Agency Based Discussion > Canva

Contributor update about tax

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outoftheblue:
Message from Canva:


--- Quote ---Hi ____,

Canva is no longer the small business we were in previous years. The time has come for us to start doing things that established businesses do, like withholding taxes.
Most of you will be familiar with this process from your other relationships in the industry. There are a few minor differences with Canva because we operate out of Australia, but the process is much the same: we will withhold a portion of your royalties and pay them to the Australian Tax Office, and you’ll need to claim them back via your own tax authorities in your country.
A key difference is that Australian law requires that we withhold tax on global sales, not just domestic sales as is the case with US-based companies.
The amount depends on the tax treaty between your country and Australia, but is not more than 30%.
The process is automatic from your end - you don’t have to do anything. We’ve already recorded your country, but let us know if what we have for you is not accurate:
Our records show you’re registered in UK.
See here for the list of Australian tax treaties and applicable rates of withholding.
We’re starting the withholding from January 1, 2017, so your next payment will be the first affected. We realise this is late notice, and apologise for that, but if you’d like to discuss your options just reply to this message and we’ll sort it out together.
We’ve also updated our Contributor Agreement to reflect these changes. (Last paragraph)
If you have any questions about any of this, just reply to this email and we’ll get back to you as soon as we can.
Cheers,
Lee

--- End quote ---

outoftheblue:
First news in the morning, they inform us that they will withhold taxes.

Also, the 10% rate for the United Kingdom in their table seems wrong to me.
It should be 5% based on current treaty:


--- Quote ---UK/ AUSTRALIA DOUBLE TAXATION CONVENTION
SIGNED 21 AUGUST 2003
Entered into force 17 December 2003
Effective in United Kingdom from 1 April 2004 for corporation tax, from 6 April 2004 for income tax (other than taxes withheld at source) and capital gains tax and from 1 July 2004 for taxes withheld at source.
Effective in Australia from 1 April 2004 for fringe benefits tax and from 1 July 2004 for withholding tax on income derived by non-residents and other Australian tax on income or gains.

ARTICLE 12
Royalties
1 Royalties arising in a Contracting State and beneficially owned by a resident of
the other Contracting State may be taxed in that other State.
2 However, those royalties may also be taxed in the Contracting State in which they
arise, and according to the law of that State, but the tax so charged shall not exceed
5 per cent of the gross amount of the royalties.

--- End quote ---

Excerpt from here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/496636/uk-australia-dtc_-_in_force.pdf

Anyka:
"Most of you will be familiar with this process from your other relationships in the industry. There are a few minor differences with Canva because we operate out of Australia, but the process is much the same: we will withhold a portion of your royalties and pay them to the Australian Tax Office, and you’ll need to claim them back via your own tax authorities in your country. "

On the contrary :  we are not familiar with the process of withholding tax, because ALL other agencies do NOT withhold tax from contributors living in countries with tax treaties.  This means WE (the contributors) have to fill out forms every year, for every agency, but no money is withheld.

The letter gives me the impression that Canva plans to do the very opposite :  (1) withhold taxes, even if there is a double taxation treaty with your country. (2) We do not have do fill out forms or send anything to Canva (3) Canva will have to do a lot of paperwork to prove for every contributor, on an annual basis, which taxes have been withheld (4) Contributors in tax treaty countries should add these Canva documents to their annual tax documents and the paid amount will be deducted.
Lee, please correct me if I am wrong here?

In my case (Belgium), this would mean Canva will withhold 10% - the Belgian taxes on Royalties are 15%, so I will have to pay 5% on Canva income and 15% on all other royalties.

Now my question is :  why do it the opposite way?  I would say (from the point of view of Canva) it's less work for the agency to let us do the paperwork and withhold nothing?

outoftheblue:

--- Quote from: Anyka on January 31, 2017, 04:07 ---On the contrary :  we are not familiar with the process of withholding tax, because ALL other agencies do NOT withhold tax from contributors living in countries with tax treaties.  This means WE (the contributors) have to fill out forms every year, for every agency, but no money is withheld.

--- End quote ---

I noticed that too.

But I did some google searches and it seems that's the way Australia works, not just Canva:
https://www.ato.gov.au/Individuals/International-tax-for-individuals/In-detail/Australian-income-of-foreign-residents/Withholding-from-royalties-paid-to-foreign-residents/

However it's a huge burden for all of us.

Canva, why don't you increase our rate from 35% to at least 38% as a way to compensate?
Or relocate to USA? Most of us - and most of your buyers too - are NOT Australian.

dirkr:
How I understand it:

For the US-based agencies we have to fill out a form to get the withholding rate according to the double taxation agreement relevant for our country. If we don't fill it, we will get taxed with 30%.

As Canva is Australia based, things work differently. We don't need to fill out anything, they will withhold the rate corresponding to the correct tax agreement.

And I would expect to get some kind of documentation at year end about the amount of taxes payed, which I can use when doing my tax return.

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