VAT: Discussion w/Zee Linden July 31-Aug 03 2008

The current anonymity of residents creates an issue for registered EU business which do L$ transactions in world.

EU VAT laws enforces any business to charge VAT to any other EU business or EU resident. In SL this is currently impossible to do, as businesses have no idea what the RL location of an SL account holder is.

Currently EU businesses which do any form of transactions are dealing with this issue in different ways:

1. Some businesses see any L$ transaction as a non-monetary transaction, which is not liable to VAT charges. The only true 'customer'/'partner' is LL as they are eventually the ones being charged and paying real US$. As LL is a US based company, any payments to any EU based company are VAT exempt.

2. Some businesses only see L$ sales (Lindex) as 'true' transactions which require a VAT surcharge. As LL doesn't offer any options to charge VAT through Lindex, they automatically end up in option 3.

3. As 'bartering' in most EU countries is seen as VAT liable. Some businesses make an estimate of the amount of VAT they should charge, based on SL statistics, which they declare. This means though, that non EU customers are partly paying the VAT charges of the EU residents. Also it negatively impacts the EU business margin.

The only party with the right data to make valid VAT charges possible is LL.

What the 'right' way of dealing with this situation is, is mostly dependent on the specific role of LL and the definition of the L$.
If the L$ accounts are to be seen as a 'credit system'. The specific EU businesses are liable to charge VAT over any EU resident transaction.
In this situation, LL is required to provide these parties with all the data and information to be able to charge VAT, basically destroying a part of the privacy of residents.

If the L$ is nothing more than a system for LL to be the middle man between SL resident customers and sellers. This means LL is the only 'real' customer and L$ sales and US$ cashouts are VAT exempt.
The latter situation does mean that LL would be required to charge some form of VAT over L$ purchases of EU residents.

I would like to know any current thoughts of LL on the need and the possibilities of enabling a more clear system for any EU business to comply with EU law and charge VAT to those persons who are VAT liable.

Whilst non-EU business are able to register for VAT, they are not required to do so. The EU cannot make it a requirement. No non-EU company needs to register for VAT in order for them to provide goods and services to customers in the EU. The *only* reason that LL is required to register for VAT is because they have offices in the EU - one of which is the billing dept in Gateshead. Why not just say that, and have done with it, Zee. I wonder if it would make a difference if the billing dept. was taken back to the U.S. That might be the only reason why EU residents have been thrown to the wolves by LL.

And what's all this nonsense about not being able to afford to absord the VAT any more? It's clearly untrue. Charging VAT caused a lot of people to get rid of tier fees, and a lot more not to get involved in tier fees. If you continued to absorb the VAT, you have more nett income than you do.

I'm sorry, but LL's decision about VAT was effectively a betrayal of many of its customers, and continuing to collect it is a continued betrayal. There is no financial need for LL not to absorb it and make SL a level playing field for everyone. Failure to do that shows LL's lack of care for any of its customers. It just happens to be EU customers on this occasion.

Its about 3 months now that i try to accept my alt's VAT number. Tried life chat several times, and never had any response

This is a cop out.
As stated in my post above. It is impossible in the current situation for any EU business to correctly assess VAT. Only LL has the required data.

Customers who pay tier fees and membership fees from their L$ balance should not be charged VAT because the money was never legal tender in the real world.

What's next? income tax? corporation tax?

Oh no that must be Sarbanes Oxley for virtual business owners....

my main ava has no probs with her VAT number, why as my alt as to pay 21% more for a premium account. I would love to hv an explanation or that alt will hv to downgrade
Katt or Zee, help pls

Most countries have clear rules that any form of transaction or payment for an item of value. (It doesn't matter with what, coins, L$, cows etc.) is liable to taxes and VAT. (Bartering regulations)
So the fact if payments are done in legal tender actually doesn't make much difference.

So US companies dont charge and US residents dont pay sales tax for online services?

Gomez

There is no United States sales tax. And many states levy the tax for items purchased outside the state come tax time.

But the bottom line is that this is a straw man in the VAT discussion. You don't pay any American sales taxes on your purchases in LL.

Again I see a lot of people complaining about having to pay VAT.

It's good to lay the blame by the right people. This is NOT LL's doing. It's EU law.
VAT is just like any other tax EU citizens pay. And these taxes are then used to pay for the governments expenses.

If you don't want to pay VAT, don't complain to LL. Either move to a non EU country (and lose all the benefits), or start a real business and write it off as business costs.

There is one valid argument made: Why can't LL simply absorb the VAT costs, like they did before? VAT charges have to be paid though.
If LL doesn't charge them to you individually, all non-EU SL residents are going to pay your VAT, without actually getting any of the benefits.

You are allowed to disagree with how those VAT charges are spent, but I suggest 'complaining' next time you vote in this case

Living in the most expensive country regarding VAT where everything in SL is 25% more expensive for me, I want to add that a majority of the people here are against EU and have never accepted what the lunitics in Brussels are up to. But the government is corrupted enough to run over what people will. The power of money indeed.
So don't give the good old "You're and EU citizen" thing, you who does so, thank you.

As for the tax issue in general, in this country it is perfectly ok to have an income from a hobby (i.e. non-professional) work up to quite a good amount without paying taxes.

LL should really make a pricelist adjusted to fit competitive to the US for us in EU recalculated with the exchange rates and taxes in mind. Let it be the same expensiveness for us all, no matter where we live. All else is just pure discrimination and should be punishable in international courts. Since when are discrimination legal?

As is now, LL are just doing that in making the EU citizens thrown out of the estate business de facto. (Then it's always nice to be able to blame the idiots in Brussels for it.)

Why has an EU avatar that buys a sim from and pays tier to an US private estate owner/company NOT have to pay VAT and when he does the same from Linden Labs he HAS to pay VAT ??

The EU avatar buys the same service from both an US person/company.

If that same EU avatar buys other things in SL he does not have to pay VAT ?
Why only for land services and not for other products/services ?

I do understand that it must be difficult for LL to know all the different VAT's in Europe, goes from 17.5 upto 25%, and can imagine that with all the changes going on in europe abt VAT it must be hard to follow, f.i. in portugal VAT is lowering, but i hv to pay VAT for every piece of pie, or an apple that i buy in Belgium. When i download a program directly from a site, like e.g. e-bay there is no problem, VAT is accepted, and my accountant is happy, because its deductable.
Only with LL i hv prob, which i dont understand

That is the crux of it, Damanios. It is unfortunate, but asking everyone else to subsidize the cost of VAT isn't necessarily fair either. VAT simply doesn't contemplate an economy like SL's, and you have to be serious about business in order to make it work.

Yeah, so bl**dy like the other lobbyists, "just start a business".
How easy is that when you already struggles for the existance thanks to low payments and high taxes? SL is supposed to be a place to relax and explore, not have to be another business doing things with business place.

/me throws Damanios in the closest wall

There are thresholds involved, I doubt many inworld estate owners are doing enough business to cross those financial thresholds, and if they are charging in Linden dollars most European tax authorities don't recognise the service as being subject to VAT anyway.

because payments between private persons are VAT free even in RL in EU.
As soon as a company is involved it starts to get nasty.

You're most correct about complaining to the right people but the business angle doesn't work as Linden dollar transactions are generally exempt from VAT charges, there's nothing to claim back so you can't really offset VAT that way.

Considering the decline of the dollar versus the euro over the last year and a half, do you really want them to do that?

And everyone else subsidizing your play is not discrimination? As far as LL is concerned, the profit per player that buys tier is equal. The amount LL makes off you is the same as it makes off anyone else. The fact that your government imposes an extra burden is a shame, but it is not LL's fault and no one else is responsible for your tax.

Hi

After being one of those hit by the VAT rules now in effect on SL i would like to know exactly when as a european i started paying tax on money.

VAT is for goods purchased as I innitially pay for the service at the onset how come I am then subject again to further charges of VAT on the same product.

Second Life is a product which I pay a fee for use of a Premium account

Any transactions conducted in SL are then also subject to VAT

I pay for my Premium account i pay VAT
I purchase land I pay VAT
I buy Lindens I am subject to VAT
I sell Lindens i am subject to VAT
VAT is a set rate of 17.5%
after paying for all four my vat is not 17.5% but a staggering 70%

I am now looking at dropping my premium account

???

Let me be clear. I don't agree with everything VAT and taxes and the way the EU is run. I do hate the fact that everything here is more expensive than in most other countries.

But I see it as completely useless to blame this one SL or LL. The only thing i could blame them for is to not anticipate this when they moved to an EU based billing model.

But i'll be nice, and change it into something that LL CAN be blamed for:

Why are all accounts in a (dropping) US$ coin, while the LL company runs in UK pound sterling?
I'm an EU resident and would like my account balance to be in UK pounds or euros please, and not bound to the US$, while the actual balance in LL accounts is in the much stabler pound... making profit on the 1000s of 'US$' in those accounts.

Esp if this specific change is causing the sudden need for EU residents to pay VAT.

hmmm... please see my (long) first post in this thread especially on this issue...
It's actually not as clear cut as you state.

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Quote:
Originally Posted by Damanios Thetan
start a real business and write it off as business costs.

damanios i hv a rl business, and want both my main ava and alt to hv there VAT nbr accepted, only my alt has probs. Life chat is very gentle but nothing is done, even not a no reply email fm them

But I have to pay VAT as a european estate owner. Even if an american avatar buys a sim from me i even pay vat on the monthly tier.