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Ricki80

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

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If you want to sell a game on steam for lets say 9.99 (10 USD) steam takes aproximatelly 30%, that means 3 USD. But there is another cut as far as i understand, and that is VAT (value added tax), which differs but i think in average it is aproximatelly 20% on steam...? Im not sure about few things...

 

1) The VAT is calculated from the full game price (before steam cut), that means in the example the vat is 20%, that means 2 USD (from 10 USD game price), right?

2) Does steam handle the VAT and it also pays VAT to the governments? That means that steam actually takes 50% (30%steamcut+20%VAT), that means 5 USD, and the developer always sees only 50% of the game selling price? (developer gets from steam only 5 USD in this example)? ANd you dont have to deal with VAT because steam deals with it (paying to governments etc.)

3) Or does STEAM pay you 70% (7 USD) and you handle and pay the VAT yourself?

 

Thank you, im not sure about this issue

 

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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 ...

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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.

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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.

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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?

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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.

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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 :)

 

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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 sad.png

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 wink.png

So always read the contracts tongue.png

 

 

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?

Edited by Ricki80

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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?)

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