Another disturbing VAT question that hopefully can be answered

I was pondering today on the whole implications of this new VAT regime, it suddenly dawned on me that this has wider implications than just land issues which many people have been focusing on. Could any knowledgeable SL'ers clarify the following questions.

1) My 1st question : Am i led to believe that any Europeans wanting to introduce more money into the game i.e purchasing Lindens via their credit cards are going to have to pay and additional 17.5-25% VAT on top of the existing exchange rate conversion ?

If that answer is "Yes" it has serious implications on the business community in terms of sales as well as any Land purchase/rental ones. On a side note, i have noticed a 40-50% drop of in sales since the VAT announcement.............a coincidence? Bear in mind Europeans form the single largest community on SL (40%+)


2) Reading between the lines, it seems anything that Euros purchase from Linden Labs attracts a VAT charge. Would this also apply to Texture Upload fees (10 L) as that goes directly into SL Coffers too. Again if the answer is "yes".....surely this is a form of double taxation as you pay VAT for the Lindens purchased to pay for these uploads


3) Same as above - but this time for Classified Adverts. A top Euro skin designer wanting to place a 100k advert ends up pay around 120K ?


4) same as above- for the formation of Groups (100 L)....costing instead 120 L

Surely questions 2) to 4) would be a form of double taxation......or are all in game services non-vatable?


Anyway just the impact of Question 1 (if "Yes" is enough to knock the existing economy for six! The other points are just semantics and probably would have very little impact anyway other than make Europeans Content providers incur additional costs.

Resident to Resident transactions, including Lindex purchases, are not included. The topic has been discussed a bit here:

/327/25/213478/1.html

Please note, when you buy from the Lindex, you are buying from other Residents...LL only facilitates the transfer, they don't supply the funds.

It also appears that anything paid to LL in Linden dollars is exempt, including the items you mentioned. The VAT info page only lists the following as taxable:

* Premium account registration
* Purchases from the Land Store
* Land use fees (tier)
* Private Region fees
* Land auctions

http://secondlife.com/corporate/vat.php

Q1 Answer No
Q2 Answer No
Q3 Answer No
Q4 Answer No

This is based on my reading of the terms and conditions on my account page as to what is Vatable:

Premium account registration
Purchases from the Land Store
Land use fees (tier)
Private Region fees
Land auctions

Lindens purchased are not Vatable.

The other conclusion I would come to and I am no means professional so just my opinion,
Linden Dollars are a fictituos currency or Virtual money. Therefore they have no existence in RL economy and cannot qualify for VAT. All of the above are paid for in U$ dollars and therefore would be subject to VAT is supplied to and or purchased by Europeans.

No, the only thing LL can (but doesn't currently seem to plan to) add VAT for is the 30 cents on every L$ buy order and the 3.5% fee on L$ sell orders.

The somewhat open question is whether businesses in-world are required to charge and pass on VAT for their EU customers. L$ is only play money as long as it stays in SL, but for most businesses the cycle is U$ to L$ and back to US$ so I think the fact that we're paying one another in L$ and not "real" currency is really not relevant (unless you never ever cash out, even to pay tier).

Texture uploads, classifieds, group creation, the L$30 places fee, etc are all economic sinks. At no point do those L$ ever get converted back into real money, they just go through a virtual shredder and get taken out of circulation so (personally and I'm probably clueless so whatever my opinion is worth) no, VAT would never apply to a sink since there's never real money involved.

The only sane way to deal with SL transactions from a RL accounting point of view is to treat SL as a closed black box.
One buys from the black box using hard currency - Purchases with VAT implications
One gets hard currency back from the black box - Revenue with Corporation Tax implications.

What goes on inside the closed black box is a barter system that uses vouchers, with no implications for VAT or Corporation Tax.

I really don't see any difference between
- a purchase from the box that results in Linden vouchers being made available for barter within the box
- a purchase from the box that results in server space aka land being made available for barter within the box

'Land' is SL is no more an asset than is a pile of Lindens. Read the TOS. Both 'land' and Lindens could go poof at a moments notice. We have title to none of it.
The whole thing runs on trust. LOL! Someone explain that to LL!


There has to be a financial interface between the virtual world and the real world.
The only sane place for that interface is the point at which RL hard currency changes hands.



This was a long way of saying that it appears entirely logical to me that VAT also applies to purchases of L$.

Put it this way:

I buy a sim at auction in US$ - and I have to pay VAT on the purchase price.

I buy a sim inworld in L$ - and I don't have to pay VAT on my purchase of L$ used to buy the sim ????


If that's so then my best way of buying a sim is to buy it inworld from a non-EU avatar.
There's 17.5% of the purchase price available to split some way in order to give him a markup and to give me a saving.
I don't think that the VAT authorities would take to that idea favourably.

Thanks for the replies..........i'm majorly relieved that the answers of questions from 1) to 4) were NO! Well, i guess i must be just having a bad sales weekend!