VAT Nonsense = Non Renewing European

For it to be taxable would actually be a _good_ thing for Europeans. It would enable businesses to VAT register (so they wouldn't have to pay VAT on their business land), and it would mean that Euro users had to pay VAT when buying from US businesses too (so Euro businesses wouldn't become uncompetitive)

Correct. So if the sim builder (I assume here you mean sim owner, not LL) is in Europe, they pay tax unless they can show in RL that they are passing on the SL service to another RL VAT registered entity, who would of course also have to have a SL presence. And in any case it would require the usual RL paper trail to evidence it.



Depends on the actual facts in question I would think. The tax authority will look to see if this is a proper part of the RL business. E.g. if it was a RL business selling widgets, the SL related income derives from land rentals and there is no obvious connection between the two, likely to be disallowed.

Inc

I shudder to think of how that would have to be implemented... Would you have two different prices, based on if your customer was in the EU or not? How would you know? Honour system? Have two different vendors at each location, or one vendor scripted to include VAT or not depending on where the buyer is from? What if you sell from prims instead of vendors...

Personally, I could see the taxation occuring at the points where RL money is exchanged. You buy L$ for real money, and you sell L$ for real money. You may or may not buy L$ directly from LL (they do mint and sell a few million L$ a month I think) but when you sell them, you're selling them to other residents only. The transactions that occur entirely in L$ would be too numerous, too small, and too anonymous to deal with. But back to the L$ -- RL$ point, the Lindex is there to facilitate those transactions, and those transactions involving real money must therefore involve 'known, identified' RL people, who have credit cards, or paypal accounts. Therefore those could be taxable... I think. Of course, IANAL and I don't know very much about EU tax laws. I do know stuff about the tax laws in Canada, where I live and do business though, and our "GST" is similar to the EU VAT.

-Atashi

They stopped accepting paypal subscription payments and now only accept payments in L$. If you pay by paypal it can only be one shot payments and the amount paid is quoted in L$ although they accept paypal payments in RL currency.

"Out of curiosity though, what is their excuse for a 'virtual' based company having to open an office in Europe in the first place?"

Well, big companies wouldn't do such a move unless they are sure they'll get a financial gain out of it. I believe it has something to do with the weak US$ and the strong British #. This costs me money too (and I live in the USA) because my bank charges me 'foreign transaction fee' every time I pay for my tire and premium account. The first time it happened the bank called me to check if I really made this "overseas" transaction, that's how I learned about it, I believe LL's move to England was not announced either.

I think, although is have nothing to back it up, it's the combination of the weak dollar, combined with the incentive of the IRS / US congress to start looking into taxing 'virtual economies'. I think LL was heavily scrutinized in the US, and in the UK they maybe have a little more 'breathing space' (for the time being).

BTW. Considering the ongoing devaluation of the US$, and assuming all LL funds are now UK pound sterling, they're now actually making money from keeping all RL money account balances in US$...

Sadly you can't ask a private company to explain their financial/management decisions.

The more I hear about this, the more I think ACS were tipped off.

They stopped taking real dollars, which happen to attract VAT, in favour of Linden dollars, which at this point in time, do not attract VAT.

All prices are quoted in $Ls because it's not a real currency, and therefore beyond the scope of any law that demands VAT be included in the price.

Robin Linden indicated LL has been paying the VAT since July, but not passing on the costs to the customer.

ACS made their covenant change, and somewhat disruptive parcel changes ("stealing" back a 16m2 chunk) very suddenly one month later.

Another month later, we suddenly hear about the VAT policy out of the blue.

If true, I think it's scandalous.

If not, I apologise for my overactive imagination ..

..but after last year's Private Island scandal .. well, mud sticks.

This is getting more sordid each day.

actually, given the size of her organisation and thus what she can afford, it's far from beyond the bounds of possibility that she actually received some decent tax planning advice from her accountants and acted on it.

Inc

Then maybe she should have advised Linden in this matter......

..but these changes taking place one month after Linden Lab started paying VAT on our behalf, and one month before they told us about it, it's quite possible they tipped her off.

We know they've tipped her off before about a pretty enormous policy change.

The EU's VAT Directive has been in place since 2003, so why pick August to make such sweeping changes across Dreamland?

The timing is very convenient.

Yes I believe her business is based in China but she lives in Germany and her account is registered in Germany... Anshe Chung owns those islands in LL's eyes, not Dreamland or Anshecorp, whatever she calls it... so how does that work? I think she will need to open up a new location in Germany to get a VAT ID.. I could be wrong though

Thats why I figured shed change her legal address to China.

Maybe she has employees at the registered business address in Wuhan to buy sims and pay tier on behalf of the business? If the transactions are based in China, they won't attract VAT, regardless of where the lady herself is based.

The problem is that ACS should be charging EU customers VAT just like LL, and if they aren't doing that, Anshe might be vulnerable to arrest while she's living in Germany. She is the head of the company, after all.

"...the incentive of the IRS / US congress to start looking into taxing 'virtual economies'"

Taxing is based on where the company is located and LL is still in the USA. That's why I think moving the financial operations to England has something to do with currency exchange.

Whatever their reason - it was a bad idea. At the end of the day there's nothing a virtual based company can do in Europe that can't be done in America. I'd love to know what their excuse is for opening a European office.

Funny thing is, when another company (one with common sense) comes along in competition, you can bet they won't be opening an office in Europe, and as such, will be in a more competitive position than Linden have now put themselves.

The reason that the common customer gets no notice of major changes to the Second Life service for which she paid, and certain individuals might get "tipped off" in advance, is because certain individuals have the resources and incentive to either sue Linden Labs and/or take their money and play elsewhere. Linden Labs counts on the fact that the common customer will suck up the disrespect, continue pumping money into Second Life, and not take advantage of consumer or legal remedies available to them.

Not only that, this VAT thing gives Linden Labs a nice excuse to do some research on whether they are undercharging for their services. Linden Labs does not expect a mass exodus from a rate increase, and after a month or two, Linden Labs will analyze the data to perhaps determine, "Hey, we can probably get away with charging everyone a lot more money!"

After getting my email on this subject, after it took effect! I read a few comments and wondered what the situation was as I was thinking about buying some land.

From looking at the UK customs and revenue site, I got the impression that..

A. The UK office for LL would actually simplify VAT purposes. If LL stayed outside the EU, they would have to register in one of the member states for non EU VAT status (at one time they would have had to register in all 27 member states) They would then have to pay the government (of the country they register with) the VAT contributions for all EU members. The government in question would then be responsible for paying the other governments their share of the proceeds at the correct local rate. Talk about hassle.

From my reading of the situation, LL having opened an office it Brighton means they can register for VAT in the UK. Now if someone from Germany (for example) buys a service from the UK, it appears they only have to pay the UK VAT. So LL can do away with a lot of the EU regulation BS that they would otherwise have to put up with. Opening an office in Brighton DID NOT subject LL to the VAT regime, they were alreay liable.

Winners (if there are any, countries like Sweden with a 25% VAT. Losers, anyone below a 17.5% VAT rate.

B. Someone made a comment regarding Helpdesk support. LL are or are in the process of having a UK based Support team. But Tech support services in this context do not fall into the VAT "capture" zone. (look at HM customs website for info on this)

Whilst I agree, LL should have given more notice, the EU directive is 4 years old after all. But they cannot be held responsible for having to introduce it, only in the way they introduced it. (NO I don't work for LL or have any conection with them apart from using SL) The real target for any frustration should be that lot in Brussels who designed said laws.

You want change, DON'T go after those who have to abide by the law, go after those who make it.

As an aside, along with a few other people, I dislike the fact that the EU can make us pay VAT for a service based outside the EU, but is unable to guarantee other rights available to us under EU law. If they can't do that, then stop charging us VAT for the service.

Considering the TOS claims that the laws of California always have the final say it's interesting how they bow to european laws on certain issues and in others US law supercedes.

Broccoli

LL have a EU VAT number, not a UK one.
What they are doing is the "stayed outside the EU" version that you describe above.
EU users are seeing their own national VAT rates on their accounts.

European courts likely would not respect that to the extent that the TOS conflicts with local consumer protection laws, so I wouldn't focus on that.

Not sure how well you are versed in American law, but federal law can trump state law and that includes the imposition and application of international laws.

Yes but that does not include the EU's decrees regarding VAT or anything else for that matter. Those are not a part of any international law or treaty to which the US is subject, those are domestic laws of the European Union.

Actually, it DOES. Read this post here because I'm not retyping the same thing over.

/327/b4/214287/7.html#post1703887

Hence why I keep telling ya'll, it's fine to fight, but at least know the facts instead of fighting with what you think it *should* be.

International law trumps state law. It trumps federal law. Simply because it was created and is enforced by a higher entity than our own government. In our world (as members of the UN), the UN is the highest court in the land and deals with international issues.

Just because we don't have that specific tax here, doesn't mean we don't have to abide by it. We actually do pay some in tax to European countries. To get informed on that, read this post:
/327/b4/214287/5.html#post1703043

Reading the OP, I am reminded of how various people of different parties want to raise taxes.

Perhaps we should our elected representatives in the states this thread. It should prove as an example that higher taxes are not the answer to a thriving economy.