This article is based on our experience and we are not tax experts, you should consult a tax advisor or accountant for help when you encounter a similar situation.
One of the more common issues when dealing with earnings from outside your country is double taxation. Sometimes the country where you build your game and the country where you sell it don’t agree on which one should be taxing your income, and you end up taxed by both.
When you know you might receive foreign income you should first check if both countries have agreed to some taxation principle. In several cases you can find that both have agreed to some rules in a Double Taxation Agreement or Treaty. These agreements will tell you who you should pay and how much and the usually keep the tax burden reasonable.
Check first if both countries have agreed to some taxation principle. In several cases you can find that both have agreed to some rules in a Double Taxation Agreement or Treaty.
When there is no agreement the country you are producing the game in might allow you to reduce the amount of taxes you are required to pay at the end of the year by showing a certificate of “taxes withheld” that shows that some foreign country has taxed you and you would have to pay double taxes if you payed your local country as well.
You will have to ask your client to give you one of those certificates. When using withholding certificates you might only be able to make use of them at the end of the year which can complicate your cash flow.
You can find information about the treaties your country has active in this page.
Photo attribution: By: TaxRebate.org.uk, from:https://www.flickr.com/photos/59937401@N07/5856711413/, licensed under https://creativecommons.org/licenses/by/2.0/