Increase stipend for EU users?

No, but LL has to have purchased a lot of VATable stuff to have anything to offset against the VAT it is collecting. That's why the size and scope of the Brighton office is interesting -- LL can use expenses generated there on which it is paying VAT to offset the amount it has to remit to the government there.

Unfortunately, EU legislation changed to apply VAT not to the point of SALE, but to the point of delivery - in other words, a company in the UK selling goods to a customer in the USA does not charge VAT, but a company in the USA selling goods to a customer in the EU is obliged to charge, collect and pass on the VAT.

Some background here:
http://www.theregister.co.uk/2001/12/14/europe_to_levy_tax/
http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_001222&propertyType=document

I see that - Its a case of the law being more favorable to Business than it is to consumers.

But what im saying is the sucess of European Sales LL has had - probably has very little to do with the Brighton office.

Its not the traditional local sales office concept.

The Brighton office really doesnt serve much of a purpose from what I can see.

Perhaps they were hoping it would help get large European Corporations involved in Second Life.

Victoria,

I think the business in the UK would be totally separate to that of the US, I am sure they cannot combine the 2 VAT issues unless they billed in pounds sterling from the UK to the UK members and Europeans members alike.

So, the US setup would have its own set of accounts under US laws etc and the UK office its own under UK laws.

Well we're subsidising something if all of the VAT collected isn't going to government.

Oh? So LL is liable for VAT collection and is registered as a VAT collector in the UK, and yet cannot offset local VAT is pays??

Surely that isnt the case.

Which you do for every single non-EU owned business co-located in the EU.

They are based in the US. From what I can tell, the UK office is for outsourced customer support and billing services with a Linden Research, Inc. employed as a supervisor for which they are still soliciting according to their employment web pages.

They get their Purchase VAT refunds through a 13th Directive procedure.
This is different to a normal VAT return in which the Purchase VAT may be netted against the Sales VAT for the payment to the tax authority.

Okay, mostly based in the US, my bad. If they were entirely US, they'd be able to get away without VAT as there would be no way to catch them. (That's how things were before a few months ago.)

http://lindenlab.com/jobs/vip.php

According to this, they were/are looking for a variety of people to work in Brighton. We know the payments section moved there, I would guess that programmers are also empolyed.

The point is moot for LL once they opened an office in the EU. But the EU can write anything they want and give any opinion they wish, it still would not have any standing on a US company with operations only in the US. Now if that company later hoped to expand into the EU, they may find the EU tax man very happy to see them do so.

I don't think it's just the opinion of the EU, it's part of its legislation that ALL companies must adhere to, regardless of business location!

http://www.internetnews.com/ec-news/article.php/2194111
http://pro.imdb.com/help/show_leaf?proeuvat

If it wasn't then surely US companies (not just LL) wouldn't charge it?

Yes it's part of EU legislation, but how does the EU enforce it against a company that has no presence in the EU? I very much doubt if US courts would consider themselves to have jurisdiction if the EU attempted to sue for unpaid VAT in the US.

Of course the EU could put pressure on the US government to put pressure on companies in the US, but I doubt if they'd get anywhere.

The fact that so many US companies do charge VAT to EU customers nowadays would indicate that some pressure must have been applied at some point.

The fact that this thread exists would indicate that some pressure must have been brought to bear on LL to charge VAT (regardless of its UK office).

Unless of course, those companies aren't actually charging VAT at all, but have increased prices for EU customers and are keeping the profit!

Not all US companies charge it. (In fact I'd say very few do.) The EU cannot force them to charge it. The US is not a part of the EU and US citizens don't vote for EU MEPs so why should their businesses be answerable to them?

All the EU can do is initiate a trade war if US's businesses don't comply, but I'd hazard a guess they don't want large amounts of attention drawn to this Directive so they'd opt not to do that.

I don't see anything in those links you posted suggesting a large proportion of US based internet businesses are complying with this directive.

I would suggest a minority are complying. Just the big names like AOL and GoDaddy, probably to avoid getting sucked into a public relations nightmare if shit starts flying.

So why the b***dy hell have LL started to charge VAT? Why does IMDB charge VAT?
In my experience most US companies DO charge VAT. I'm not sure if it's quite as easy as "EU laws don't apply". I can't quite believe that LL needs an office in Brighton so badly to make it go through the whole trouble and expense of collecting VAT.

More information:
http://discuss.fogcreek.com/askjoel/default.asp?cmd=show&ixPost=4361&ixReplies=26
https://author.tucows.com/article.php?sid=&account_id=&id=495

But are the majority of US firms explicitly refusing to comply, or is it that they just don't know/ or don't invisage any EU sales?

In my experience, most US companies that are based *only* on US soil, do *not* charge VAT.

LL are no longer based _only_ on US soil.
iMDB is owned by Amazon, a company that has offices throughout the EU.

I currently have recurring annual contracts with three different US companies providing domain name services and webhosting. They don't charge me VAT. Guess what? None of them have offices outside the USA.

It really is. Why is that such a difficult concept? The EU has no business expecting non-EU companies to collect tax for them. They have no authority. No jurisdiction in those countries. If businesses want to stick two fingers up to them, they're quite welcome to do it, and there's very little they can do.

Just imagine if every government in the world implemented a VAT directive like the EU's. Internet trading would become impossible.

That's the underlying issue.

The EU has no jurisdiction to enforce its own fiscal laws outside its boundaries -- good luck getting a US court to enforce European tax laws. But, if companies that are based outside the EU have a presence *within* the EU, then enforcement is easy because the company is legally present. So any company that is present in the EU should comply because they can have it enforced against them in Europe. Hence the situation LL finds itself in.

(Some) Europeans will complain and say "well then why are we subject to USA laws on gambling"? The answer, again, is jurisdiction. The servers for SL are located in CA and TX. It is 100% clear that both of these states and the US federal government have jurisdiction over *anything* taking place on these servers. That's why US law on gambling applies there. When you play SL, you are playing *in* the US, because everything happening is taking place on a server in the US, and you are merely using your local computer wherever you are in the world to *look* at what is happening on the servers in the US.

But let's say you are playing slots at slotsRus.ru, hosted in Russia. A US based credit card company would still be forbidden to pay them. It's bigger than just SL. The UIGEA is pretty sweeping. Your CC company had better not be based in the US if you want to gamble.

Well that would be one way to require non EU companies to pay the VAT.

They could just stop EU based credit cards from making payments to companies that dont pay the VAT.

You think Visa and Mastercard are going to go for that one? Not bloody likely

If its the LAW they wont have a choice. Kind of like why SL cant bring back gambling no matter where they were to move to.