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Apple’s new CTF rules protect more small developers from the iPhone sideloading tax

Apple announced a new Core Technology Fee (CTF) a few months ago when it confirmed iPhone sideloading was coming to the European Union (EU). The fee amounts to €0.50 per app download after the first one million annual downloads. It applies to developers who want to sell apps outside the App Store in competing marketplaces or from their websites.

The CTF saw plenty of pushback, especially from some developers who seem to take the iPhone for granted and believe they shouldn’t have to pay Apple any fees for what the iPhone ecosystem does for them. However, the EU has not protested the CTF, at least not yet.

However, Apple needed to address some issues with the CTF. For example, a brand new developer creating an app that goes viral would risk going bankrupt once the CTF threshold is surpassed. Moreover, some apps are completely free, and they might end up in an immediate deficit.

Apple finally amended the CTF rules this week, giving developers more exemptions.

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The CTF is an alternative to the Apple fee developers currently pay in the App Store, but it only applies to developers in Europe who want to take advantage of iPhone and iPad sideloading support.

Apple published an update to the CTF rules on its developer website, reiterating that certain categories of developers are already exempt from CTF payments.

“Only developers who reach significant scale (more than one million first annual installs per year in the EU) pay the CTF,” Apple wrote. “Nonprofit organizations, government entities, and educational institutions approved for a fee waiver don’t pay the CTF.”

New CTF exemptions

However, Apple also announced two additional conditions under which the CTF is not required, fixing issues with the previous rules.

First of all, Apple will not charge the CTF if a developer has no revenue:

This includes creating a free app without monetization that is not related to revenue of any kind (physical, digital, advertising, or otherwise). This condition is intended to give students, hobbyists, and other non-commercial developers an opportunity to create a popular app without paying the CTF.

Secondly, small developers who make less than €10 million in global annual business revenue and want to sell their apps outside of the App Store will get “a 3-year free on-ramp to the CTF.” That should allow them to develop apps, including programs that can go viral, without risking bankruptcy once they have to start paying the CTF.

Once the developer exceeds €10 million in revenue, they’ll start paying the CTF, but it’ll be capped to €1 million per year:

Within this 3-year period, if a small developer that hasn’t previously exceeded one million first annual installs crosses the threshold for the first time, they won’t pay the CTF, even if they continue to exceed one million first annual installs during that time. If a small developer grows to earn global revenue between €10 million and €50 million within the 3-year on-ramp period, they’ll start to pay the CTF after one million first annual installs up to a cap of €1 million per year.

The same rules will apply to iPad apps, as iPad sideloading is now mandatory in the EU. Apple has confirmed in the same document that iPadOS will support sideloading in the EU, just like the iPhone.

Apple’s concessions prove the company isn’t going after the little guy, as some might claim. That anyone with a potentially brilliant idea can succeed on an iPhone and iPad. The original CTF rules contained oversights for scenarios that apply to specific types of developers.

Apple would be a fool to block such creativity with the CTF. But the new fee is certainly needed. I don’t see how anyone can expect to develop premium apps for the iPhone and iPad and not pay Apple some sort of tax.

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