Posts by DoubleX

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DoubleX
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Please let me know if you have any other questions :)
Can authors get an invoice for the author fees you charged them before February 2015?

There were no Author Fees before February 2015.

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DoubleX
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(2) There won’t be VAT on the author fee because for EU VAT Purposes, Envato acts as a supplier in the middle. This means that for VAT purposes our invoice for an author fee is immaterial, because as far as the VAT is concerned the author supplied to Envato, and Envato supplied to the buyer.

I explained this in my post about the EU VAT changes here – http://themeforest.net/forums/thread/author-information-about-eu-vat-changes/160108

It’s a very strange side effect of the EU VAT laws, and is only relevant in the EU.

Author Fee are transactions only between Envato and the Author, am I right?
Author Fee is explained (in a simple way) as a “service”, not commission, am I right?

If answers to both questions are “yes”, then:
- Author has to report his full earnings, then deduct Author Fee as expenses
- In my case, this is service provided from Australia (classified as 3rd country type) to my EU country
- If I am receiving any service from 3rd country such as Australia or USA, I need to pay VAT for it.
So for example if buyers will pay $1000 for my projects, according to my current rate (60%) :
*20% is buyer fee = 200$
*80% is my gross income = 800$
*20% is author fee = 200$
*20% (in my country) from author fee is VAT = 40$
My net income is $800 – $200 – $40 = $560.

Same rules will apply to many EU authors, you are forcing them to pay additional VAT and higher income taxes due to higher gross income. So they might not be responsible for VAT purposes regarding sales, but many of them are responsible for VAT purposes regarding Envato’s Author Fee. The whole mess could be simplified just by charging buyer fee only…you don’t need Author Fee at all.

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DoubleX
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I have checked every single laptop on market, because I want to get out and make projects outside as well. My choice is: Lenovo Y50-70 with 4710HQ cpu and 16gigs of RAM. However I’m going for classic TN panel 1080p version (which is known for terrible viewing angles and poor colors) and I’ll switch it with an IPS screen (there is a lot of discussion about this display change on the internet). Also I’ll change the internal HDD for Samsung 840 EVO 500GB SSD, it should skyrocket.

I would not go for UDH display version because:
- You will need to switch to 1080p resolution for After Effects which will result in worse picture quality than on native 1080p display (After Effects CS4-CS5-CS6 are not optimized for UHD resolution, all icons will be tiny & unreadable…only if you use CC 2014 version you should be fine)
- higher resolution = higher power consumption
- UHD display has a 48Hz locked refresh rate, which might be noticeable

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DoubleX
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Zdravim aj my sme SK based ;)

Zdravim, mate nejake slovenske riesenie pre tuto situaciu? Pridajte sa do FB skupiny :)

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DoubleX
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SnoopyIndustries you forgot the part where Envato is making invoices on our behalf, the invoices we need to include into our accounting, the invoices which are unusable in my country, the invoices which might force me to register for VAT even if I don’t have to pay it. Or the part where we have to declare our full earnings before Author fee, the earnings which never reach our bank. Or the part, where many authors are forced to register for VAT because they need to pay VAT for Author fee. Or the part where all these transactions are happening on a marketplace with virtual currency, not in our banks…I’ve spoken to few accountants, so far it looks like a total dealbreaker.

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DoubleX
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Az teraz som si vsimol, ze tato tema ozila a som rad, ze to ostatni neberu na lahku vahu. Pridal som sa do FB skupiny.

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DoubleX
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One more important question. It has been already asked, but I want to make sure it won’t stay in the dust.
Why there have to be 2 fees? Why do you need to charge from both Author and the Buyer?
You could simplify the whole process by charging just one fee from buyer, it could be called for example “Handling fee”, it would go from 50% to 30% (64% if buying from non-exclusive author) and in the result:
- The money author would receive on the invoice would match with his balance increase (no misunderstandings like “I earned $10 but on invoice it says $15?!”)
- At least for Authors, the statement page would be again simple without “Author fee” mess
- Authors would not need to report higher income than the one truly earned = many Authors would pay lower income tax (as before this change)
- Author’s fee is the service you are charging to Author = many Authors need to pay additional VAT for this service

On the other hand:
- Envato would still get the same cut
- I believe buyer doesn’t care if he is invoiced ”$32 by Author and $8 by Envato” or ”$20 by Author and $20 by Envato” = in the end he is invoiced the same amount of $40

Please consider this.

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DoubleX
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PaBlikMM I just realised that I pay taxes the same way and same rules apply to me. This thing is getting bigger dealbreaker by every second !

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DoubleX
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I’d like to give an important notification to Authors who are not VAT registered businesses:
Make sure to check with law in your country if you need to be VAT registered if you are supplying / receiving service from/to third country such as Australia. In my country, I don’t need to register for VAT if I’m supplying service to Australia (selling items, reseller model), but I need to be registered if I receive service from Australia.
Envato charging us with Author’s fee (which will be invoiced at the end of every month) is receiving service from Australia and it forces me to register for VAT.
Just more and more headache thanks to this platform nonsense…

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DoubleX
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When I found out about Envato and started selling here, everything was different, everything was simple. There were these nice badges – paws, commission rate right in front of your eyes, fun facts about how much you need to earn to get to next level of commission and to get awesome gold paw (which everybody respected). Blue steel paw, which arrived later, was something beyond horizont, but still reachable. Everything in your dashboard inspired you to move forward and kept you reminding, that it’s going to be only better and better, you just need to keep working.
Till now. Now it’s just a buzz, headache.

I’m trying to imagine the possibility of changing my business model to adapt with the one you are trying to achieve. But there are many problems coming with this, a lot of authors including me might rather switch to another marketplace, which is operating on commission model and start from a scratch, it might not be too late. But I must say I like Envato the most, I love the community.

Collis, I’m happy that you are responding to author’s questions and I have prepared few examples which show certain issue and compare the way different models solve it:
(all of the upcoming information should be correct, if not, anybody can repair me)

1. VAT responsibility
Reseller Model: No problems for author, author is selling to Australia and is free of VAT.
Platform Model: Author is direct seller, he is obligated to register for VAT, to pay VAT and to report it. Envato says they are doing it instead of author, in their name. There is no proof that Author’s VAT has been paid. In case of tax audit, right now all author can say is: “Envato is doing it for me. Envato has it in the terms, you can check Envato’s VAT ID EU826409867.” – I don’t believe this will be enough. They’ll want to see proof that Author’s VAT has been paid and they’ll want to see exact amount.

2. Accounting
Reseller Model: One invoice per month to Envato.
Platform Model: Author needs to find a way how to create let’s say 100 invoices a month, Author needs to register 100 new businesses a month (if they work in similar software as I do), Author needs to wait till he gets his money to see what was the conversion rate and apply it to all 100 invoices so the balance in bank account matches. And finally, Author needs to find out how to connect all these invoices with one simple bank transaction. Now imagine working in a team and splitting everything to half. Time-consuming nightmare. Authors who have an accountant can prepare for a lot higher expenses.

3. Personal Information
Reseller Model: Anonymity, people know Author’s nickname and his clients he is writing with, know his e-mail address.
Platform Model: For few bucks anyone can get Author’s name and city/state he lives in. It’s easy to google that country’s registered businesses list, find out full Author’s address and pay him a visit.

4. Real earnings + Income tax declaration
Reseller Model: Author’s real earnings = marketplace balance after commission cut, the money which actually gets into his bank account.
Your Platform Model: Author’s real earnings = balance BEFORE “author’s fee” cut, therefore higher amount, the money he never sees in his bank.
Now special case: When I submit my tax declaration I use so called “flat expenses” which are calculated only from the income. Real expenses are not important at all, I don’t even need to include them in my accounting. This combination of higher earnings and “flat expenses” will result in paying higher tax. Basically I’m paying extra tax thanks to your author’s fee!
Conclusion – authors will have to declare higher income even if they never touched that amount of money. Higher income will cause higher taxes for certain authors, and maybe some other problems too.

5. Transactions
Reseller Model: Transactions inside marketplace are not important. Transactions from marketplace to author’s bank account are important. Reseller is VAT responsible.
Platform Model: Transaction for each sale goes directly to author’s bank account. Then author can pay “author’s fee” to platform. Everything goes through author’s bank account, is easier accountable and tax audit can have all the documents. Money flow is the proof. Author can do invoices directly after sale is made. Author is VAT responsible.
Your Platform Model: Transactions inside marketplace are important. You generate invoices on our behalf saying we are direct authors and that we agreed to it when we accepted the terms – when we signed up. (When I signed up this was a commission system, usually when a huge change is coming, you should do it like for example paypal – they inform you about change month in advantage also saying that you agree to these new terms by continuing using their services and if you don’t agree you need to cancel your account in your menu settings. What Envato did is they changed the terms and act like this is how it was all the time.) Author has to match up Envato’s invoices with his accounting. Author has to wait till he gets the money so he knows what is the current conversion rate. Author should be VAT responsible but isn’t, yet he, by himself, has nothing to prove that in case of tax audit.

6. Responsibility for sold items
Reseller Model: Reseller is responsible for all items. But, because we witnessed that Envato can do magic, I believe they could just include to terms that Envato is seller (for accounting/VAT purposes), however author is liable for items he uploaded (originality, content), and if somebody can sue Envato, Envato can sue author.
Platform Model: Author is fully responsible for his items.

7. When I asked The Financial Directorate of the SR, which is I believe the highest institution in my country, about the situation regarding “who is the direct seller and who is VAT responsible” in case of Envato, I got the answer that THIS is the document that should answer all my questions. Now according to this document:
Reseller Model: authorises the charge to the customer, sets the general terms and conditions of the supply
Platform Model: does not authorise the charge to the customer, does not set the general terms and conditions of the supply
Your Platform Model: authorises the charge to the customer, sets the general terms and conditions of the supply.

8. Lastly, consequences of Envato’s decision about which model to choose:
Reseller Model: People won’t even notice, authors can continue working.
Your Platform Model: People are going crazy, they have to make important decision which might end up later really bad, many authors are leaving, many authors have to stop working and have to deal with this situation, in the future their productivity drops as they need to spend more time dealing with the accounting. “You Do Creative, We’ll Do the Rest.” sounds like a nonsense.
- – - – - – - – - – - – -

These were examples where I compared two (three) different models and their problems. Most of them offered better solutions in Reseller model. You said you and your team considered all the cons and pros and yet you decided that the Platform model will be better choice. So maybe you could reveal us other examples, where Platform model is the better choice, so we understand why it was a better choice.

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