If you are a US person looking for information on how to submit a Form W-9, please click here.
This article is a guide for non-US Authors including;
- How to Complete and Submit a Form W-8 to Envato
- Backup Withholding Tax
- Royalty Withholding Tax
- Getting More Help
- Frequently Asked Questions
If you are a non-U.S. person, your sales to US buyers may be subject to royalty withholding tax of up to 30%.
However, if you are a resident of a country that has an income tax treaty with the U.S., you may be eligible for a reduced withholding tax rate. The full text of these treaties can be found on the IRS website.
A list of the applicable treaty royalty withholding tax rates can be found here. The applicable rates applied are based on the copyright classification.
The purpose of the Form W-8 is to establish your identity and status as a non-U.S. person, that you are the beneficial owner of the revenue and whether a lower rate of withholding applies as the result of a treaty claim. Even if your country does not have a treaty with the US, the form is used to establish that you are not a U.S. person.
If you do not provide a Form W-8, we are required to treat you as a US person and ALL sales will be subject to backup withholding tax of 28% (regardless of the buyer’s location). Go here for more information.
If you complete a Form W-8, you must also provide us a Tax Identity Number, otherwise we are required to deduct royalty withholding tax of 30% on your US sales only. More information is provided below.
What’s required?
Non-US Authors are required to complete a standard IRS form called Form W-8 which includes some basic information about you, including your Foreign Tax Identification Number (TIN) and country of residence.
An author account has one owner, and it is their details which should be in the W-8. That owner can be a corporation or other type of entity, but not a partnership. Partners must nominate one partner to submit a W-8 or W-9. Withdrawals will only be made to the nominated partner.
How to Complete and Submit a Form W-8 to Envato
To help you provide this information quickly and easily, we have provided a form on Envato Market.
The form is available under Tax Information on your Settings page. You can also access the form by copying the following link and simply updating it with your username "https://themeforest.net/user/<username>/tax_information/new” We take your privacy and information security seriously, and will use industry standard practices to securely store any details you provide in this form.
Detailed instructions for completing Form W-8 (Individuals) or Form W-8 (Entities) are available on the IRS website.
What will we do with this information?
The W-8 form will determine the appropriate withholding tax rate that will be applied to your sales to US buyers. At the end of each financial year we'll send to you and the IRS the appropriate IRS Form 1042 so that you can accurately report your income to your local tax authorities and claim any credits for the taxes withheld and remitted to the IRS.
Backup Withholding Tax
If you are a non-US Author and do not provide a W-8, we are required under US tax law to treat you as a US Author and may be required to hold back 28% of your earnings and send it to the IRS. Refer to this article for more information on backup withholding taxes.
Royalty Withholding Tax
Generally, transactions in digital creative content gives rise to royalty earnings. If you are a non-US author, your sales to US buyers may be subject to withholding based on your country’s income tax treaty with the US.
US tax law provides that the US government may collect taxes for US source royalty income. A royalty is considered to be US sourced when the sale is made to a person residing within the US.
To find out your treaty article reference & paragraph number, and applicable withholding tax rate you can view an extract of ‘Table 1. Tax Rates on Income Other Than Personal Service Income Under Chapter 3, Internal Revenue Code, and Income Tax Treaties’ here.
You can view full the Table 1 on the IRS website here.
Any tax withheld will be remitted to the IRS - and not held by Envato.
Any tax withheld by Envato (either royalty withholding tax or backup withholding tax) will be remitted to the IRS on a monthly basis. We will also be preparing and filing Forms 1099 and 1042 with the IRS that will show the amount of gross sales and taxes withheld. Authors will be provided a copy of their Form 1099 no later than 31st January the following year or Form 1042 no later than 15th March the following year. These forms can be provided to your tax accountant to assist with claiming any tax credits that may be available.
We will begin collecting royalty withholding tax and backup withholding tax from authors from January 1st 2016.
Getting More Help
We’ve provided lots of helpful answers in the FAQs below, and we also have a special email address you can write to where we’ll provide as much help as we can. Of course, this has the caveat that you should always seek advice from a professional accountant / tax advisor because we can’t advise about your specific tax situation, including filling out your specific W-8 form.
You can email: taxinfo@envato.com if you need any additional help or general assistance.
Frequently Asked Questions
I don’t have a US TIN or a foreign tax identity number, what should I do?
If you are in a country with a tax treaty rate for US RWHT, then you need to add a tax identification number to claim a treaty benefit. If you have a tax number from your own country (i.e. a “foreign tax identification number”), then add that into the W-8 form where specified. This is usually the number that you quote when you lodge your tax return or pay tax in your own country.
If you’re not sure what is the right number in your country, talk to a tax advisor or accountant. You may need to apply to your country’s government or tax authority. Alternately, you can apply and get a US number called an ITIN (Individual Taxpayer Identification Number).
If your country has a tax treaty with the US, there is a simple application process with the IRS that involves a form called the W-7. You find the instructions and form here. Assuming you’re not a US person, then you will most likely be completing the form as a “Nonresident alien required to get ITIN to claim tax treaty benefit”. However, if your country does not have a treaty with the US, then the tax identification number is not necessary as you are unable to claim a treaty benefit.
If you’re a non-US corporation and don’t have a foreign country ID number, then you have to apply for a US Employer Identification Number (EIN), using Form SS-4 Application for Employer Identification Number. As always, consult a tax advisor or accountant for assistance, or check the IRS website.
I need a letter from Envato to support my W-7 application for a Tax Identity Number, who should I contact?
As part of the IRS ITIN application process, an author may be required to provide a signed letter or document from Envato, on official letterhead, showing their name and verifying that an ITIN is required to make distributions to them during the current tax year that are subject to IRS information reporting and/or federal tax withholding.
If you require this document, please contact the Help Team. You will need to provide us with your full name that matches the W-7 application. User names are not acceptable.
What happens if I don’t provide a US TIN or a foreign tax identity number?
If you are from a country with a tax treaty with the US, we can’t apply the benefit of the treaty rate reduction and will be required to apply RWHT at 30%. So if you’re in a non-treaty country, it doesn’t matter, and completing the W-8 form at least ensures we don’t need to treat you as a US author.
Does this apply to US Authors?
No, this is a US tax form from the IRS (the US tax authority) for non US Persons. A separate form (W-9) is applicable for US Authors.
What’s this for?
This process is needed to meet the IRS’ requirement that the appropriate taxes are applied to sales of digital products considered to be royalties.
What about the past?
Sales after January 1st, 2016 are subject to these guidelines. This coincides with operations commencing for Envato USA.
What happens if I don’t complete my tax info until after withholding starts?
Any amounts withheld prior to receiving your tax information will be sent to the IRS.
What happens if I don't provide my details, Royalty Withholding or Backup Withholding is applied, but I also pay my tax?
You should consult your accountant or tax advisor on how to ensure you’ve paid your correct taxes on your end of year tax return.
How secure is my tax information stored with Envato?
We take your privacy and information security seriously, and will use industry standard practices to securely store any details you provide in this form.
What documentation will I get about amounts withheld?
You will be able to see tax withheld on your statement page and will receive a 1042 form.
Should I be seeking tax or legal advice?
Anytime you earn money as an independent contractor, freelancer, or through an online service, you should make sure you have informed your accountant or tax advisor so they can help make sure that you are correctly paying your taxes.
What if there are multiple owners of the account?
Envato Market enters into a legal agreement with the person who creates an account and agrees to the terms and conditions. If you are a non-US Person then you should complete the Form W-8 details. An author account has one owner, and it is their details which should be in the W-8.
That owner can be a corporation or other type of entity, but not a partnership. Partners must nominate one partner to submit a W-8 or W-9. Withdrawals will only be made to the nominated partner.
Does this apply to Envato Studio?
Yes, Envato Studio providers will be required to complete these details. If you are an Author on Envato Market, you only need to complete the W-8 or W-9 form once and we will ensure these details are applied to you Envato Studio account.
If I already pay taxes in my country for my earnings on Envato do I still need to provide the tax information Envato is asking for?
Yes. Envato is requesting information in order to report that portion of your income that US tax laws deem to be derived from a US source. Absent this information, Envato will be required to withhold 28 percent of your gross sales.
How can I determine if my country has a tax treaty with the United States?
Please review the complete list of all US tax treaties provided by the IRS.
Will I be taxed twice if my country does not have a tax treaty with the US?
The answer will depend entirely on your country of residence.
If my country does have a tax treaty with the US how will that affect what info I need to supply to Envato?
If your country has an income tax treaty with the US, please fill out the treaty benefits portion of the Form W8.
If my country has a tax treaty with the US how much tax will be withheld from my earnings?
Generally, an income tax treaty will provide for a reduced or zero rate of withholding on royalty income.
If I am a citizen of another country but live and maintain a residence or address in the US does that affect the tax information I must supply to Envato?
You will need to speak with your tax advisor, as circumstances and opinions may differ.We recommend that you speak with your tax advisor, as this may be a very fact specific question.
I am an international author so why is the U.S. taxing me?
US tax law provides that the US government may collect taxes for US source royalty income. A royalty is considered to be US sourced when the sale is made to a person residing within the US.
How will my earnings as an author be calculated after withholding tax is applied ?
If the sale of a $49 WordPress theme is to a U.S. buyer.
The first thing is that in a $49 WP theme sale, $12 of that is our Envato Fixed Buyer Fee directly to the buyer. So the author’s Item Price is in fact just the $37.
Step 1: $49 - $12 = $37 is the author's Item Price
Next, we apply US Royalty Withholding Tax (RWHT) and send this to the IRS. This changes based on the treaty rate between your country and the USA. Again, using your example, let's say the author's country doesn't have a treaty with the US and the RWHT rate is 30%.
Step 2 (part 1): 30% of $37 = $11.10 to the IRS
The other thing that happens (at virtually the same time as the RWHT is applied) is that we take our Author Fee. This will be based on the kind of author you are (exclusive or non-exclusive) and the amount you have sold on Envato Market. You can see these rates here.
Let's say for the purposes of this example that the author is an exclusive Elite author with an Author Fee of 12.5%.
Step 2 (part 2): 12.5% of $37 = $4.63 to Envato
These amounts are deducted in sequence from the author's earnings of $37:
$37 - $11.10 (to the IRS) = $25.90
$25.90 - $4.63 (author fee to Envato) = $21.27
Therefore the author will have a net earning of $21.27.