Increase stipend for EU users?

Exactly, which is why the Brighton Office is making more sense from a business point of view.

This doesnt make a lot of sense. Why do they get to write off what they buy?

So there are more Island square meters than Mainland?

But Nibb, any European that owns Islands and uses them for any form of business, ie: renting land to SL users etc, then they themselves should be VAT registered, even if they are under the VAT threshold in their Country, they can still apply voluntarily.

The system is netting. Its the whole idea behind a VAT. You only have to remit "net" VAT to the government if you are a business who is liable to collect VAT on your own sales.

It's value added, they've added value to it...or something like that! Anyway, that's how it works, they don't pass on our 17.5% on each transaction, they get a tax bill and it's worked out on the basis of:

Output Tax minus Input Tax.

Where output tax is what they collect and input tax is what they paid in the chain of supply.

But won't they have spent the additional 100k on taxes so they break even? I'm sorry if that's an ignorant question. I'm American so I'm not familiar with the VAT tax like the Europeans here are, and I'm trying to understand it. Are you saying that if they buy, say a bunch of servers in the EU and pay 100k in VAT on those purchases, then turn around and sell services or goods or whatever in the EU and have to collect 1mil in VAT, that they only have to pay the difference of 900k? The Europeans here keep saying it's not a tax on them, it's a tax on businesses who do business with them, but in the scenario above, LL takes a double hit. they owe VAT for doing business with a EU vendor and they owe VAT for selling services to EU consumers. Which is it?

At any rate, Bradley is right. Turning this into an argument about Europe being better than the US, no wait, the US is better than Europe, etc., is not helping anything. It divides a group of people who generally get along quite well. We're all proud of our homelands, and we all have good reasons to be. Now stop picking at each other.

Europeans - this is your tax. You should pay it. That said, You have every right to complain. LL's implementation of the tax was insane. It has to be some of the worst customer service I have ever seen. They owed you a heads up or a ramped up implementation or something. The way they did it was pure grade-A stupid. I wish I could offer you something other than my sympathies and I hope you'll support us when they do something equally stupid and untrustworthy to us in the US (I don't know what, but it's bound to happen eventually - maybe issue us all 1099s for transactions in SL and screw up our income taxes or something).

Americans - yes, it's their tax, but they had no way of anticipating this hit and every reason to believe it was built into the price they were paying. Look at it from their perspective. Everything they buy is VAT inclusive, so they don't have any reason to expect this hit without warning. You'd be screaming like stuck pigs if it happened to you, too.

There - dispute resolved. The end. Can we all just get back to answering questions and goofing on each other now? Life was much more fun back then.

True, but in practice you'd need a fairly large number of islands to be able to do that. It's going to hit the smaller places but not the larger ones. I'm not sure if receiving rent in $L even counts as a proper business. Once it goes through the lindex, it's all money earned in the end

So companies in the UK can do the same with the VAT they pay LL?

No. They *collect* VAT from people they sell things to, and *pay* VAT to people they buy things from. You net what you have paid to others against what you have collected from others, to arrive at a net amount you remit to the government. It's designed that way to tax your "added value" -- ie the additional amount you make by selling your goods over what you pay for the inputs. As a practical matter, it works out to be a consumption tax, because the everyday consumer is not VAT registered, and cannot offset their VAT payments against VAT they collect (because they don't collect any), so their VAT payments are borne 100% by them.

The issue is that if your "business" only does business in Lindens, then it cannot register as a VAT payer because Linden transactions are exempt. So they are treated as a consumer, and cannot net VAT ... ie, they bear the tax burden 100%.

Companies in the UK would have to prove that any VAT paid to LL was done in terms of business and as L$ transactions are apparently not subject to VAT, good luck to them proving it's a legitimate claim.

I just wonder if Linden Research, Inc. is going to put into action Article 26c of the EC Sixth Directive, added by Article 3 of the VAT on E-Commerce Directive (Co.Dir.2002/38/EC) or not. That is the BIG question!

Okay

then this is a case of the tax system benifiting business at the expense of the consumer. Its not a case of EU residents subsidizing American residents.

The same can be said for any business at all in the EU thats owned by a non-EU concern.

I imagine that the Brighton Office costs LL a great deal more than it "earns" so in the scheme of things I dont see the real issue on that.

I was refering to Tier fees and LindenX fees

the same fees LL will be charging the VAT on.

Hey I can assure you I've learnt more about VAT in the last week than I did in the previous 37 years

Input taxes can be reclaimed, so in my example LL's total VAT bill would be £900,000.

^^ Yeah that.

Remember people, the more money printed to help reduce our flods of tears, the less your $Ls are worth.

I'm from the UK. I think it's a bad idea.

Lobby your MP, MEP, write to the papers, sign a petition, whatever.

Just making an observant point.

For those of you comparing LL to other online companies that you purchase RL goods for, like iTunes, or something like that, you DO NOT pay what we pay.

There are backend programs that go by your billing addresses on the cards you use to sign up, or the gift cards purchase locations. It automatically sets up for that.

Let me (as an RL business owner) make something PERFECTLY clear. The US government has tax programs in place where if your billing address is in one state and the company you purchase from is in another, then they DO NOT have to pay ANY taxes. Period.

However, if you are inside the state, you pay state taxes, if you are under a county and they have taxes, you add that on top and city limits impose an additional tax. (This means taxes are different for rural and suburban in the same state and across state lines.) This DOES NOT cover international trade. My business operates outside city limits. Therefore I'm only obliged to charge county taxes in my county, and state taxes inside my state, but someone across the country pays NOTHING.

This is why you don't see Americans paying taxes on the goods from LL. Because the back end and collection for California residents is rather small compared to entire COUNTRIES, they can eat those costs. The singular tax alone is more than triple, at the very least and at least 4 times as high as an in state tax in California would be, PER PERSON.

HOWEVER, when I take my cruises to the Caribbean, anything that isn't under that countries laws to be duty free, I have to pay YOUR taxes on MY US soil (Example would be shopping districts on US islands and territories) when I purchase it if that company isn't under exemption. So don't sit there and tell me that this is unfair based on the dirt underneath whomever.

And don't kid yourself. No matter how much you want to believe, the majority of the players are not under VAT. I know you want to use it to make a statement, but the last media figures were that Americans were still the largest country by account playing (logging on, whatever). Just because YOU see more people outside of the US, doesn't mean we aren't there (cue spooky music).

Really, seriously, get out more. Read up on the actual laws. Read up on what people really DO have to pay. A lot of the statements made here are in ignorance or are totally and completely false. I don't mind if you want to fight for it, but you can't fight for it when you don't know the facts. 1000 people who have no idea are not better than 10 who do.

You can't register for VAT if all transactions are VAT exempt.

Company (A)
sells product which they want £100.00 (They are VAT Registered)

They have to sell that product plus VAT =£117.50. (17.5% in Uk)

They keep the £100.00 and pay the Government £17.50 (in theory)

But

Company (A)
buys Server from Company (B)
Server Costs £200.00 plus VAT=£235.00

Company (A)
then Submits monthly or Quartely to HM Customs their VAT return.

Company (A)

Input Sales VAT
100.00 17.50

Output Sales
200.00 35.00

HM Customs will now pay back Company (A) £17.50 because they paid more for Output than Input.

If the Input was more than output which in most cases it is, then Company (A) would pay HM Customs back money every month.

So basically, it is Input minus Output.

Well not exactly. The problem here is that people are "doing business" in SL in a currency that is not VATable, but paying LL in a currency that *is* VATable. So they can't offset collect VAT from their sales in SL to offset against the VAT they pay to LL. It seems like that can't be changed without making the Linden a real currency, and that seems to raise a host of problems.

Outside of SL, it would work fine because to the extent you have EU costs, at least some of those will have involved the payment of VAT, and you can use that to offset your liability to remit the VAT you have collected on your own sales.



This is an interesting question. If 1/2 of SL is from Europe, the VAT amount on islands and tier must be a LOT, I would think. I wonder how big the Brighton office is. Does anyone know?

There’s a point missing here and in many of the posts. The only point of sale for SL is in the state of California in the USA. Even the office LL has in EU is only a processing center for sales conducted from in the USA. The sale is under that jurisdiction and falls under the tax methods of that location. Prior to opening the office in the EU, LL could have just ignored the VAT issue as no EU tax man has standing in the USA. But LL did open an office and as such now has to collect this sales tax. Yep as a US corporation LL will most likely view it as sales tax no matter what others care to call it because they are a US corporation. Operating from that view they will likely pass the cost directly to the one purchasing there product and causing the tax liability as they would any other tax in the USA. No matter what people are willing to pay, if it does not cover the bills plus what the company considers a worthwhile profit, the price some on is willing to pay in any geographic location is irrelevant.

Since they're not "non-EU" anymore after moving, I don't think it applies.

Pure and simple, VAT is a sales tax.
Value Added Tax - added to the price of (some but not all) goods at the point of sale.

Only Companies and individuals who are "VAT Registered" are allowed to charge VAT on goods (and afaik all companies over a certain turnover HAVE to be VAT registered)

Only companies and individuals who are "VAT Registered" can reclaim VAT on their business expenses (afaik).

I think LL introduced this tax in its typically half-a**ed way - not every EU resident has yet got the email, and sending it out after it started applying VAT is unforgivable.

Having said that, as an EU resident, I understand that LL have to charge the VAT to comply with the law - It's not LL's fault, but as some here have said, it's a blanket sales tax that should never be applied to "digitised" goods at all. That's government greed for you.

LL should just remember the old saying, "It ain't what you do, it's the way that you do it".

If it had handled this issue better, then I'm sure there wouldn't have been such an uproar and the SL economy wouldn't be as damaged as it could be due to the sudden collection of VAT.

Got it - Perfect explanation. Thanks Victorria!

But the Brighton office didnt get all this European business. They're seperate things.