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US Tax Withholding for Downloadable Subscription Software

As of January 1, 2022, FastSpring will start to withhold tax from foreign sellers’ downloadable subscription software (DSS) sales if you earn a US-sourced income from those sales. This is in accordance with the IRS tax information and reporting rules under 6050W. Withholding is only applicable when sellers outside of the US sell a product that meets DSS criteria to a customer in the US. The withholding rate varies based on your country of residence. 

Most products, including SaaS and perpetual downloadable software goods, are not subject to withholding. 

DSS Criteria

In order for the IRS to consider a product downloadable subscription software (or term software), the product must meet all of the following criteria. If one or more criteria do not apply to the product, the IRS does not consider it DSS, and withholding does not apply. 

  • Downloadable: A product which customers download from the internet and activate on their local computer. After installation and registration, customers can utilize the product without internet access. 
    • Example: A desktop game application which the customer downloaded from the internet, but plays offline. 
  • Subscription: FastSpring rebills the customer a fixed price on a recurring basis for access to the software. This typically includes access to version updates and technical support. 
    • Example: $9.99 monthly access billing.
  • Software: An application that can run on the local drive and processing system of a computer. This does not include the following: SaaS, digital goods (visual works, browser-based games, audio works, multimedia files), or perpetual downloadable software.
    • As defined in the IRS tax regulations 1.861-18, a software is a computer program with a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result.
    • FastSpring Product Tax Categories that classify as downloadable computer software include the following: DC010400, DC010500, DC020000, DC020100, DC020200, DC020400, DC020402, DC020500, DC020501, DC020502 and DC020503

Sales that are Subject to US Tax Reporting and Withholding

Subscriptions that meet all DSS Criteria will be subject to US tax withholding under the following conditions:

  • You are based in a tax withholding country. 
  • A US-based customer purchases your DSS

Your subscription must meet both criteria in order for FastSpring to withhold a percentage of proceeds. For more information on withholding rates country qualifications, click on Tax Withholding Rates below. 

For more information on product configurations and tax categories, see Product Tax Category.

Tax Withholding Rates on US-Sourced Income

The following table reflects US tax withholding rates based on the US’s income tax treaty associated with that country. According to IRS guidance, countries that are not listed do not currently have a treaty with the US, and are subject to a 30% withholding rate.

Tax Withholding Rates on US-Sourced Income

The following table reflects US tax withholding rates based on the associated income tax treaty with that country. Countries that are not listed do not currently have a treaty with the US, and are subject to a default 30% withholding rate according to IRS guidance.

Seller W8 CountryWithholding RateTax Treaty Article and Paragraph
Armenia0.00%Article 3 and Paragraph 1
Australia5.00%Article 12 and paragraph 2
Austria0.00%Article 12 and paragraph 1
Azerbaijan0.00%Article 3 and paragraph 1
Bangladesh10.00%Article 12 and paragraph 2
Barbados5.00%Article 12 and paragraph 2
Belarus0.00%Article 3 and paragraph 1
Belgium0.00%Article 12 and paragraph 1
Bulgaria5.00%Article 12 and paragraph 2
Canada0.00%Article 12 and paragraph 3
China10.00%Article 11 and paragraph 2
Cyprus0.00%Article 14 and paragraph 1
Czech Republic0.00%Article 12 and paragraph 2
Denmark0.00%Article 12 and paragraph 1
Egypt15.00%Article 13 and paragraph 1
Estonia10.00%Article 12 and paragraph 2B
Finland0.00%Article 12 and paragraph 1
France0.00%Article 12 and paragraph 1
Georgia0.00%Article 3 and paragraph 1
Germany0.00%Article 12 and paragraph 1
Great Britain / UK0.00%Article 12 and paragraph 1
Greece0.00%Article 7
Hungary0.00%Article 11 and paragraph 1
Iceland0.00%Article 12 and paragraph 1
India15.00%Article 12 and paragraph 2A II
Indonesia10.00%Article 13 and paragraph 2
Ireland0.00%Article 12 and paragraph 1
Israel10.00%Article 14 and paragraph 1B
Italy0.00%Article 12 and paragraph 3
Jamaica10.00%Article 12 and paragraph 2
Japan0.00%Article 12 and paragraph 1
Kazakhstan10.00%Article 12 and paragraph 2
Kyrgyzstan0.00%Article 3 and paragraph 1
Latvia10.00%Article 12 and paragraph 2B
Lithuania10.00%Article 12 and paragraph 2B
Luxembourg0.00%Article 13 and paragraph 1
Malta10.00%Article 12 and paragraph 2
Mexico10.00%Article 12 and paragraph 2
Moldova0.00%Article 3 and paragraph 1
Morocco10.00%Article 12 and paragraph 1
Netherlands0.00%Article 13 and paragraph 1
New Zealand5.00%Article 12 and paragraph 2
Norway0.00%Article 10 and paragraph 1
Pakistan0.00%Article 18 and paragraph 1
Philippines15.00%Article 13 and paragraph 2A
Poland10.00%Article 13 and paragraph 2
Portugal10.00%Article 13 and paragraph 2
Romania10.00%Article 12 and paragraph 2
Russia0.00%Article 12 and paragraph 1
Slovakia0.00%Article 12 and paragraph 2
Slovenia5.00%Article 12 and paragraph 2
South Africa0.00%Article 12 and paragraph 1
South Korea10.00%Article 14 and paragraph 2
Spain0.00%Article 12 and paragraph 2
Sri Lanka10.00%Article 12 and paragraph 2
Sweden0.00%Article 12 and paragraph 1
Switzerland0.00%Article 12 and paragraph 1
Tajikistan0.00%Article 3 and paragraph 1
Thailand5.00%Article 12 and paragraph 2A
Trinidad and Tobago0.00%Article 14 and paragraph 2
Tunisia15.00%Article 12 and paragraph 2
Turkey10.00%Article 12 and paragraph 2
Turkmenistan0.00%Article 3 and paragraph 1
Ukraine10.00%Article 12 and paragraph 2
Uzbekistan0.00%Article 3 and paragraph 1
Venezuela10.00%Article 12 and paragraph 2B
My country isn’t listed30.00%There is no tax treaty and the default rate applies.