Selling a game on Steam- Steam and VAT cuts...?

It gets even more complicated, because you often need to pay VAT in the country where the person lives who bought your product (EU at least). So, when you are a french developer, selling your game over steam to a person living in germany, you need to pay the german VAT in germany. But I would be surprised if Steam would not do this for you. Eventuelly this would leave you with 50% of money... and then you need to pay taxes ...

We both have something in common - our knowledge of tax and VAT is limited, and it is dangerous to go alone. In your shoes, I would be looking for a professional accountant. This is incredibly important if you are operating as a business, it costs near nothing to hire an accountant, and costs enough to ruin you personally and professionally should you get caught doing things wrong by HMRC and fined a massive amount, or worse, sent to prison!

Definitely hire an accountant, ask them about this (some might even give some initial free advice on the subject!) sooner rather than later!

By the way, keep receipts and electronic copies of all money in and out. Your accountant will definitely need this.

Like braindigitalis said, VAT is complex and you need to get an accountant. Steam may pay VAT, but you may also have to pay VAT.

Don't add the percentages. A 21% VAT and Valve taking a 30% cut doesn't mean they take 51% and pay you 49%. It doesn't work like that.

If they pay 21% in VAT and take a cut of 30%; all out of 9.99, that means:

9.99 / 1.21 = 8.25619

8.25619 * 30% = Valve takes usd 2.48.

8.25619 * 70% = Valve pays you usd 5.77.

usd 5.77 is the 57% of 9.99; not the 49%.

Note however, you may have to also pay some VAT for those 5.77; but if that's the case that also will probably mean Steam has to pay you more than $5.77 (because something called VAT credit raises. Wikipedia has an example of how it works. Everyone in the chain pays VAT; but it also depends on legislation. i.e. exports to other countries may not be taxed by VAT, but imports are).

That is assuming the final price was usd 9.99, and Steam didn't instead increase the price to usd 12.08 (9.99 * 1.21). I don't know how they operate in that regard.

There's a lot of "if"s involved. Get an accountant.

No, im just asking, when we finally start our game production of course i will get an accountant (im not an idiot...) :-). But not yet, i just want general info.

There has to be someone here with direct experience with that, someone who already published a game on steam and knows how it works 101%...

Can someone like that please reply?

I know steams doesn't allow people to comment on their contracts for how they are paid, so it may be hard to find someone who can give you 101% of the info.

I have sold non-game software in the past, not via steam, and the outlet I used managed the VAT style taxes for different countries for me.

My sales were well below any thresholds though and once you pass certain sale levels in some countries things get real complex real fast. In the EU you will need to register for VAT for countries where your levels hit the limit and will need to account for VAT sales in those countries. You will then need to pay the VAT collected.

EU is not the only country with VAT like taxes. NZ and Aussie have GST and there are various sales taxes in US and Canada? that you might be liable for?

If steam can handle all this for you it would be well worth whatever % they would want to take from you to do it. If not you will find yourself is a sea of paperwork and accounting hell :)

[edit]I'm mostly wrong[/edit]

Your 1/2/3 options are all wrong.
4) Steam adds VAT onto the retail price, depending on where the customer lives.

Steam is your publisher and your retailer.
Typically, retailers handle VAT. If the game has a price of $10, someone in a country with no VAT will be charged $10, someone in a country with 15% VAT will be charged $11.50. The retailer, who is actually selling the product to the customer, takes care of adding that extra bit of tax to the price, and giving it to the customer's government.

Retailers typically sell products at retail price (plus tax), and buy them at wholesale price from your publisher. In the case of Steam, because they're the retailer and the publisher, there is thankfully no difference between the retail/wholesale price.
If you have a royalty agreement with your publisher (typical these days is 70% for you, 30% for them), then this would probably be splitting the wholesale sales price. A brick and mortar retailer might buy a new game for $40 wholesale and then sell it for $60 retail -- you'd be splitting the $40 with your publisher. Be aware of these details when reading contracts -- e.g. the Unreal 4 royalties requires you to pay Epic 5% of the retail price of your game!!

So with a $10 game on Steam, a 15% VAT customer pays $11.50, their govt gets $1.50, you get $7 and Steam gets $3 from each sale.

However, there's also other forms of tax that you have to pay besides VAT. Let's just say for example that businesses have to pay a 30% tax on all income...
Some publishers would give you $7, and then you have to pay $2.10 to the government in income tax, only keeping $4.90 for yourself.
Other publishers will pay the $2.10 to the government on your behalf, and you can keep the $4.90 without worrying.

When you sign a publishing agreement with steam, they'll tell you all the paperwork that you need to fill out, including tax declarations. AFAIK, Steam can handle paying the tax on your income for you, while I think Google Play doesn't. That's just rumors though -- read the information you get when signing on with them.

It also depends which country you're in... Steam is a US company, so they have to report all their income to the USA's IRS. Depending on which country you live in, you could end up being double-taxed, where you have to pay a percentage to the IRS, and to your own government's tax agency again after Steam pays you
To avoid this, you need to live in a country which has a "tax treaty" with the US -- which allows Valve to report your income to the IRS, but then pay the taxes only to your own government (and not actually pay anything to the IRS).

As others have said, an accountant can help with all that...

Back to the off-topic UE4 example -- let's say that VAT is added onto the price so it doesn't affect you, your game retails for $10, you get 70% of that, and you pay %30 in income tax. That means you end up getting $4.90 per sale, but Epic games want you to pay them 5% of the retail price, which comes to $0.50... which means you're actually paying 10.2% royalties on your income, not the 5% that a lot of people are expecting
So always read the contracts

Your 1/2/3 options are all wrong.

4) Steam adds VAT onto the retail price, depending on where the customer lives.

Steam is your publisher and your retailer.

Typically, retailers handle VAT. If the game has a price of $10, someone in a country with no VAT will be charged $10, someone in a country with 15% VAT will be charged $11.50. The retailer, who is actually selling the product to the customer, takes care of adding that extra bit of tax to the price, and giving it to the customer's government.

Retailers typically sell products at retail price (plus tax), and buy them at wholesale price from your publisher. In the case of Steam, because they're the retailer and the publisher, there is thankfully no difference between the retail/wholesale price.

If you have a royalty agreement with your publisher (typical these days is 70% for you, 30% for them), then this would probably be splitting the wholesale sales price. A brick and mortar retailer might buy a new game for $40 wholesale and then sell it for $60 retail -- you'd be splitting the $40 with your publisher. Be aware of these details when reading contracts -- e.g. the Unreal 4 royalties requires you to pay Epic 5% of the retail price of your game!!

So with a $10 game on Steam, a 15% VAT customer pays $11.50, their govt gets $1.50, you get $7 and Steam gets $3 from each sale.

However, there's also other forms of tax that you have to pay besides VAT. Let's just say for example that businesses have to pay a 30% tax on all income...

Some publishers would give you $7, and then you have to pay $2.10 to the government in income tax, only keeping $4.90 for yourself.

Other publishers will pay the $2.10 to the government on your behalf, and you can keep the $4.90 without worrying.

When you sign a publishing agreement with steam, they'll tell you all the paperwork that you need to fill out, including tax declarations. AFAIK, Steam can handle paying the tax on your income for you, while I think Google Play doesn't. That's just rumors though -- read the information you get when signing on with them.

It also depends which country you're in... Steam is a US company, so they have to report all their income to the USA's IRS. Depending on which country you live in, you could end up being double-taxed, where you have to pay a percentage to the IRS, and to your own government's tax agency again after Steam pays you

To avoid this, you need to live in a country which has a "tax treaty" with the US -- which allows Valve to report your income to the IRS, but then pay the taxes only to your own government (and not actually pay anything to the IRS).

As others have said, an accountant can help with all that...

Back to the off-topic UE4 example -- let's say that VAT is added onto the price so it doesn't affect you, your game retails for $10, you get 70% of that, and you pay %30 in income tax. That means you end up getting $4.90 per sale, but Epic games want you to pay them 5% of the retail price, which comes to $0.50... which means you're actually paying 10.2% royalties on your income, not the 5% that a lot of people are expecting

So always read the contracts

Really thanks for the explanation. I know of course about the income tax for companies, but im glad to learn that the VAT gets added to the price standardly displayed on steam store page... I have somehow never noticed this while buying a game on steam...

Could someone confirm this please, it sounds too good to be true :-). (that steam adds the VAT at checkout in each customer sale, so the price the customer sees on steam/game/store page is practically always higher.)

Also good to know about the unreal deal, i have never thought out that you actually pay more in the end :-). "Nifty" little trick from epic side :-)

EDIT: So in most cases i believe the Vat is 15-20% in most countries "that matter for game sales"? So lets say an average of 17,5%. So when customer from such country wants to buy a game that on its steam store page has a price "tag" of 10 USD, the customer at the cashout will pay not 10 USD, but 11,75 USD... Correct?

ARe you BTW sure about that VAT Hodgman?

I just tried to buy 2 games, clicked as much through without actually buying them and i always saw just the default price... I tried only 2 games but i believe it would be the same for all of them, check the picture below:

http://postimg.org/image/wozspnysr/

So am i living in a country that doesnt require adding VAT to electronic (computer) games (which i dont believe...(?)), or is the price included in the game price (19.99 USD?)

Yeah you're right about EU VAT - it's paid based on the retail price... So you'd have to take that into account when setting the price in Euros. Note that steam allows you to set different prices for different countries -- e.g. often a game will be USD60 for an American customer and USD100 for an Australian one >:(

With your example game, this is what the store looks like for me: http://i.imgur.com/G0fEe4Yh.jpg

Note that the price is not equal (US$19.99 is cheaper than €19.99), and I've got the extra item on their of "Tax: $0".
In Australia, VAT (or GST as we call it) must be included in the retail price, but should also shown to the customer on recepits. It's 10%, so it should be a $20 game that includes $2 of GST in that price, but apparently isn't... Somehow they're getting away with not charging me any GST - maybe because I'm importing a product and paying in foreign currency?
Huh.

Anyway, the agreements you sign with Valve will have to covee all of this, plus Valve helps developers choose a price for their game per region.

The GST is most likely already included in the final price, much like over here in germany (thought we have a VAT of 19% :( ), I think that there's a tax agreement between USA and Australia. So, the developer will only see 90% of your $20 minus -30%. In each country, each market, customers will be used to different final prices. In some countries the final price will always include the VAT, in other countries people are used to add them on top.

It's strange that VAT/GST are supposed to be paid on the increase in value - e.g. the difference in retail and wholesale, but my quick research on EU VAT says that for digital goods this isn't taken into account.

A digital publisher can buy the rights to a good for 90c per unit, sell it for $1 per unit, make a profit of 10c per unit, but then be required to pay 17c to a European tax office. WTF is up with that?

If it really is a value-added-tax, then it should only be taken from Valve's slice.
I wholesale them a product for $7, they distribute it and retail it for $10, with a markup of $3... So they should pay, say 17% VAT on the increased value of $3 (which is 51c).

The GST is most likely already included in the final price

The standard here is to include it in the retail price, but also explicitly write "Contains GST of $0.91“ etc, because there's situations where you can apply for refunds of your GST paid. In manufacturing chains, we do a stupid thing also where everyone pays 10% GST on the full value, but then applies for a refund such that they only end up paying GST for the value they added :/
On the steam screenshot I posted, they're explicitly telling me that it contains no tax component (whereas Ricki's screenshot doesn't even mention tax).

Well i believe in my screenshoots it means that the VAT is included in the 19,99 USD...

Can someone write here VAT levels that apply for steam games in the most videogames selling regions...?

I believe its in general:

USA, UK, Germany... and then goes the other ones like russia, france...?

USA VAT for steam games is 10%? (or does it vary even per state in the USA :-O)?

UK VAT 20%

Germany VAT 19%

France VAT 20%

Russia ....

Well so basically it is as said in the beggining, its like any other shop i know around here (online or physical) you got one final price and the VAT is already included in it.

> A digital publisher can buy the rights to a good for 90c per unit, sell it for $1 per unit, make a profit of 10c per unit, but then be required to pay 17c to a European tax office. WTF is up with that?


This is how it would work in germany more or less: As company you would pay € 0.90 which would include € ~0.17 VAT. Then, when you sell it for € 1 you would pay €0,19 VAT, but you can set this off, so that you only need to pay € 0,02 VAT actually, so only the end-consumer will need to "pay" the VAT, not the company.

It's strange that VAT/GST are supposed to be paid on the increase in value - e.g. the difference in retail and wholesale, but my quick research on EU VAT says that for digital goods this isn't taken into account.

You're right about that. However it's the seller who must increase the value. If the seller didn't, then it is assumed the price already included the raise.

It's strange that VAT/GST are supposed to be paid on the increase in value - e.g. the difference in retail and wholesale, but my quick research on EU VAT says that for digital goods this isn't taken into account.

You're right about that. However it's the seller who must increase the value. If the seller didn't, then it is assumed the price already included the raise.

I guess which is why you want to use a retailer like Steam rather than running your own store. Ain't nobody got time to research the implications of selling something to 300 jurisdictions...

It's strange that VAT/GST are supposed to be paid on the increase in value - e.g. the difference in retail and wholesale, but my quick research on EU VAT says that for digital goods this isn't taken into account.

You're right about that. However it's the seller who must increase the value. If the seller didn't, then it is assumed the price already included the raise.

I guess which is why you want to use a retailer like Steam rather than running your own store. Ain't nobody got time to research the implications of selling something to 300 jurisdictions...

But that is quite recent change that indies are almost unable to sell games on their own sites... Its has to do something with the EU and it went in force only in 2015 i believe?

It's strange that VAT/GST are supposed to be paid on the increase in value - e.g. the difference in retail and wholesale, but my quick research on EU VAT says that for digital goods this isn't taken into account.

You're right about that. However it's the seller who must increase the value. If the seller didn't, then it is assumed the price already included the raise.

I guess which is why you want to use a retailer like Steam rather than running your own store. Ain't nobody got time to research the implications of selling something to 300 jurisdictions...

But that is quite recent change that indies are almost unable to sell games on their own sites... Its has to do something with the EU and it went in force only in 2015 i believe?

You know there is a threshold to vat right? Check with an accountant, but I'm sure that you don't even have to deal with it at all until your turnover per year is greater than £20K...

I guess which is why you want to use a retailer like Steam rather than running your own store. Ain't nobody got time to research the implications of selling something to 300 jurisdictions...

It would be easy if it weren't for the EU that screwed up. Traditionally, "civilized" countries applied the VAT from imports (as seen from the country of the buyer) by withholding at the payment issuer (e.g. typically the credit card). Even if you pay with PayPal, PayPal gets the money via a credit card transaction, a bank transfer, or another PayPal transfer.

Only the last one is hard to withheld (paying w/ PayPal using funds from a previous PayPal transaction), and even then, legislation on "decent" countries is to make the buyer liable for paying the VAT. After all, the VAT is a tax imposed on the consumer, not the seller (but normally the seller is the one who deposits the VAT funds to the Tax agency since it's the most practical thing to do; but not in this case).

But no... the EU wanted to force the buyer to register with their tax administration agencies even if the seller never set a foot there, or despite these EU countries don't even have jurisdiction to enforce such thing. I ranted about it in detail on my website.

You know there is a threshold to vat right? Check with an accountant, but I'm sure that you don't even have to deal with it at all until your turnover per year is greater than £20K...

Yes, but the problem with EU's new legislation is that you have to check the threshold of every single european country, and watch out if there's a country without thresholds.

It's a mess.