US Tax Withholding for Downloadable Subscription Software

As of January 1, 2022, FastSpring withholds tax on sales of downloadable subscription software (DSS) US-sourced income. The IRS taxes US sales that generate royalty income for foreign sellers on sales of subscription software in the form of withholding.

Most products, including SaaS, non subscription (perpetual) software licenses, and other digital goods do not qualify for withholding.

DSS Criteria

If a product meets all of the following criteria it is considered DSS.

  • Downloadable: After the initial download, a product can be utilized without internet access.
    • Example: A desktop game application downloaded from the internet, but played 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.
    • 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 Subject to US Tax Withholding

Sales of DSS are subject to US withholding under the following conditions:

  • You have a foreign tax status, and based in a tax withholding country.
  • A US-based customer purchases your DSS

A foreign tax status is represented by a seller when completing a form W-8 in the online questionnaire.

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. 

What does this mean?

If your product configurations are set-up as DSS, withholding will apply on your US sales. If you feel this is inaccurate, please ensure your products are not configured in your storefront to withhold.

A product is configured to apply withholding if:

  • It’s assigned a tax code of It’s assigned a tax code of DC010400, DC010500, DC020000, DC020100, DC020200, DC020400, DC020402, DC020500, DC020501, DC020502 or DC020503. Use tax code DC020600 for perpetual software or find another applicable tax code here.
  • Setup as a product subscription. It’s been added under the subscription dropdown in your storefront.

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.