UK VAT Law

LOL - But seriously this just underlines the stupidity (and futility) of governments' attempts to regulate something that attempts to be international.

Just as the VAT imposition isn't, at root, LL's fault (although its implementation was atrocious), neither it the fact the the legislation regarding content and activity is based on the actual physical location of the servers. So, EU legislation says that tax is applied that is relevant to the country at the point of delivery (eg: goods/services supplied from the US are charged tax relating to the customer's country of origin, not the goods'), but other legislation specifies that internet activity that is originated in a state/country is subject to the laws of that country. So, we're stuck between the two - Gambling isn't allowed in the US, so nobody can have it, even though it's not illegal in the EU. VAT however, must be charged to EU customers, even though there is no VAT charged for SL services in the US.

Perhaps the solution would be to move the SL servers to Europe? Then, gambling would be legal, VAT would be charged to EU residents, but not US residents (as now) and us Europeans wouldn't have to pay more (ok, semantics - would not incur higher costs) than our US counterparts. In return for paying more (incurring higher costs) than residents in the US, we'd maybe get lower pings!

Yes, I know that ain't never going to happen, but a few EU based servers would be a start wouldn't it? Of course it goes against the whole "SL one community" spirit, but as long as world governments impose local rules on virtual worlds, then that's not going to be feasible really, is it. Imagine if the state of California passes a law that bans the virtual representation of humanoids, or the virtual representation of dancing - not going to be much fun in SL anymore, ist it?

This is one of the reasons the "games" often have separate EU servers -- so they can have separate pricing (including VAT ), separate customer service, a local team of people who are familiar with, and in a better position to comply with, local laws, etc. I wouldn't expect LL to go this route. If they did, costs would rise for everyone significantly without question, due to the staffing costs in Europe.

I'm almost done now - we're going round in circles with this! But, as I've said before, I'm not blaming LL for the fact that it has to charge tax on behalf of EU governments, but rather for its inept, insensitive and economically reckless method of introducing it.

As I've also said, I quoted 25% to try and get you to think what it would be like if this happened to you. The cost of operating an SL account for some EU residents went up by such an amount overnight - "price", "cost" "tax", call it what you will - the net effect is that people are paying more.

7.25% - 3% - 5% and no tax at all on digital services? - Good luck with that!

the whole reason behind this is EU making a rule concerning competition between EU-Merchants and non-EU-Merchants in the internet.

If you don't have to pay VAT for non-EU-Merchants their "stuff" (=goods, services) is cheaper than the inner-european "stuff". To take that advantage away and make it "even" EU introduced VAT for that.

now in SL it totally works the other way (thanks to LL). There is _no_ european competition to SL or to LL's Land supply. That means European _inner-sl-merchants and land owners_ have a dissadvantage of 15-25% compared to non-eu-merchants.

The only working solution would be that LL opens the market for 3rd Party Sims.

Look at what you get at your favorite ISP. Dual-dual core servers for 200-300€ a month, often near unlimited traffic yada yada.

e.g. in germany you have to pay 1904USD for a sim and 232,05USD tier. A big sucker for all european land owners. Since european landlords wont be able to raise their own tiers (they'd be out of the market otherwise), it's cutting their possible profit.

So what will this mean: Quite simple. Europeans will buy less sims, or rather said - land in general.

Btw, afaik that rule has been around since 2000. Good morning linden labs.

Btw - I still dont get the high prices for a Sim. I guess a class-5 sim isn't a state of the art root server with dual-dualcores and 8+ gigs of ram... (how many sims run on such a machine actually?)

Just compare your favorite ISP with the LL prices for a sim. It's just not right.

Each server has 4 cpus, and so run four sims. I believe 'void' servers run 16.

The price LL charges for a sim is not based solely on the costs associated with purchasing the hardware; the 'setup' fee they charge for a sim (plus associated tier) is the main source of revenue for the business as a whole (though other sources have become available in the last year or so: Lindex for one). The money collected from setup fees and tier helps pay for the developers, admin, VAT emails, donuts & coffee.

+ the abandoned land no one really can put to use.

the price is still too high, there is no competition, so no good price, end of story. xD

Each server has 2 dual-core CPUs, with 2G of RAM. Each core runs a sim, so up to 4 sims can run on one server.

Void sims are run 4 to a core, and may run on the same CPU as the regular sim to which they are anchored.

Ah. Thanks for the correction Maximillian!

In that case, the $ must also cover King Phil's mojitos in the seychelles then

SO how much do we want to bet Anshe moves "Legally" from Germany to China?

(Irish - but may be international English-language) Joke:

"Hey. Are you shearing that sheep?"
- "No. Get your own one."

damn, I can get a root server like this for like 300€ a month (including VAT ), set up fee 100€ for 12 months contract... and that company makes profit with it.

That server is: 2x Opteron 2216, 2 x 2 x 2,4GHz, 8 GB Ram (!), Raid1 with 2x 500gigs HD space.

let's assume 300€ a month and round a lot xD.

300€-tax=~240€ net (still including the companies profit)

let's assume they make ~10% profit (holla!)

~220€ net a month.

so 80€ (set up-tax)+220*12=2720€ a year. Consider this is actually a way better server than those stated above.


so lets assume you can run 4 sims on that machine....

set up price: 1600USD*4= 6400USD
Tier: 195USD*4*12=9360USD
sum for first year: 15,760USD.
not too bad.

ok, you get 1.41USD per € right now so...
2720*1,41=3835.20USD.

profit in first year:
11924,8USD. Holla. that's a lot of mojitos.

2nd year; ongoing:
9630USD tier-(2640*1.41)=9630-3722,4=5908.

I didnt really pay attention to my calculation so there could be a lot of errors, and I didnt do that much of research to find a comparable server... free mojitos for everyone!

us based price: http://www.myinternetservices.com/webservers/dedicated (hi napoleon, hi crazy!)

It's already there. Her business is registered in Wuhan, even though she lives in Germany.

This might explain her land policy overhaul last month, during which she also took a 16m2 chunk out of every single parcel in order to place a payment box. Any theories?

paypal costs too much profit.

It was implemented in 2003. It's called the E-Business Directive.

You're arguably subsidising the development costs that went into the simulaor software as well. They're not just hosting a machine for you.

Webhosts also tend to use open source web server software (Apache) to keep their costs down.

I don't quite understand the situation there. According to her website, she still accepts Paypal for land credits.

Now if she was only accepting rental payments in $Ls, that would be a different matter. You might theorize she was doing that to get around the EU's E-Business Directive herself .. and it wouldn't be the first time Miss Chung would've receive a tip off about a pretty huge policy decision (remember the private island scandal of November 2006?). But apparently she's not doing that, so there's that theory shot down in flames.

Cost of living would be the least of my worries. I'd expect riots in the United States if their government tried that. Here in England, we'd just put the kettle on, make a pot of tea, raise our eyebrows and say "oh well, life goes on."

sure, they are not just hosting a machine. see my above assumption. still plenty of money to cover your development. It does not matter at all though - in the end, in a monopoly there is no fair price.

very true! considering their monopoly though, you'd think they'd have figured how to turn a profit by this point.

Baaaaa!
Fleeced again!
Nice to see so many readers of this thread, and the general back and forth is most entertaining. I do hope though that people who are effected are actually doing something about it rather than just moaning on a forum.
Take your pick: Raise a support ticket, vote at downing street (UK citizens - http://petitions.pm.gov.uk/EU-INTERNET/ ), use some form of consumer on-line compliant system, go and ask Robin some tough questions. Anything legal and politely executed will be a step in the right direction.
Just don't assume that moaning on a forum will get you anywhere.

Yeah - the bottom line is that LL seems committed to nailing up its own coffin, without any assistance from any other significant parties in the equation - competitors who want a slice of the action, disgruntled customers (that's everyone then,) assorted axe-grinders, griefers and dumbass redneck trolls.

This probably won't kill them, but next month it'll be something else, the month after that they'll ban all sexual activity without the presence of a company approved chaperone, then they'll ban Christmas on some tortuously argued pretext that it discriminates someone, or infringes a policy somewhere. The month after that they'll decide all their customers, worldwide, have to abide by Ruritanian VAT at 250% plus one goat (or 2.5 chickens) monthly. In February they'll peg the Linden to the Zimbabwean groat, or whatever TF the currency there is (if they even still have one.) In March they'll appoint Chris "Chuck" Nor(i)s as SL Diplomat-in-Chief, and in April they'll invest the entire Lindex Holdings in a desperate scheme to convert prims into antimatter to build a faster-than-light-engine to go back in time and start the company from scratch - properly this time.

Wittgenstein once said "imagine this butterfly, just as it is - but ugly"

I say "imagine this company, just as it is - but competent"

QFT!

Why can LL not take payment in L$ instead of $US form those in Europe? L$ is nto an official world currency thus no vat would be nor could be payable?
PI sims owners take L$ and no vat is applicable according to the relevant laws, so why are we not allowed to pay Tiers etc in L$

LET US PAY INWORLD!!


I also agree that as the service (SL) is totally based in USA and is nto "imported" into the EU then there should be no vat payable either, ok I hear someone shouting the software but that is free open source and thus not a chargable 'asset .
I do do not import the server software or data base, any software I use to access SL is either Free open source or my own 'inworld' creations and not VAT chargable anyway.
So I am still very much puzzled at what the VAT is being charged for /on ?

If I set up an account while living in USA then move to the UK and use the system do I get charged VAT ?

If i get a friend in the USA to set up an account there and I pay them my tiers etc and they in turn pay that for me for me, and I access it from here is that vat chargable?

In other words my question is; is VAT determinable by an IP access ? or an IP set up address

There is a 2003 Bruxelles decree on this referenced in the various threads.

A) Because LL decree it so. Their platform, their rules. B) The EU has decreed that useage of an electronic service is taxable dependent on the country of consumption, NOT the country of origin.


You're being charged on the consumption of a service within the EU (it doesn't matter where the service is being provided from) whilst being resident in the EU. There are plenty of posts about why this is so - a specific case for electronic services.

Yes


I think this does not conform to the TOS. Basically you would accessing someone else's account. Easy way to get yourself banned.


See the blog. Yes it is.

Inc

FWIW, here's an email I sent LL earlier. I'm not holding my breath that it will make the slightest bit of difference.

###

To whoever receives this,

What I have to say will neither fit in a support ticket (limited to a few hundred bytes as they are,) nor meet the strict criteria listed as being appropriate for handling via support ticket, so I can see no alternative but to email this to [email]support@secondlife.com[/email] (I'm guessing that email address exists) and [email]contact@lindenlab.com[/email] (the only listed email address you publish that I can assume works.) I would be obliged if you would forward it to Robin Linden (or anyone else dealing with the imposition of VAT on European customers,) and I apologise if it clutters up the mailbox of someone unconnected with the fiasco.




To whichever Linden(s) it may concern,

I did not receive any email from you regarding the imposition of VAT charging on my account (and by the sound of it, I am far from alone in in that.) I had to stumble upon it in the forums yesterday, a couple of days after it was introduced.

Maybe you don't realise just how outraged your European customers are about the way you've handled this - if the discussions in the forums are anything to go by, then they are ALL at least as unimpressed as I am. It is received wisdom that the Lindens do not bother reading the forums, so I am taking the step of emailing you to register my disgust, and to point out that you are apparently in breach of UK and European law in your handling of this matter.

Linden Labs may or may not be legally required to collect VAT on behalf of HM Customs or the EU - I'm not a tax lawyer, so I don't know. But one thing there can be no doubt about is that it is an utterly reprehensible and abominable abuse of loyal customers, and a serious breach of UK and European law, to impose this policy with zero notice (even the people who did receive the email about this apparently got only a few hours notice,) and while you are still advertising prices for this service excluding VAT. In Europe (whose laws you seem suddenly so eager to abide by,) you are required by law to display inclusive prices, either instead of or alongside exclusive ones. You are also obliged to give reasonable warning. Your so-called experts may know about tax law, but they are woefully ignorant of European consumer protection legislation.

You must have known for some time that this was coming, but you apparently chose to withold that knowledge from your European customers while they continued to do business on terms you knew to be incorrect. I would expect any European court to deem that a very serious breach of the law. This tax did not suddenly become liable at the point you imposed it - it may, or may not have been already liable, and you should have given us fair warning.
Anyone who bought significant areas of land shortly before you instroduced this price hike would have a very strong case in European law against you. I don't know how American law works, but we take that kind of thing VERY seriously on this side of the pond.

It may be that in the US prices are shown exclusive of sales taxes, and that you don't consider it to be a "price increase" per se; so what's the fuss? If you don't like it, blame your governments for levying these taxes, etc. - there are cultural differences that have contributed to this situation, I'm sure. But here in the UK and Europe, I can tell you without a shadow of a doubt that this is seen by everyone as a discriminatory price rise. Your European customers do not blame their governments - they blame you. And no amount of rationalization or argument (and certainly not the casual contempt of not even bothering to keep us informed,) is going to change that. We feel, wrongly or rightly, that Linden Labs is discriminating against us, ripping us off, however you want to phrase it. We are not impressed.

Since this policy disadvantages your European customers by anything up to 25% over non-Europeans, many Europeans are now actively stating that they will sell up as soon as they can - they'll dump their land and scale back their business activites because they've had enough; some will move to offshore estates, others will simply leave. Some may be considering legal action against you. This can only have a hugely detrimental effect on all your other residents too (not to mention your corporate reputation and profitability.) If the tax really is liable (and there are seemingly credible claims in the the forums that this is at least very unclear, if not plain wrong,) then there were certainly better ways you could have handled its introduction (ANY other way would have been better!)

I suggest you amend the stated pricing on your website to comply with the legal requirements, and perhaps take just a little time to consider how you might go about treating your customers with a modicum of respect in future, before you're left with just the mass of 'no payment info' cold accounts. Those millions of residents on the login screen look good, but how many of them actually contribute to social or economic growth in SL?

yours sincerely,

psimagus Hax


PS: I might also suggest (though with no real hope,) that you provide some sort of contact system to handle communications from your customers that don't fall under the support ticket scheme (and aren't limited to a few dozen words maximum.)
There are occasions when your customers legitimately need to contact you, that are not covered by:

* You are getting an error message that states you cannot log in from your location
* Your account has been disabled and you need it reactivated
* You need to report a region being offline
* You are an estate manager and need to request a rollback
* You need to request a LindeX Tier Review