it’s needed (non-business buyer), and envato acts as what it truly is: the supplier.

I’m sure no author will ever agree on the “buyer buy directly from author” part here, we all know it is not the reality, and I’m sure you know it, too Collis. But I guess unless some day a court will decide what is the truth here, we can all stick with our own and our lawyers opinions.


#7

After seeing the way this article was worded, I’m a little suspicious of what’s potentially heading our way in 2015. To me it sounds like we’re about to get hammered by more than just a VAT.

Does this mean at some point, we’ll be required to fill out a tax or VAT form in order to stay out of trouble with the EU?


#8

So, to sum up - the authors from Europe when it comes checks from the European Tax-Office (EU IRS), must pay overdue VAT from previous years. Is that right?

So Theme Punch has to pay 20% of 2 million? :wink: They wrote that they now have a problem, and this post just struck them.


#9

Thanks for the update, it’s good to know that you’ll handle the VAT as part of our agreement.

However, this:

Envato Market as a platform with direct transactions between buyer and author

is completely wrong and not the reality. Direct transactions between the buyer and the author? :slight_smile: Seriously?

10 Nov 2014 ThemeForest Sale Arwyn - A Charming Personal WordPress Blog Theme 8070813 $30.10

Where my money, if the transaction was done between the buyer and me? I haven’t received anything. Who purchased it? What’s his e-mail address? How can someone make transactions with me without paying me anything or me knowing anything about him? :slight_smile:

You can’t call the above a transaction, I’d call it more like a “notification” that you sold an item and you’ll give me my part next month :wink:

@prestahome that’s a good question, but I don’t think that’s correct. If that’s the case, then all the european union sellers are screwed. :slight_smile: Envato as well, as it would be their fault, the money flow shows very clear who’s doing the transactions and they would be open to lawsuits. I doubt anyone from the $250K+ authors can pay 20% of what they sold here.

Not talking about deals with other people, it’s very rare that only one person got all the money from one account.


#10

Hi Collis,

Thank you for the post.

But what does it mean for EU authors?
Who will “earn” the VAT? Envato or the author?

That’s important for me, because I live in Italy and I have to declare (as well of the incomes of course) the debit VAT. If I receive this VAT, then I will need to pay this VAT deducted by the credit VAT (if I buy something I pay for the price + VAT, that’s the credit VAT).

Benito


#11

@collis

Legal wise, I have to agree with FinalDestiny. This is not considered a direct transaction, not where I’m from, it’s called indirect payment. Unless Envato is purchasing all my items, it’s called indirect payment or commission payment. Absolutely no legal institution will accept my paperwork saying the above.

Basically speaking, if I go and pay my taxes with the system above, I’ll be charged at 100% of my sale value, which is not correct, because my payment is 70% or less, so legally speaking, Envato is paying me xx% of sales, not the buyer.

The big problem for EU authors is that financial institutions ( in a lot of countries ) will NOT know what to do with this and we’ll get taxed so much that being an Envato author will no longer be feasible.

Let’s do math. Envato tells my financial institution that I get 100%, but Envato taxes me for that depending on the author level. I sell a product that costs 100$, I get 70% from Envato, my financial institution taxes another @24% out of the whole 100%, that means you cut another @24% out of that, and voila, the price of my item is 100% and I get 46$. Where’s the logic in this? Because I’m really really trying to see it!

Basically said, someone is plain and simple robbing me of the 30%. Because I cannot declare that “Hey these guys take a 30% tax” because the Terms of Service of Envato say that I am the direct seller… which I’m not! :expressionless:

This is my opinion as an author, it does not reflect the opinion of a moderator, a staff member, or any representative of Envato


#12
Enabled said

Let’s do math. Envato tells my financial institution that I get 100%, but Envato taxes me for that depending on the author level. I sell a product that costs 100$, I get 70% from Envato, my financial institution taxes another @24% out of the whole 100%, that means you cut another @24% out of that, and voila, the price of my item is 100% and I get 56$. Where’s the logic in this? Because I’m really really trying to see it!

actually its $46 you are left with (70-24).

But it gets really funny for non-exclusive authors. they get 33%, but have to pay taxes for 100%. they are left with something around 8-13% of the item price. Now add the costs that they have and they are actually paying to be here, not earning.


#13

Hi guys, some broad answers to a few of the comments:

I think the main point here is that authors won’t receive or have responsibility over the VAT paid. In the transaction chain, for VAT purposes, Envato will step in as the supplier and manage the compliance.

If you’re concerned about a specific situation, please don’t hesitate to email taxinfo@envato.com. I’ve been on the phone with ThemePunch (wish we were talking for a more fun reason, but really cool to speak to them!). We are committed to our community and work with authors on specific situations.


#14

To be honest ThemePunch situation is crucial, if they need to pay tax from previous years this will be disaster for many EU authors.

I am waiting for response in this case. This is most important to me and for sure many EU authors.


#15
collis said

Hi guys, some broad answers to a few of the comments:

I think the main point here is that authors won’t receive or have responsibility over the VAT paid. In the transaction chain, for VAT purposes, Envato will step in as the supplier and manage the compliance.

If you’re concerned about a specific situation, please don’t hesitate to email taxinfo@envato.com. I’ve been on the phone with ThemePunch (wish we were talking for a more fun reason, but really cool to speak to them!). We are committed to our community and work with authors on specific situations.

Yeah… here’s the main question … 100% we’re getting less than 46% … why is Envato not declaring themselves as the middle company… because in the long haul, Envato is currently taxing a lot of European authors more than their own governments. That was my main concern and actually still is.


#16
collis said

Hi guys, some broad answers to a few of the comments:

I think the main point here is that authors won’t receive or have responsibility over the VAT paid. In the transaction chain, for VAT purposes, Envato will step in as the supplier and manage the compliance.

If you’re concerned about a specific situation, please don’t hesitate to email taxinfo@envato.com. I’ve been on the phone with ThemePunch (wish we were talking for a more fun reason, but really cool to speak to them!). We are committed to our community and work with authors on specific situations.

Oh thank goodness, I was worried. :slight_smile:

It’s not the VAT I was worried about, it’s the spaghetti legalese I was dreading.


#17
lollum said

Who will “earn” the VAT? Envato or the author?

I think the government will “earn” the VAT. :smiley:


#18
Enabled said

@collis

Legal wise, I have to agree with FinalDestiny. This is not considered a direct transaction, not where I’m from, it’s called indirect payment. Unless Envato is purchasing all my items, it’s called indirect payment or commission payment. Absolutely no legal institution will accept my paperwork saying the above.

Basically speaking, if I go and pay my taxes with the system above, I’ll be charged at 100% of my sale value, which is not correct, because my payment is 70% or less, so legally speaking, Envato is paying me xx% of sales, not the buyer.

The big problem for EU authors is that financial institutions ( in a lot of countries ) will NOT know what to do with this and we’ll get taxed so much that being an Envato author will no longer be feasible.

+1, exactly. This needs to be addressed ^.^.


#19
collis said

I think the main point here is that authors won’t receive or have responsibility over the VAT paid. In the transaction chain, for VAT purposes, Envato will step in as the supplier and manage the compliance.

But you are the supplier, for VAT purposes and not only. For every possible purpose. We don’t supply anything. We don’t invoice, we don’t receive money, we have no idea who our customers are, we just get a monthly payment from you, the supplier.

Let’s not play the game where Envato is the good guy that will pretend to be the supplier just for VAT purposes. You are the supplier and you don’t need to pretend to be so just for VAT purposes. If it was the other way around, we to pay VAT, it would mess the whole Envato system and you wouldn’t be able to control anything. But you currently control everything(invoices, payments, refunds, clients) which is pretty clear makes you the one and only supplier.


#20
FinalDestiny said
collis said

I think the main point here is that authors won’t receive or have responsibility over the VAT paid. In the transaction chain, for VAT purposes, Envato will step in as the supplier and manage the compliance.

But you are the supplier, for VAT purposes and not only. For every possible purpose. We don’t supply anything. We don’t invoice, we don’t receive money, we have no idea who our customers are, we just get a monthly payment from you, the supplier.

Let’s not play the game where Envato is the good guy that will pretend to be the supplier just for VAT purposes. You are the supplier and you don’t need to pretend to be so just for VAT purposes. If it was the other way around, we to pay VAT, it would mess the whole Envato system and you wouldn’t be able to control anything. But you currently control everything(invoices, payments, refunds, clients) which is pretty clear makes you the one and only supplier.

+1 exactly.

But don’t expect to hear anything else from Collis. It is obvious they want to stick to this version.