Collect royalties from abroad: a Colombian game studio and its foreign publishers
A royalty is calculated by someone else, paid once a quarter and often reduced by withholding before it arrives. This illustrative case follows one Colombian studio from the royalty statement to the peso account.
Game studios rarely invoice their income. A publisher sells copies, keeps a share, computes what the studio is owed and sends a statement some weeks after the quarter closes, usually with tax already withheld. Reconciling and planning around that cycle is a different job from chasing a client invoice.
At Soulbit Academy, we present this case as an illustrative composite. The studio, the publishers and every figure are fictional and labeled as assumptions. They show how to collect royalties from abroad without losing track of the statement, the tax and the cash flow.
Collect royalties from abroad: the case of Andes Pixel Works
Andes Pixel Works S.A.S. is an illustrative nine-person studio in Medellín that built a strategy game for PC and consoles. It owns the intellectual property and licenses distribution to two publishers: one in the United States, paid in dollars, and one in the United Kingdom, paid in pounds sterling.
Each contract sets an advance already paid, a royalty rate on net receipts and quarterly statements. The studio does not see sales data in real time. It sees what each publisher chooses to report: gross sales, digital storefront fees, the recoupment balance and the resulting royalty.
Why is a quarterly royalty harder to manage than a client invoice?
The amount is computed by the payer, it arrives late and it can be reduced by withholding. An invoice is issued and collected. A royalty must first be verified against a statement and the contract, and only then becomes cash. The studio therefore needs a reconciliation routine, not just a bank account.
What a quarterly royalty statement contains, line by line
A royalty statement is the periodic report in which a publisher explains what the game sold and what it owes the studio. It reads in four steps: gross sales, storefront fees, royalty rate and recoupment. Every line should reconcile with the contract and with the studio's own storefront reports.
Gross sales are what players paid. Storefront fees are what the digital stores for console and PC keep, and they come off before the royalty is calculated. The rate is then applied to net receipts. Last comes recoupment: the publisher first recovers the advance from the royalties earned, and pays cash only when the advance balance is zero.
Table 1 applies those steps to the second-quarter 2026 statement from the US publisher. Every figure is an assumption of the example, not a market rate and not a Soulbit price.
| Statement line | Calculation (assumed) | Amount in USD |
|---|---|---|
| Gross sales for the quarter | Publisher's report | 600,000 |
| Digital storefront fees | 30% of 600,000 | 180,000 |
| Net receipts (royalty base) | 600,000 minus 180,000 | 420,000 |
| Royalty earned | 22% of 420,000 | 92,400 |
| Advance recouped | Unrecovered balance at quarter start | 52,400 |
| Royalty payable before withholding | 92,400 minus 52,400 | 40,000 |
| Withholding at source | 30% of 40,000 | 12,000 |
| Net cash received by the studio | 40,000 minus 12,000 | 28,000 |
Check the arithmetic from the top: 600,000 minus 180,000 is 420,000; 22% of 420,000 is 92,400; subtracting the 52,400 advance balance leaves 40,000; 30% of that is 12,000. The studio receives 28,000 dollars, not the 92,400 it earned. One assumption deserves a question to the publisher: whether withholding applies to the cash paid or also to royalties applied against the advance.
What the publisher asks for before paying: Form W-8BEN-E and withholding
Before the first payment, a US publisher asks the studio for a tax form and withholds tax at source. The default rate on US-source royalties paid to a foreign person is 30%, according to IRS Publication 515. A treaty in force can reduce it, but only for residents of the treaty country.
The DIAN does not list the United States among the treaties Colombia has in force, in its official list of international tax treaties. So Andes Pixel Works cannot claim a reduced rate from the US publisher and plans on 30%. Our guide to the Colombian double taxation treaties explains how to check any other country.
A company gives the publisher Form W-8BEN-E. The IRS instructions for Form W-8BEN-E ask for the entity's country of residence, its classification and its tax identification number. Individuals use Form W-8BEN instead, covered in the W-8BEN guide for LATAM contractors.
Does the UK publisher withhold the same way?
Not necessarily. The UK publisher follows UK rules, and the DIAN lists a treaty in force between Colombia and the United Kingdom since 2019. We do not state a rate here because we did not verify one. In the example, the UK publisher is assumed to withhold nothing. That is an assumption, and each contract needs its own check.
One more caution: if the deal is in substance a sale of copies and not a licence, the payment may be classified differently from a royalty. That call belongs to the studio's tax adviser.
The Colombian credit for taxes paid abroad: article 254
Article 254 of the Colombian Tax Statute lets Colombian companies credit foreign income tax against their Colombian income tax on foreign-source income. The credit is limited: it cannot exceed the Colombian tax attributable to that same income.
Without the credit, the royalty would be taxed twice, once by the United States and again in Colombia. With it, the foreign withholding works like an advance payment of the Colombian tax. Here is a simplified calculation with assumed values: 4,000 pesos per dollar and a 35% income tax rate.
To keep the arithmetic simple, the example uses only the amount payable after the advance is recouped; Colombian taxable income is recognized on an accrual basis (here the full 92,400-dollar royalty), so the real credit limit is for the accountant to compute. On that simplification, the 40,000-dollar royalty is 160,000,000 pesos of income, and the Colombian tax on it is 56,000,000. The withholding of 12,000 dollars equals 48,000,000 pesos. That is below the limit, so the credit is the full 48,000,000, and the studio owes 8,000,000 pesos more. The real calculation allocates costs and expenses, and the accountant must run it.
The credit is claimed in the annual income tax return, not quarter by quarter, and it needs proof of the withholding. Keep each statement and each withholding certificate together with the matching payment.
Exchange rules and a quarterly cash plan
Exchange rules come first. Colombian foreign exchange rules do not treat every foreign-currency flow the same way, and our guide to the Colombian foreign exchange regime explains which operations must be channelled through the exchange market and which belong to the free market.
This article does not state whether royalties on game licences must be channelled. That depends on the exchange rules and on the contract, so the studio should confirm it with an authorised exchange intermediary or an exchange adviser before the first payment, and check the Banco de la República.
The cash side is simpler to quantify. With the assumed rates of 4,000 pesos per dollar and 5,300 per pound, the quarter brings 28,000 dollars from the US publisher (112,000,000 pesos) and 30,000 pounds from the UK publisher (159,000,000 pesos): 271,000,000 pesos in total. Monthly costs of 70,000,000 for nine people mean the quarter covers about 3.9 months, so the margin is under one month.
Table 2 compares three ways to handle that receipt. None is recommended in general: the right one depends on the studio's costs and risk tolerance. For accounting at the daily rate, see the guide to the DIAN exchange rate (TRM).
| Policy for each receipt | What the studio does | Main trade-off |
|---|---|---|
| Convert everything on receipt | Sells all dollars and pounds for pesos at once | Fixes the peso amount, but exchange-rate timing is a single bet |
| Convert monthly, by need | Holds the balance and converts the amount for each payroll | Spreads the rate over time, but needs a quote every month |
| Convert half, hold half | Converts for two months of costs and keeps the rest in dollars or USDC | Splits the risk, but leaves part of the cash exposed to the currency |
Receiving the money: payment link, USDC or dollar balance, payout in pesos
Soulbit lets Andes Pixel Works receive the publisher's payment into a dollar or USDC balance under institutional custody and move it to pesos when it chooses. The flow has four steps, and the studio decides where it stops.
The first is collection. The studio shares a payment link or the receiving details enabled for its balance, depending on what each currency supports, and Soulbit's human support helps choose. The second is reconciliation: match the payment to the statement and the withholding proof.
The third is the cash decision from Table 2. The fourth is conversion by OTC quote on request, with no public order book, and a payout to Colombian bank accounts over the local rail for payroll and suppliers. Whether a publisher accepts a payment link or a new account depends on its vendor processes, so ask during contract negotiation.
What Soulbit V1 delivers and what it does not
Soulbit V1 delivers balances in stablecoins (USDC and USDT) and in fiat (USD, EUR and GBP) under institutional custody, KYB, payment links, collection QR codes, OTC conversion by quote on request, payout to Colombian accounts over the local bank rail, batch payroll and human support. The local rail runs only in Colombia.
It does not do what the case might suggest. It does not compute withholding or royalties, issue withholding certificates or run the article 254 calculation. It does not reconcile against storefront reports. It has no API integration with accounting systems, automatic conversion, card or yield on balances.
No price advantage is claimed either. There is no closed fee schedule, and conversion is quoted case by case.
Frequently asked questions
How much US tax is withheld on royalties paid to a Colombian company?
The default US withholding rate on royalties from US sources paid to a foreign entity is 30%, according to IRS Publication 515. A lower rate needs an income tax treaty in force between the two countries. The DIAN does not list a treaty in force between Colombia and the United States, so a Colombian studio should plan on the full 30%.
Which IRS form does a Colombian company give a US publisher?
A company, such as a Colombian S.A.S., gives the publisher Form W-8BEN-E. Form W-8BEN is only for individuals. Without a valid form the publisher applies the default 30% withholding, and many publishers also hold the payment until the paperwork is complete.
Can a Colombian company recover the tax a foreign publisher withheld?
Article 254 of the Colombian Tax Statute lets a Colombian company credit tax paid abroad on foreign-source income against its Colombian income tax, up to a limit tied to the Colombian tax on that same income. The studio needs the publisher's withholding proof, and its accountant should confirm the calculation.
What does recoupment mean on a game royalty statement?
Recoupment is the publisher recovering the advance it already paid. Royalties earned are first applied against the unrecovered advance, and cash is paid only when that balance reaches zero. The studio should keep its own record of the remaining balance so it can check each statement.
Does Soulbit calculate royalties or tax withholding for a studio?
Soulbit does not calculate royalties or tax withholding and does not replace the studio's accountant. It handles the money movement: receiving the payment through a payment link or an enabled balance, holding it in USDC or dollars, converting by OTC quote on request and paying out to Colombian bank accounts.
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