The PayPal-India issue which started last month and affected most bloggers/freelancers/small-businesses in India, started to finally resolve (almost).
In a recent announcement, PayPal cleared the air saying that it is not ‘Import/Export Code’, but a ‘Purpose code’ that Indians need to specify while withdrawing money from PayPal account to local bank account!
Complete list of purpose code is here but its not clear yet that which purpose code we need to use exactly! This is the reason to start this discussion here.
Purpose codes bloggers/freelancers need to consider
Following are codes of our interest. You can see full-list here.
- P0801 – Hardware Consulting
- P0802 – Software Consulting
- P0803 – Data Management and Processing Consulting Services
- P0805 – Freelance Journalist
- P0806 – Newspaper / Aggregator
- P1006 – Brand/Business consulting and management services
- P1007 – Marketing/ brand consulting / logo design / event management services
PayPal also made it clear that freelancers need to use one code out of P0801/P0802/P0803 and bloggers need to use one code out of P0805/P0806. For logo design (and related banner/graphics design IMHO) purpose code P1007 should be used. For SEO services and affiliate programs, there are still no clear guidelines. There are some questions that are not clear yet and creating confusion as discussed below…
Confusion #1 – Most Freelancers provide services that are mix of software consulting and data management/processing/consulting services
Whereas, our blogger to wordpress migration service will fall under data management or processing service because we are “migrating (processing)” data not developing any codes. Going in depth, we developed a wordpress plugin to facilitate migration service but the payment we get from our client is not for the codes but for the data-migration service. We are actually charging for our time, not codes!
Confusion #2 – Whether bloggers should use P0805 or P0806 or P0802?
By nature of job bloggers are freelance journalist (#P0805). But most bloggers make money from ads sold on their blog which is like newspaper (#P0806).
Most bloggers grow with traffic and ad-rates mostly depends on traffic and quality of reader-base. Whereas a typical freelance journalist makes money through royalties – more like selling articles to newspaper or other media agencies. This is more like paid-blogging job on rtBlogs network!
Added to above confusion, many bloggers makes money from freelancing services on their blog which may fall under purpose code P0802 0r even P0803!
Confusion #3 – What about SEO-services and Affiliate Marketers
There is no clear mention of SEO experts and affiliate marketers. India have many freelance SEO experts and almost every professional blogger is selling something on his blog under some affiliate program. As a matter of fact, we also make considerable money from affiliate marketing! So which code we should use guys!
There are 2 purpose codes seems near match and they are – P1006 and P1007.
For affiliates marketers, P1007 seems the best as it mentions payment for marketing services.
For SEO guys, I am in dilemma. SEO guys can also be considered as marketers as most big SEO campaign involve indirect marketing efforts in terms of paid-reviews/sponsored posts. But overall description of SEO job is more suited to purpose code P1006. As SEO efforts most of the time used to give a brand long-term exposure.
Workarounds… (What I will be doing!)
After much brainstorming here is the plan we will be executing. Please note that this is our opinion and our workaround. Farhad Irani, in PayPal’s official post made it clear that if you are not sure about which purpose code to use, you better contact PayPal customer support.
First thing to note is that while selecting a purpose code, keep in mind that its your bank to whom you may need to justify your “purpose”. For justification you will be needing proofs like print-outs of PayPal transaction details page as well as other goods/receipts.
Next fact to consider is PayPal don’t charge any fees on withdrawal of Rs. 7000/- or more. So you may go unnoticed by making multiple withdrawals of moderate amounts.
Now while breaking one-big transaction into many small transactions, do not simply use mathematical division. Rather you should try grouping transactions by purpose-code!
So personally, I will do following…
- Code P0802 – All payments for wordpress theme/plugin and customization work backup work
- Code P0803 – All payments for blogger to wordpress migration, apache to nginx migration, wordpress backup-recovery services, etc
- Code P0806 – All payments from advertising i.e. BuySellAds, Kontera, Infolinks, etc
- Code P1007 – All payments for affiliate marketing i.e. payments form Dreamhost, hostgator, etc and payments for logo-design, graphics design services
Only SEO is missing from above list. But as of now we are providing SEO services only as part of some bigger project.
Apart from this Indian guest/paid-bloggers who receives payment via PayPal, technically should use purpose code P0805. But if you (paid-blogger) and sender (blog-network/media agency) both resides in India, you should always use NEFT (National Electronic Funds Transfer). It works faster, keeps you away from legal issues related to cross-border transactions and also you get more money by saving in currency conversation charges.
With this purpose code facility, PayPal will resume withdrawal to local banks in India starting from March 3, 2010 (that is tomorrow afternoon in India).
Let us know which purpose code you are planning to use and why? Also if you happen to get any helpful response related to purpose code from PayPal guys, please share with us.
Update: Complete list of purpose code can be found here on Reserve Bank of India’s site (Thanks Webmaster Tips for link)