One of our focuses in our annual roadmap this year has been to develop a platform to support and prepare for the next stage of Envato’s global growth. To do this, we’ve recently made the big decision to expand overseas.
It almost goes without saying that the US is a key market for any digital business and our industry. We think there are great opportunities to expand Envato there, and so we’ve chosen the US as the first international market to set up in.
Along with more growth opportunities, being in the US will help us service US buyers with more targeted payment methods leading to better conversion rates and happier buyers. This requires some important changes to how US buyers, and all authors, affiliates and Envato Studio providers interact with Envato. We’re announcing this almost three months ahead of the US launch date to give you time to plan and prepare.
As of January 1st 2016, all Envato Market US users will pay and be paid by our US company. This should make very little practical difference to most of your on-site experience of Envato Market, except when you get to paying. Payment methods are the main change you’ll see. We’re aiming to introduce more options for US buyers. Currently, we turn away qualified buyers because of our limited options.
All users (US and non-US) will continue to interact with Envato Pty Ltd (in Australia), but our US company will help Envato Market take payments from and make payments to US users.
Having a company in the US means that Envato will need to do a few new things, in order to comply with US regulations. Some of these requirements will also mean some changes for our Authors and Buyers. Please read this announcement and the associated Help articles in detail.
All US Authors, Affiliates and Service Providers Must Complete a W-9 Form
If you are a US Author, Affiliate or Service Provider, then you will be required to complete a standard IRS form called the Form W-9 so that we can issue you a Form 1099-MISC income summary each year. Check our Help Center article for the exact definition of who classifies as a ‘US Person’.
Starting with the US financial year 2016, we will issue Form 1099-MISC forms to report your total gross sales (excluding our buyer fees), affiliate income and Envato Studio gross sales. You’ll get a form at the end of 2016 which you can use to file your income tax return.
If you withdraw to PayPal, we will ask PayPal to exclude your sales from PayPal’s 1099-K reporting.
If you don’t complete a Form W-9, we’ll hold back 28% of your total worldwide sales as Backup Withholding Tax and remit it to the US Internal Revenue Service (IRS). This tax is applied on the total sales (i.e. prior to our author fees being deducted) as per the IRS requirements. It underscores how important it is to provide us with a completed Form W-9.
How to Complete a Form W-9
- Go to your account settings page to complete your Form W-9 Read this Help Center article for more information on completing the form, including FAQs
- If you have already provided a Form W-9 form to Envato, there is no need to resubmit unless your information has changed. Please ensure that you keep your tax information up to date.
All Non-US Authors, Affiliates and Service Providers Must Complete a W-8 Form
From January 1st, 2016, when you sell to a US buyer, we’ll apply US Royalty Withholding Tax (US RWHT) on those sales only.
US RWHT rates range from 0% up to 30%, and depend on your country of residence and whether there is a tax treaty between your country and the US. We will apply US RWHT only on those sales made to US buyers.
In most countries, the US tax paid will count as a tax credit in your home country when you complete your tax return. Please speak to your tax advisor to understand how this works in your country.
When will Envato not apply US RWHT?
- US RWHT won’t be applied on items sold with a Tools license (such as items in GraphicRiver’s Add-ons category). Income made from selling this kind of license is classified in a different way and doesn’t give rise to this tax.
- 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.
- US RWHT won’t be applied to affiliate referral payments or commissions.
What’s the Withholding Tax Rate Between the US and My Country?
A list of the applicable treaty royalty withholding tax rates can be found here. The applicable rates applied are based on the Royalties > Copyright classification.
How Do I Get a Tax Credit to Show I’ve Paid Tax Already?
You will be provided a summary of the taxes withheld and you can use this to claim a tax credit subject to the laws of your country. Talk to your tax advisor to discuss how this can be done in your country.
Here’s an example of the summary document you’ll receive. We will provide a copy of the Form 1042-S to each author and the IRS in March of the following US tax year. The first one will be in March 2017.
What Happens if I Don’t Complete a W-8 Form?
In absence of a valid Form W-8, the IRS requires us to assume you are a US Person who has not completed a form, meaning all your sales will be subject to Backup Withholding tax of 28% (see the section on US Persons above).
Can I Just Not Sell to US Buyers?
Unfortunately not at this time. All buyers are able to browse and purchase all items for sale on Envato Market.
How to Complete a W-8 Form
- Go to your account settings page to complete your Form W-8
- Read this Help Center article for more information on completing the form, including FAQs
What Information is Sent to My Tax Authority?
Outside of the US, Envato generally doesn’t send information to local authorities. In some circumstances, we may be required by authorities to provide information. You will need to provide your tax authority with the summary document (see above) to claim a tax credit.
Note that the IRS has formal information exchanges governed by their various double tax treaties, and may report your US sales for other purposes.
Can There be More than One Owner of an Envato Account?
Envato Market enters into a legal agreement with the person who creates an account and agrees to the terms and conditions. This person can register as 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).
Due to complexity, however, outside of the US the business cannot be a partnership. In those cases, the W-8 must be completed by an individual or business/company. For US partnerships only, the W-9 form may be completed by a partnership entity.
We have explored what it would take to extend Envato Market to allow multiple owners for an account such as partnerships, however, it’s a very complex area of regulation given the global reach of our author base. So at this time, there are no plans to change the service to accommodate that scenario.
When is this Program Starting?
Sales after January 1st, 2016 are subject to these guidelines. This coincides with operations commencing for Envato USA.
What Information Will I Get on My Statement?
Your statement will be updated to show when taxes are applied, and the amounts withheld.
New Withdrawal / Payment Rules Starting January 1st 2016
As of January 1st 2016, we are streamlining our withdrawal system. Withdrawals will only be processed to the nominated account holder payment details and the country must match the one on the completed W-8 or W-9 form.
We will be restricting the number of withdrawal destinations an author can make to just one per month (or for express withdrawals, one per week). So one PayPal account, or one bank account, etc.
We know this means some authors will need to adjust their cash flow planning and have put this announcement out as far ahead as we could to give you time to do so.
We understand that from time to time an author might change their account details, and therefore you can update your details in any subsequent month. However, you will no longer be able to split withdrawals in a single month.
Multiple author accounts can use the same payment and tax details, so long as they are validly completed and consistent with account ownership. This would be relevant for authors who, for example, manage an exclusive account and a separate non-exclusive account.
These rules will be applied for the January withdrawal (paid out on January 15th).
Swift Fees Decreasing
Along with these changes, we’re dropping our Envato Swift Fees for bank transfers from US$35 per transaction to US$25 per transaction. This will apply for all transfers following January 1st, 2016.
Countries Where You Can’t Use Envato
Payment providers including PayPal and many Australian and American banks, cannot make payments to, or receive payments from certain countries in the world, such as North Korea, Afghanistan and Myanmar.
In addition, US sanctions prohibit trade with countries subject to full scope sanctions, such as Iran and North Sudan.
In December 2015, we will be updating our terms and conditions to clarify that Envato Market and Envato Studio will not be accessible from certain restricted countries. From that time onwards, users in those countries will be presented a page redirecting them to a Help Center article. This list of countries may change from time to time and can be found in the Help Center.
If you are in a restricted country or intend to move there after January 1st 2016, you should contact us immediately. Your account needs to be closed in, or before, December 2015, and any earnings withdrawn and items downloaded.
We aim to make Envato as universally accessible as possible and will monitor sanctions lists for changes that allow us to offer our services more broadly. If you are an affected user and would like to discuss options please contact us.
While our user base in these countries may currently be very small, it’s not a step we’ve taken lightly, and was a significant discussion point on whether to expand into the US. Ultimately we decided in favour of steps to expand the business and community overall.
What About Countries Where Payment is Temporarily Blocked?
Payment operators, including banks, periodically cease operations in certain countries. A good example is Greece that has had temporary blocks in place recently. In these cases, where there are no broad full scope sanctions, we will hold funds and wait until payment operators recommence operations.
This is a substantial announcement with a lot of impacts for authors, affiliates and service providers on Envato. Some of the impacts are pretty big, and news about taxes is generally never something anyone wants to hear!
I wanted to stress that this set of changes is not one that we’ve taken lightly, and we’ve put a lot of effort into considering and weighing up the trade-offs for our users.
On balance, I believe that this is the right move for Envato and our community overall. Ultimately growing in the key market of the US will lead to a larger revenue pool for authors on Envato Market.
However I understand that there will be some authors, affiliates and users who may find that this means that selling with Envato no longer makes sense. As always, it’s important for every user to weigh up their situation and consider what’s best for them.
As with some of the other big changes in the past, I’m personally reaching out to as many authors as I can to answer questions, and discuss their personal situation where it’s helpful. Together with Matt from our Elite team, I’ve spoken with a handful of authors prior to the announcement. If you think it would be helpful, please ping Matt or me (collis at envato) and we’ll line something up as soon as we can.
Please read all the relevant Help Center articles and FAQs completely to find answers to your questions.
We have created discussion threads for other questions, and we’ll be providing batches of answers every few days.