VAT Nonsense = Non Renewing European

It's not. She was tipped off about the Private Island price hike last year - and the grandfathering of existing island tier rates. She used this information to her advantage to buy second hand islands on the cheap, knowing full well that their prices would rocket in the coming days as the $100USD tier difference between old and new islands became public knowledge.

Seems to me to be a completely reasonable statement LL *could* have made. As an American ignorant to the tax culture in the EU, I can see how they could have easily made the mistake they did. Still no excuse though.

I'll tell ya - during my 3 year tenure in SL, it amazes me how resident opinion of Linden Lab has shifted from "Benevolant Custodian" to "The Man". This sea change in attitude seemed to begin when our intimate relationship with LL withered, and a more impersonal one began to take shape as grid population grew.

While I pine for the heady days of 'Phil Linden, our collective buddy' - I wonder to myself how it is even possible to maintain an intimate relationship with 10 million registered accounts. Perhaps anyone attempting to play in the global metaverse space is doomed to become 'The Man' as well.

This has already been discussed.

China does have VAT, but it doesn't apply to online services, and it isn't part of the EU, so it's irrelevant.

As for the VAT registration issue - you have addressed exactly the problem. L$ transactions don't attract VAT, and according to another poster here who has apparantly tried it, you _can't_ register for VAT unless you sell things that VAT is chargeable on. Thus, VAT registration is no use to any businesses purely inside SL.

well ... I do appreciate people are upset over the issue and the handling - I have actually posted a bit on the VAT threads in an effort to help people understand why LL took the action they did - whilst not supporting the way they did it.

And if you've only 512, is it really going to cost you that much extra? (Most houses in SL are non-transfer I believe....)

Personally I love SL and the friends I've made - I would have to lose a LOT more before I would ever consider quitting.

Inc

The problem here is that Linden Labs, once again, has broken its contracts with customers and deceived them out of their investments with Linden Labs. And Linden Labs has done so knowing that for the customers affected, suing Linden Labs is prohibitively expensive. Plus, Linden Labs can bank on the fact that its customers does not know what sort of consumer protection laws are available to protect them from Linden Labs action.

Whether Linden Labs was mistaken about VAT laws, or whether this was by design, the fact of the matter is that it is the responsibility of Linden Labs to figure out the VAT laws before making a transaction. Customers relied on the representation of rates from Linden Labs when creating accounts and investing. Apparently Linden Labs made a mistake. Typically, when one party to a transaction makes a mistake about the transaction, the party making the mistake has to eat that mistake.

I thought the EU was supposed to be a progressive economic organization. Surely the EU provides a mechanism to handle mass consumer complaints against an individual company.

I'm not sure what would be on the forum if LL ahd done that, and I prolly wouldn't know if they had. I think I would have died of the shock of seeing LL act competently in a corporate manner befitting a global based company.

...or opened up another beer.

~Jessy

Oh there would have been bitching, because at the end of the day, even if LL had communicated appropriately and legally about the change and the timing of it, it's an increase in cost for EU players. That's not going to be a welcome thing, no matter how it's communicated -- that doesn't mean the communication is irrelevant, it is relevant and legally required in some countries, but what I am saying is that the resulting cost increase would still have led to a LOT of complaining, I am certain.

It's ok Incanus, I'm only joking

It's not as if I can't afford it - because I can. But I tell ya, if this could have been avoided by them 'not' opening a European office, then I feel even more inclined to leave than I did when I first saw the announcement. Opening an office in Europe was a very badly thought out move on their part. What really irritates me though, is that we'll probably have to pay VAT when we buy or sell Linden's, or when we convert Linden's to dollars, or dollars to European currency. If they can get away with cr*p like this, it wouldn't surprise me in the least. Before you know it, there's nothing left.

Don't get me wrong, I love Second Life - but I've not got as much to loose as you. I've made no friends here, or built no business (although I was about to), so it's easier for me I suppose. I think I'll just let my weekly allowance of Linden's build up until I'm due for renewal, and then sell whatever there is at that time - and quit. As for the land and house, I'll just have to try and sell it I suppose.

Oh there would have been bitching about how the increase meant people would leave, prevent EU people competing on a level playing field etc. but the anger would have been directed in the main at an EU Directive intended to create a level playing field having the opposite effect, and not at LL per se (one or two might have a pop at LL but not on the same level we are seeing).

If the communication had been handled better it would have been LL and the residents against the EU VAT directive rather than residents against LL and the EU VAT directive.

As someone has said in another thread, this isn't the end of SL as we know it, but it is another dent in LL's credibility, and the supply of new customers to replace the alienated ones is not inexhaustable.

Matthew

A Chinese company selling electronic services to EU residents would be required to collect VAT too.

Agreed. LL's poor communication has just inflamed the situation. The real problem is with the EU directive, but LL's extremely cackhanded implementation of this has actually taken attention away from where the blame really lies.

Exactly.

Every country in the world is apparently obliged to collect VAT from EU customers.

It became enforcable in LL's case because they got an office in the EU.

I imagine it's enforcable in Anshe's case because .. well, whether her business is based in China or not, the lady herself is living in Germany.

Of course, but since Anshe isn't in Europe, LL aren't going to be charging Anshe VAT on her sims. She can easily dodge VAT on fees paid by Europeans by asking for them to be paid in L$ instead. And no country can raise trade sanctions against China right now, so it's unlikely that the European taxmen will get to her.

The major problem is still that European businesses now have to pay VAT on their sims (which they _aren't supposed to have to do_, if they're business supplies), but have no way to charge VAT to European buyers or to ensure that international businesses do so too (which they _are_ supposed to be able to do).

Not to feed the paranoia, but the change in the Dreamland tier system was actually announced about 2-3 months ago, and started being implemented last month. So either they got a very long lead time or it was unrelated.

This is actually rather interesting. I'd love to know if Anshe herself is liable or whether it's her company, and if registering a company outside of the EU gets you out of this mess?



Which is where the "She was tipped off" rumour is coming from. If she has changed her model to L$, because Anshe is a bit too well known to be able to evade the attention of the tax collectors.



Yes I was looking at a flowchart about this last night. If the service is used for business reasons and if it's enjoyed and used outside the EU, VAT isn't due. I'm not sure whether the enjoyed and used outside the EU means by me as an individual or by the platform as a whole.

Ciaran

It means both - it refers to the end user, whether as an individual or a registered trading entity

Inc

I thought that VAT-registered EU companies didn't have to pay VAT on _anything_ they bought for business, no matter where it was "enjoyed". A bit difficult to figure out where a stack of office supplies is being enjoyed after all

I think the question is who is the "end user" of a sim in SL? Is it the person who builds on it, or the person who visits and interacts with the build?

In terms of the wording, I think it's quite clear that the builder is adding value and therefore doesn't have to pay VAT themselves, but I don't know the specifics..

You 'could' follow Atashi's advice but alternatively instead of 'not' entering any new details..enter a few parting words to LL..maybe 'Cheerio Chaps'... I wont suggest any that spring to my mind..because they're rude, and the good folks of the Forum aren't used to that sort of thing.

Robin Linden claims LL have been paying the VAT since July, so they've certainly known about it 2-3 months.

What exactly were the changes Ralph? Is it true that Anshe Chung Studios stopped taking Paypal? (Their website doesn't appear to corroborate that - with Paypal Subscribe buttons all over the place.) If so, do they now expect customers to pay with CC or $Ls?

I figured a rental box would dictate the latter.

This L$ transactions are free of VAT is a weird thing anyways. I can't figure out how and where this fits in current TAX/VAT policies.

Assuming only good/services which are paid RL money for are considered 'real'. This means that buying L$ and cashing out your account are VAT taxable actions:

1. You pay LL a certain amount of RL US$/pound/euro/etc.
2. You receive the 'right' to a specific amount of service, either performed by LL or by an external party, eventually paid by LL. The 'amount' of service is represented by 'L$', which have no intrinsic value by itself, but can be exchanged within the system, for a fixed amount of 'service received'.
Actually whoever performs the actual service (land rental, use of content, etc.) is not important, you purchased the service from LL for RL cash.

3. A party who has performed a specific amount of service is eventually paid for this by LL. The amount of service performed is quantified by the same L$ concept. The service is performed to one of LL customers, who bought this right to service by buying the L$.

The fact that there's an internal mechanism to define the price of one 'service unit' (L$) is of no concern to this. The Lindex is just an internal mechanism for 'bookkeeping' by LL.
If it is not, it would mean, the L$ has intrinsic value, and can be taxed, and LL is in effect a financial institute.

So, to be honest, i'm expecting VAT to appear on L$ purchases sometime soon too. (otherwise, the L$ has intrinsic value IMHO), but not on sales. This could seriously screw up Lindex.
Please explain to me where I am making a mistake in this... i for instance know this leaves a huge gap, where tax and 'barter systems' is concerned (Lindex/in world economy can be considered as such).

Yumi

the end user in this case is the first VAT unregistered person to interact with LL - usually a private individual, but can of course be a company. If that entity is in the EU, VAT at the national rate applies. If they're not.... it doesn't. If the entity uses the sim as part of their RL VAT registered business - e.g. for demonstrating RL achitectural designs in the planning stage - they would be able to include the expense in their accounts. If on the other hand, the sim is used for a bit of toothsome BDSM in the owner's spare time.... well it should definitely NOT appear in the business accounts! lol

Inc

But this again is where we hit the problem - the traditional tax system would assume that the sim builders would register for VAT. Unfortunately, in SL they can't register for VAT, because L$ transactions are exempt - and even if they weren't, the builders would have no way of knowing which avatars were European and which weren't, or from which European country they came to charge them the correct tax, etc..



What if they used it as part of a business selling SL objects, which cashes out into RL currency?

Damanios

As I understand it, currency supply/trading is not subject to VAT (open to correction here). That said, the Linden is NOT a RL currency and I believe the tax authorities would treat it as a form of game token... which means it MIGHT be subject to VAT. I would have expected LL to have researched this aspect with their tax/banking advisors in the EU before blogging that it was not taxable. But then....... certainly one for the lawyers.

(Insert supernatural being of choice) help us all if that happens.....

Inc

I'm very afraid this, in the end, won't fly... either the RL transaction (buying L$/) are VAT taxed. (Selling L$ won't as LL is not a eu company).
Or (and) the L$ economy is considered a 'barter system', which is STILL taxable for VAT. This will be a horrible administrative nightmare for both LL and everybody involved (esp the people using RL companies on the grid...)