Hi, recently sellers on itch.io has been receiving e-mail to fill out tax info. I'm not USA citizen and my country doesn't have any tax treaty with USA so I'm liable to 30% withholding tax on income derived from USA. I'm OK with that but recently I initiate a payout and I'm confused to find out out of income that I should have (after itch.io cut and payment processor fee), itch.io takes 30% of that for withholding tax (to be remitted to USA government) even though only half of buyers comes from USA.
Is it correct application for withholding tax? Why should USA government gets tax money from sales from buyers outside of USA? Shouldn't itch.io only take withholding tax from buyers which comes from USA? I'm using collect by itch.io payment method. Could be that buyers country info is irrelevant? As long as buyers money comes to itch.io, it's considered income from USA (money goes to USA bank so it's USA income?) and I'm liable to 30% withholding tax. This is what I can think of.
With this 30% withholding tax, I can only get around 50% of total gross sales. I'm still OK with that if the sales are big but the reality it's hard to make sales through itch.io. Hope you guys from itch.io can figure out something to tackle this issue. This is not good for sellers from outside of USA that doesn't have tax treaty with USA.
Nevertheless, I'm still supporting itch.io. You guys are doing a good job to be the easier storefront for indie game developers. Keep up the good work. It's just this withholding tax comes out of nowhere that might confuse some of sellers here.