# Payout Tax

You can choose between **VAT** or **Income tax / Withholding / TDS**, depending on the requirements in your region.

### How it works

1. Go to **Settings → Payments → Payout tax**.
2. Turn on the **Payout tax** toggle.
3. Select your **Tax type**.
4. Choose how the tax is calculated and who pays it.
5. Click **Save**.

<div align="left"><figure><img src="/files/yJEF37zF5bHvXSwl4YCI" alt=""><figcaption></figcaption></figure></div>

{% hint style="warning" %}
Changes to tax settings only affect future payouts.
{% endhint %}

### VAT settings

VAT applies when you must charge a value-added tax on affiliate commissions.

#### Tax type options

* **Included in commission**: VAT is displayed inside the commission, but doesn’t reduce the payout.
* **Added on top of commission**: VAT is added on top of the commission, increasing the total payout.

#### Tax value options

* **Fixed percentage for all affiliates**
* **Percentage entered by affiliates**

> For example:&#x20;
>
> Commission: 100 USD\
> VAT rate: 21%
>
> If VAT is **Included in commission**, the affiliate receives **79 USD**, and **21 USD** is counted as VAT.\
> Total cost to you: **100 USD**.

<div align="left"><figure><img src="/files/hmuWXMj2aUiEWnIZ2njm" alt=""><figcaption></figcaption></figure></div>

> If VAT is **Added on top**, the affiliate receives **100 USD**, and you pay an additional **21 USD** VAT.\
> Total cost to you: **121 USD**.

<div align="left"><figure><img src="/files/2ULHnuhijmuxx2e1xzhh" alt=""><figcaption></figcaption></figure></div>

### Income tax / Withholding / TDS settings

Use this when you are required to withhold income-related taxes from payouts.

#### Who pays the tax

* **Paid by merchant**: The tax is added on top of the commission.
* **Paid by affiliate**: The tax is deducted from the affiliate’s payout.

> For example:&#x20;
>
> Commission: 100 USD\
> Withholding tax: 10%
>
> If the tax is **Paid by merchant**, you withhold **10 USD,** and the affiliate receives **90 USD.**\
> Total cost to you: **90 USD**.

<div align="left"><figure><img src="/files/iVkkdgVxCx3UxCGrWEO3" alt=""><figcaption></figcaption></figure></div>

> If the tax is **Paid by affiliate**, you need to pay them an extra of **10 USD**, so they receive **110 USD**\
> Total cost to you: **110 USD**.

<div align="left"><figure><img src="/files/APqR8m5zKmXsQ2knDTaB" alt=""><figcaption></figcaption></figure></div>

For tax value, use a fixed percentage to apply the same VAT rate to all affiliates. If affiliates come from multiple tax regions, allow them to submit their own VAT rate.

<figure><img src="/files/XMqFam7k82Ceb6hdVNPk" alt=""><figcaption></figcaption></figure>

### When to use VAT vs Income tax / Withholding / TDS

* **Use VAT** when:
  * You must apply VAT to service payments.
  * Affiliates are VAT-registered businesses.
  * VAT must appear on invoices or financial reports.
* **Use Income tax / Withholding / TDS** when:
  * Your local laws require you to withhold tax from payouts.
  * Affiliates are individuals or not VAT-registered.
  * You must report withheld tax to the government.

{% hint style="success" %}
Tax rules vary based on country and affiliate business type—consult a tax advisor if unsure.
{% endhint %}


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