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Developer
Developer
Posts: 39
Registered: ‎03-17-2009
My Device: Not Specified

Re: Tax Classification?

As of 17 January 2013, the question mark button next to the "Canada Withholding Tax Classification:" entry on the Vendor Portal | Manage Products | Add Product page still links to WHT_FAQ.pdf, which is the document explaining US rules.  Here is the text of RIM WHT Tip Sheet - Canada March 2012 Final for Vendor Portal.pdf , sent to me on 2 January 2013:

 

-- START DOC


Characterization of Amounts Paid to Developers for Canadian Withholding Tax Purposes (Sales To
Canadian End Consumers)


Certain types of income sourced in a country and paid to a non-resident of that country may be subject
to withholding tax. Where applicable, withholding tax is deducted from the gross amount paid to the
non-resident by the withholding tax agent and is remitted to the government.


Research In Motion E-Commerce Inc. and Research In Motion E-Commerce Corporation (in this
document together with Research In Motion E-Commerce S.a.r.l. referred to collectively as “RIM”) are
each considered to be a withholding tax agent for digital goods with respect to the amounts paid to you
for your applications and other in-app digital goods offered through BlackBerry App World (“BBAW”) in
Canada and the U.S., respectively. RIM will rely on you to characterize your income from digital goods
distributed through BBAW for withholding tax purposes. The characterization may differ in Canada and
the U.S. Therefore, you must characterize your income from your digital goods for each Canada and the
U.S. (if you choose to distribute your digital goods in each of those countries).


The characterization must be provided for each app or in-app digital good where an end consumer will
make a payment for the digital good, such that RIM will owe an amount to you for distributing the
digital goods. The characterization is not relevant for digital goods that you choose to distribute on
BBAW free of charge to end consumers.


The information contained in this document is of a general nature only and is not intended to be, nor
should it be construed to be legal or tax advice to a particular person. Under no circumstances shall
RIM be construed to be providing tax advice or consulting services to you. This document is not
exhaustive of all tax considerations, including whether or not you have a Canadian or U.S. income tax
filing or payment obligation, and is based on RIM’s interpretation of the tax legislation and guidance
in force as of [DATE OF POSTING]. You should consult your own tax advisors about the specific tax
consequences of distributing your digital goods through BBAW.


Please note that your choice for the characterization of amounts paid to you for your digital good is
subject to audit by RIM. Where RIM disagrees with your characterization, we reserve the right to reclassify
the characterization of the payment and apply withholding tax at the relevant rates.


Canada:


Generally, from a Canadian income tax perspective, the payments you receive from the distribution of
digital goods may be categorized as a sale or royalty. Amounts paid by RIM to you that are characterized
as a sale will not be subject to withholding tax in Canada. Amounts paid by RIM to you that are
characterized as a royalty are subject to withholding tax in Canada at a general rate of 25% which may
be reduced or even fully eliminated depending on your country of residence. If the end consumer makes
a one-time payment to download your digital good to their device and the digital good will remain there
indefinitely without losing its original function, you should classify the payment as a sale rather than a
royalty.

For all other scenarios, please consider the criteria listed below when selecting your categorization.
Note that none of the factors by itself is definitive and that all relevant factors should be considered in
aggregate in making your selection.


Sale


Generally, the following factors may be considered indicative of a sale characterization of the payment
from the end consumer:

 

- The digital good is downloaded to the end consumer’s device and remains on the end

consumer’s device indefinitely without substantially losing its original functionality (i.e. it does
not become inoperable after a particular period of time has elapsed).


 Example: New levels in a gaming app delivered in-app that are downloaded, retained,
and indefinitely functional on the end consumer’s device


- The digital good is downloaded or can be downloaded by the end consumer but can only be
accessed by the end consumer during its short period of relevance


 Example: Download of news articles, magazines, or sports clips in-app that are only
relevant for a short period of time before they are replaced by newer content


- The digital good includes lifetime access to content that is streamed /accessed online through
your server


 Example: Lifetime access to streaming content


- The digital good includes content that is streamed /accessed online through your server for a
limited period of time and the digital good has a short period of relevance


 Example: Digital access to news articles or video clips stored on your server that are only
relevant for a short period of time before they are replaced by newer content


Royalty


Generally, the following factors may be considered indicative of a royalty classification of the payment
from the end consumer:


- The digital good includes content that is streamed/accessed online through your server for a
limited period of time but the digital good is of a nature that could be enjoyed for a period that
is longer than the period it will remain on the end user’s device or remain functional


 Example: Movie rental, limited time access to online radio, or limited time access to
other streaming content


- The digital good is of a nature that an end-user might want to use on a repeated basis, but the
use is restricted to a certain number of times or for a limited time period


Example: Movie rental or application rental, limited time subscription for mobile device
anti-virus software, or limited time subscription for mobile data backup and recovery

 

-- END DOC

 

I've done my best to pass on the information I received, but please rely on RIM and not me for any legal issues; I am neither a lawyer nor an agent for RIM. I hope this helps other folks until such time as RIM decides to correct the information available at its BlackBerry App World™ Vendor Portal.

 

P.S. Perhaps somebody at RIM might care that in 2013, several of the help pop-ups on that page say:

 

        *This field is not required at this time, but will become a required field in 2012.