Currently VAT is implemented on top of the product price (aka VAT exclusive), so your revenue will never be reduced if VAT is collected on a transaction. This may change in the future though since it's counter-intuitive to how European buyers expect pricing to work. VAT is not an income tax, it's a sales tax. So there's no threshold's about how much money you make and whether VAT is collected or not.
On your dashboard's home screen, itch.io reports "Gross Revenue," which is the sum of the amounts people paid for your goods (minus sales tax, like VAT). So if 10 people paid 5 dollars, then $50 will be reported.
The payouts screen breaks down your actual earnings, after subtracting any relevant fees. This represents how much you get paid after everything is settled. These fees include:
- itch.io's revenue share - set by you on your account settings
- Payment processor fee per transaction
- US withholding tax (for international payees only)
- Account adjustments
- Any fees from money transfers that previously happened
- Tax identity verification
- Refunds/Fraud that were overpaid to you in a previous payout
itch.io only makes money from our revenue share, highlighted in bold above. All of the other fees are passed through directly. Why do we do this? Because we let you set revenue share to 0%. Those additional fees represent a substantial amount of money going through the system and we would be unable to operate if we did not structure payments in a way that prevents us from losing money by just having someone on our platform. (Although we do make an exception by covering the cost of bandwidth)
Hope that explains everything.
Also, please avoid making topic titles in all caps with excessive punctuation. So other people can find answers when they have similar questions, write a brief summary of your question as the topic title.
Thanks