Taxes! We know, your favourite topic.
Luckily for you, Steady takes care of a lot of the accounting work.
And because Steady is based in the European Union, there are some advantages to using Steady for creators based in Europe. Let’s dive in.
First: What is Value-Added Tax (VAT)?
Value-Added Tax (VAT) is a tax which is payable on sales of goods or services. Within the European Union, VAT is calculated as a percentage of the cost of the product. The VAT rate varies between EU member states. The final VAT tax burden falls on the end consumer of the good or service. Each party in the chain of supply (manufacturer, wholesaler and retailer) acts as a VAT collector and passes the VAT onto the tax office.
In Steady’s case, the members are the final customer and must pay the VAT for their membership. This is included in the price of their membership (subscription) to your media content.
Steady takes care of the VAT accounting work for the sale of your content to members, ensuring VAT is declared to all relevant tax authorities.
To understand how Steady handles VAT, we need to first understand Steady’s role in business terms.
Steady plays the role of an agent, mediating transactions between paying supporters (members) and the creator (you).
Steady makes 2 key transactions.
Steady “sells” memberships to your supporters.
In this transaction, Steady is the provider. Your paying members are the recipients.
You as a creator “supply” your content to Steady (so that Steady can then sell it to your members).
In this transaction, the creator is the provider, and Steady is the recipient.
Members → Steady
Each member pays VAT as part of their membership fee. Steady calculates the VAT rate for each membership sale.
The VAT rate for each person who buys a membership depends on
1) the country where the member lives
2) the type of content you publish as a creator
Steady calculates all the members’ VAT for you and passes it on to the tax office.
This saves you, the creator, from having to calculate the VAT separately for every single person who supports your project.
Steady also calibrates all of the credit card and PayPal fees on the membership sales. If the member's payment currency is different to your creator’s payout currency, Steady does a currency conversion for you.
This saves you a heap of time.
Unlike Substack and Patreon, Steady does not charge a currency conversion fee.
Unlike Patreon, Steady does not charge an extra fee to withdraw your earnings from the platform. You can find out more about how Steady compares to its competitors.
Creator → Steady
Reminder: You as a creator “supply” your content to Steady (so that Steady can then sell it to your members).
In this transaction, you are providing a service to Steady.
And like any other situation where you provide a service, you need an invoice for your accounting, and you may need to pay VAT for that service. The invoice for providing a service usually states the amount due for the service, plus VAT.
Steady Invoice P1 & P2
Steady prepares this invoice* for you each month. We calculate the VAT on your behalf. The invoice is delivered alongside your monthly payout for “providing” the content.
The invoice you receive consists of the “Credit Note” (p1) outlining your earnings and VAT rate. The “Monthly Statement” (p2) gives a breakdown of your earnings, including the VAT deducted from membership sales.
*Please note that the invoice prepared by Steady is a “self-billing invoice”, also called a “credit note”. This means that Steady calculates how much we owe you for providing content to us. This differs from a typical invoice whereby you, the service provider, would prepare and send us the invoice. The self-billing invoice saves you, the creator, accounting work.
The net payout you as a creator receive is the amount generated by membership sales, minus Steady’s 10% commission, the VAT on membership sales, and transaction fees (credit card and PayPal fees). Here are some further examples of Steady payouts,
How does Steady calculate the VAT rate?
Steady is based in Germany. VAT for the Creator → Steady transaction is handled differently depending on the country where you as the creator reside.
VAT for Germany-based creators
If you pay taxes in Germany, you’ll need to declare your VAT rate in the Steady backend before your first payout.
In Germany, the individual VAT rate is either 19%, 7% or 0%. You will need to declare this VAT to the Finanzamt (tax department), just as they must declare their income. It is the responsibility of the creator to provide this rate to Steady.
19% VAT is the standard rate
7% is the reduced rate applicable to the sale of “basic needs” goods, including groceries, books, and magazines
0% VAT rate, i.e. a VAT exemption, is generally only possible for small businesses whose turnover was less than €22,000 in the past year
If you are a Germany-based creator and you do not know your VAT rate, please consult your tax advisor.
Setting your tax rate in Steady’s backend:
From this information, Steady calculates the VAT that the creator needs to pass on to the tax office and adds this to the creator’s net payout and invoice. This saves you, the creator, accounting time and hassle!
VAT for EU-based creators outside of Germany
Before your first payout as an EU-based creator outside of Germany, you will need to declare your tax number in the Steady backend before your first payout.
For EU-based creators outside of Germany, your net payout and monthly invoice does not include an added VAT rate. It states on the invoice “plus 0% VAT”. This is because the Reverse Charges VAT Mechanism applies.
Reverse Charges VAT is an EU regulation that prevents money from moving across borders and back again needlessly.
The payout for EU creators based outside of Germany is therefore the net sales amount with no added VAT.
If you are a creator based in the EU outside of Germany, it is your responsibility to declare reverse charge VAT and pass it on to your local tax authority via the appropriate VAT reporting method in your region.
Non-EU based creators
For non-EU-based creators, it depends on a country-by-country basis as to how the Creator → Steady VAT transactions are handled. But generally, the Reverse Charges Mechanism applies. You will need to provide your tax number in the Steady backend before your payout.
If you have further questions about your personal VAT status, we recommend contacting a taxation adviser. Steady is not able to give taxation advice.