XTRM helps takes away the burden of tracking and dealing with global tax reporting
How does XTRM manage taxes?
Understanding how we manage taxes is important to understand how XTRM is classified in the payments industry.
1. XTRM is referred to as a Third Party Settlement Organization (TPSO)
We sit between the remitter (paying company) and the beneficiary (receiving person or company). A third-party settlement organization is a central organization with the contractual obligation to make payments to participating payees in a third-party payment network.
Characteristics of a third-party payment settlement organization include:
- financial services are exempt from VAT (Value Added Tax)
- the existence of a central organization with whom a substantial number of providers of goods and services (who are unrelated to the central organization) have established accounts
- an agreement between the central organization and the providers to settle transactions between the providers and purchasers
- the establishment of standards and mechanisms for settling such transactions, and
- the guarantee of payment in the settlement of such transactions
2. Payments made to companies or individuals are made from XTRM
All payments made to beneficiaries are identified as having come from XTRM, even if the source of the funds was a 3rd party remitter (paying company).
3. Taxation at source is not required
The recipients of payments will typically not be employed directly by your company, but even if they are, the responsibility to notify the IRS (or whichever Tax authority based on where they live) falls on the recipient. This is the case all over the world wherever we process payments. In other words, when the recipient or company submits their taxes, they have to declare "Other income", and withholding at source is not required. Recipients can use the data on the 1099-K (USA) or equivalent transaction reports posted in their account, regardless of where they live in the world, to notify their tax organization of all applicable payments.
4. Beneficiaries of payments are responsible for reporting all transactions
It is the beneficiary's responsibility of all payments, regardless of whether they are an individual or a company, to report all income to their local tax authority in the usual manner. It requires them to submit data and documents we provide them on the site to their local authority. For example, in the US, individuals, and companies can log in to their accounts at any time and download from their accounts the 1099-K and applicable payments for any tax year.
5. Remitters (paying companies) reporting is provided in the system
We provide the necessary reporting for any remitting company to provide to the IRS. The requirement to report depends on the country and local rules. We will take the burden of submitting those reports for certain countries based on local rules and payment threshold limits.
6. We collect all required data for tax reporting
We capture all the relevant data electronically to assist all companies and recipients in filing their taxes for all payments sent and received correctly. For example, this includes an electronic collection of W9 and W8-BEN or country equivalent data and electronic posting of 1099 K's (USA) and all transactions reports for download.
Note, the Individuals "Profile" must be at a minimum 80% complete IDL (Identity Level) to access and download the document. More Info
