When we announced the changes around Envato’s US expansion16, many authors were concerned about losing the ability to withdraw their earnings to different places. After a lot of careful work going through all of the options and issues, we’ve got a solution to allow split withdrawals with some extra requirements for identification of the account holder.
Split withdrawals are temporarily extended, but there are new requirements for withdrawals to multiple countries
For the time being, we’ll continue to provide the option for splitting your earnings withdrawal. To withdraw to a country other than the nominated country on your completed tax information, you’ll need to provide extra information.
Here’s how it will work:
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Every account owner must still complete one Form W-8 or W-9.
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If you are a non-US author and you wish to withdraw funds to a country different to the one stated on your Form W-8, you must provide documentation to support your residence or your company's presence in the country declared on your Form W-8. For an individual, this documentation might be a copy of your passport that shows the country of residence or citizenship. For a company, this would be a certificate of incorporation issued by the government that the company was established in. So if you complete a form listing Germany as your country, but need to withdraw for some reason to Austria, you’ll need to provide extra documentation about your residence in Germany (and we’ll apply tax treaty rates for Germany).
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If you are not able to provide such documentation, and need to withdraw to a different country to the one stated on your form, then the US Royalty Withholding Tax (US RWHT) that will be applied on your account will be the maximum rate of 30%.
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If you are a non-US author, who has provided the relevant documentation, all revenue will be subject to US RWHT based on the country in your Form W-8 and reported on your annual 1042-S form with the account holder’s details.
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If you are a US author who has submitted a valid Form W-9, you can withdraw funds to a non-US country without having to provide documentary evidence. However, we will be reporting all revenue on your Form 1099.
Copies of your documentary evidence should be sent to financesupport@envato.com.
Split Withdrawal Examples
Example 1
An author who is a citizen and resident of Canada submits a Form W-8 declaring their country of residence as Canada. The royalty withholding tax rate that would be applied is the Canada - USA treaty rate. However, the author has requested that their withdrawals be paid to a bank located in the United Kingdom. In this case, the author is required to provide documentary evidence such as a copy of their Canadian passport that shows they are a resident of Canada. If evidence to support the Canadian residence is not provided, they will still be able to withdraw to the United Kingdom, but no longer benefit from the Canada - USA treaty rate (we will have to apply the maximum royalty withholding tax rate of 30% on all sales to US buyers).
Example 2
An author that is a company established in France submits a Form W-8 declaring their country of residence as France. The royalty withholding tax rate that would be applied is the France - USA treaty rate. However, the author has requested that their withdrawals be paid to a bank located in Singapore. In this case, the author is required to provide documentary evidence such as a copy of the company’s certificate of incorporation that has been issued by the French Government that shows the company was incorporated or established in France. If evidence to support the French residence is not provided, they will still be able to withdraw to Singapore, but no longer benefit from the France - USA treaty rate (we will have to apply the maximum royalty withholding tax rate of 30% to all sales to US buyers).
Example 3
An author who is a US person submits a Form W-9. The author moves to Brazil and takes up residence there and establishes a bank account in Brazil. No documentary evidence is required to be provided as all sales will be reported on their Form 1099.
Example 4
An author that is a citizen and resident of Australia submits a Form W-8 declaring their country of residence as Australia. The author’s bank account is also located in Australia. No documentary evidence is required to be provided. The royalty withholding tax rate that will be applied on US sales is the Australia - USA treaty rate.
Example 5
An author that is a citizen and resident of Australia submits a Form W-8 declaring their country of residence as Australia. After several years, the author decides to take up residence in New Zealand. The author decides to retain their bank account in Australia. Upon becoming a New Zealand tax resident, the author is required to submit a new Form W-8 that declares New Zealand as the new country of residence, and provide evidence that demonstrates this. In the absence of this documentary evidence, the author will not be able to benefit from either the Australia - USA treaty rate or the New Zealand - USA treaty rate; instead, the maximum royalty withholding tax rate of 30% will be applied to all sales to US buyers.
Example 6
An author that is a citizen and resident of Australia submits a Form W-8 declaring their country of residence as Australia. The author’s bank account is located in USA. If evidence to support the Australian residence is not provided, they will still be able to withdraw to USA, but no longer benefit from the Australia - USA treaty rate. We will have to treat the author as a US person and apply backup withholding tax rate of 28% to all that author’s sales (to US buyers and non US buyers). The author will also be issued a Form 1099 at the end of the year, which will be lodged with the IRS.
As always, please consult a tax advisor in regards to your personal situation.
Questions
Based on the forum discussion, these updates are not a silver-bullet solution for all situations. Hopefully they do improve the situation for some authors who were concerned about the changes coming.