Tax Information & Form W-8 Requirements for non US Authors

Summary: This article details how to complete and submit your W-8 Forms, for Authors and organizations outside of the US, as well as some FAQs.

Your situation will determine which tax form you need to fill out.

- US persons are required to fill out a W9 form
- Non-US individualswill need to fill out a W-8BEN form (you are here!)
- Non-US organizations will need to fill out a W-8BEN-E form (you are here!)

While we cannot provide you with tax advice, we have put together this article to help you through the process. This has the caveat that you should always seek advice from a professional accountant/tax advisor because we are not authorised to advise about your specific tax situation, including filling out your specific tax form.

This article is about the W-8 forms, we have an equivalent article for the W9 form, for US persons.

What’s required?

Non-US Authors are required to complete a standard IRS form called Form W-8BEN (for individuals) or Form W-8BEN-E (for companies) which includes some basic information about you, including your Foreign Tax Identification Number (TIN) and country of residence.

The purpose of the Form W-8BEN and Form W-8BEN-E is to establish your identity and status as a non-U.S. person. If you do not submit your tax information, your Market earnings from US buyers will be taxed at the highest rate of 30%, and will not benefit from a reduced withholding tax rate under a double tax agreement (if applicable).

With regards to earnings from Elements, Envato makes it compulsory that a W-Form has been completed by the author to ensure backup withholding tax does not apply to their earnings.

An Author account has one owner, and it is their details which should be in the tax information. That owner can be a corporation or other type of entity, but not a partnership. Partners must nominate one partner to submit their tax information. Withdrawals will only be made to the nominated partner.

Royal Withholding Tax

Generally, transactions in digital creative content give rise to royalty earnings. If you are a non-US Author, your sales to US buyers may be subject to royalty withholding tax, depending 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.

Accordingly, 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.

Note: Any tax withheld will be remitted to the IRS - and not held by Envato.

Any tax withheld by Envato will be remitted to the IRS. We will also be preparing and filing form 1042s for the year ended 31 December with the IRS that will show the amount of your gross earnings from US buyers and taxes we paid from these earnings. You will be provided a copy of your Form 1042 from 15th March in the year following the year you made your earnings. These forms can be provided to your tax accountant to assist with claiming any tax credits that may be available in your home country.

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 forms are available under Tax Information on your Settings page. You can also access them by copying the following link and simply updating it with your username:

https://themeforest.net/user/<username>/tax_information/new

Tax Form W-8BEN - for Non-US Individuals

To see the W8BEN form:

1. In the Tax information section, you’ll need to select I am not a US person option.
2. For "Registered as", select An Individual option.

Part I

The first section of the form asks you for your personal details. In this section, please provide details including your name, country of citizenship and postal address in your country of residence. Please ensure that you provide a complete address because we will use this address to send you a hard copy of your Form 1042, which is your US earnings summary for the year.

It also asks for your tax identification type and number. You may provide your Foreign Tax ID Number, which is the number that you use when you submit your tax return or pay taxes in your country.

If you’re unable to provide your tax identification number you won’t be able to claim a tax treaty benefit and your earnings from US customers will be subject to 30% withholding rate.

To find your Foreign Tax ID Number, please see the guidance provided by the various jurisdictions and the OECD here. Alternatively, you may also find the guidance provided by the European Commission.

Part II

In the second part of the form, if you’re from a country that has a treaty with the US you’ll need to fill out the treaty article number and tax rate relevant to your country. You can find this information in this extract table from the IRS. You can also view the full table on the IRS website. If your country is not on this table, that means your country does not have a treaty with the US.

If you’re from a country that doesn’t have a treaty with the US you will not have to fill out this part of the form and we’ll make this easy for you by hiding this section.

Even if your country does not have a treaty with the US, it is beneficial for you to submit your tax information. By submitting your tax information, your earnings from non-US buyers will not be subject to US taxes. Note, however, that your royalty income from US buyers will attract 30% royalty withholding tax.

Part III

In the final section of the form, you’re required to certify the information you’ve provided is correct.

Please make sure you understand all the items under this section. 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. It is important to note that providing false information is subject to penalties under perjury.

You will also need to acknowledge the certification and provide your name as an electronic signature.

Once you’ve submitted your information look out for the success message at the top of your screen. If you don’t see this there might be an error in your information that you’ll need to fix before submitting again.

Tax Form W-8BEN-E - for Non-US Organizations

To see the W8BEN-E form:

1. In the Tax information section, you’ll need to select I am not a US person option.
2. For registered corporation, select A Corporation option.

Part I

The first section of the form asks for your organisation’s details. In this section, please provide your details including your name, your organisation’s name, country of incorporation, and address of your country of residence. You’ll also need to specify the name of disregarded entity (if applicable) and chapter 3 status.

A disregarded entity is a business that has a single owner and is not a corporation under the US Regulations section 301.7701-2(b).

Chapter 3 status refers to, chapter 3 of the US Internal Revenue Code (Withholding of Tax on Nonresident Aliens and Foreign Corporations). Please refer to the IRS instructions for further details https://www.irs.gov/pub/irs-pdf/iw8bene.pdf. For your Chapter 3 status, please select the type that represents your classification (for example, corporation, trust, estate, etc). By selecting a particular type, you are representing that you qualify for the classification indicated.

It also asks for your tax identification type and number. You may provide your Foreign Tax ID Number, which is the number that you use when you submit your tax return or pay taxes in your country.

If you’re unable to provide your tax identification number you won’t be able to claim a tax treaty benefit and your earnings from US customers will be subject to 30% withholding rate.

To find your Foreign Tax ID Number, please see the guidance provided by the various jurisdictions and the OECD here. Alternatively, you may also find the guidance provided by the European Commission.

Part II

The second section of the form is all about your country’s tax treaty with the US, if any.

An entity that is claiming a reduced rate of, or exemption from, withholding under an income tax treaty must confirm the country where the entity is identified as a resident for income tax treaty purposes and check the box to certify that it is a resident of that country.

An entity that is claiming a reduced rate of, or exemption from, withholding under an income tax treaty must check the box to certify that it derives the item of income for which the treaty benefit is claimed and meets the limitation of benefits provisions contained in the treaty, if any.

If you are a resident of a foreign country that has entered into an income tax treaty with the US that contains a limitation of benefits article, you must select the type of entity that is claiming the treaty benefits. You can read about the different types here.

Then if you’re from a country that has a treaty with the US you’ll need to fill out the treaty article number and tax rate relevant to your country. You can find this information in this extract table from the IRS. You can also view the full table on the IRS website. You’ll also need to explain the conditions based on your residency that make you eligible for the rate of withholding specified.

If your country is not on this table, that means your country does not have a treaty with the US and if you’re from a country that doesn’t have a treaty with the US you will not have to fill out this part of the form. We’ll make this easy for you by hiding this section.

Even if your country does not have a treaty with the US, it is beneficial for you to submit your tax information. By submitting your tax information, your earnings from non-US customers will not be subject to US taxes. Note, however, that your royalty income from US customers will attract 30% royalty withholding tax.

Part III

In the final section of the form you’re required to certify the information you’ve provided is correct.

Please make sure you understand all the items under this section. The purpose of the Form W8BEN-E is to establish your identity and status as a non-U.S. organisation, 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. organisation. It is important to note that providing false information is subject to penalties under perjury.

You will also need to acknowledge the certification and provide your name as an electronic signature.

Once you’ve submitted your information look out for the success message at the top of your screen. If you don’t see this there might be an error in your information that you’ll need to fix before submitting again.

Frequently Asked Questions

• What will we do with this information?

  When you complete your tax information, you are certifying that you are not a US person. The Form W-8BEN or Form W-8BEN-E form will determine the appropriate withholding tax rate that will be applied to your sales to US customers, if any (see Royalty Withholding Tax). At the end of each calendar year we'll send to you and the IRS a summary of your earnings from US customers, 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.

• I don’t have a foreign tax identity number, what should I do?

  If your country of residence has a tax treaty with the US, you need to include your Foreign Tax ID Number on your tax information. Your Foreign Tax ID Number is usually the number that you quote when you lodge your tax return or pay tax in your own country. To find your Foreign Tax ID Number, please see the guidance provided by the various jurisdictions and the OECD here. Alternatively, you may also find the guidance provided by the European Commission.

• 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 us. You will need to provide us with your full name that matches the W-7 application. The IRS will not accept Usernames.

• 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 royalty withholding tax at the full rate of 30%. If you’re in a country that has no tax treaty with the US, unfortunately, we won’t be able to reduce the royalty withholding tax rate of 30%.

• 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 happens if I don’t complete my tax info until after I am taxed at the highest rate of 30%?

  As any amounts withheld prior to receiving your tax information will be sent to the IRS, we are unable to give you a refund However, we will send you an earnings summary (Form 1042-S) which will show the earnings that you had and the taxes that you paid before your submitted your tax information. You may provide this statement to your tax adviser / accountant to see if you are eligible to claim tax credits in your country.

• What happens if I pay Royalty Withholding Tax, but I also pay my tax in my home country?

  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 or if you are eligible to claim tax credits for the royalty withholding tax that was paid to the IRS.

• 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 we will also send you a Form 1042 from 15 March following the year you had your earnings.

• Should I be seeking tax or legal advice?

  Any time 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-8BEN or Form W-8BEN-E details. An Author account has one owner, and it is their details which should be in the tax information.

  That owner can be a corporation or other type of entity, but not a partnership. Partners must nominate one partner to submit a tax information. Withdrawals will only be made to the nominated partner.

• 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?

  If you do not provide your tax information, Envato will be required to withhold 30% from your gross earnings from US buyers.

• 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 W-8BEN or Form W-8BEN-E.

• 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 (RWT) 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 RWT 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 RWT 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.