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

Hm. Fair enough for those, then - although that doesn't cover the *other* EU countries - but that still leaves open a fairly large number of transactions whose status is in doubt.

For one example, I sell transcription and proofreading services in RL, and plan to sell them in SL also; I'd have to wonder what the status of those would be, inasmuch as it seems odd that it's VATable if done using my current transcription playback software and Word, but non-VATable if done using voice chat and a notecard. And then there are some scripted projects on my dev list that call out to an external web server, which calls into question the entirely... and then there is the issue of things like sim building, etc., which might seem to be VATable if paid for with EUR/US$ directly, but not if paid for with L$, even though it's the exact same transaction conducted through an intermediary.

Hell, that ruling might even allow for some ingenious person to make tidy money by setting up a via-SL "transaction arranger" service to scrub the VAT off any arbitrary EU-US transaction, depending on what exactly the definition of "transaction" is...

I expect this ruling to change as soon as it becomes fiscally significant, I really do.

Well, you can get the law in question from the EU's own web site at ( http://europa.eu/scadplus/leg/en/lvb/l31044.htm ), a summary of the relevant Directive:



Good enough?

Indeed and here is another one for you, if you were to sell me your services via email, that's VAT rated, if you were to publish it as a physical book, that's not VAT rated.

It's a mess and a can of worms.

LOL. Thats why we didnt like this EU where the paupers want the moneys from the rich.

This edict talks about "In the interests of the proper functioning of the internal market, such distortions should be eliminated and new harmonised rules introduced for this type of activity. Action should be taken to ensure, in particular, that such services where effected for consideration and consumed by customers established in the Community are taxed in the Community and are not taxed if consumed outside the Community."

Im shure if the EU doesnt exists the market is lesser distorted and all countrys around do better financial jobs as when some lazy parlamentarians sleep well in Brussel and serve for their lobbyists and invent such tutored laws. My mindset is that the government has to serve to us and not that we pay their fantasies and support things like unplanned idling like the EU it is. And LL has to proof that they maded what they have to made with the VAT.

EU players are now playing the game under dual laws EU VAT laws and US gaming laws

Last year due to US gaming laws we were prevented from gambling withing SL ..."then" we were hit with the VAT laws.

Now correct me if i am wrong here firstly we were playing the game under US laws =No gambling.
Then told we were playing the game under EU laws = Taxation

As a UK player along with many thousand others believe if we are being subjected to EU laws hence having to pay VAT on eveything we do within SL then we are allowed to play the game under our own laws hence Gambling on EU sims!!!!!!!! BUT we are not we are still subject to the US law of NO gambling

I would also like to add to my previous post when Linden Labs stopped all gaming in sl a large number of people pulled out this in turn caused the failure of Ginko banking

How many of you lost out on that fiasco and how many of you had your lindens turned into Bonds with WSE.....................Have you checked your account lately on there !!!!!!


I have been unable to log onto my account for the past 4 months and have not received any replies from the numerous emails i have sent to them

Different rules.

For most purposes, you're subject to the laws of wherever the servers are. That would be California, I believe.

The taxation, though, is a special exception, because the EU tends to think it can make laws for the entire world; while ordinarily it doesn't get away with it, in just *this* case, it can enforce it on companies that do business in the EU because it can lean on the intra-EU bit to get the foreign (in this case, US) bit to comply. (That's why Amazon.com will charge you VAT if you buy a book there from Europe, but Bob's Bookstore of Power Cable, Nebraska won't - because they can lean on the former, but not the latter.)

This is true, you were doing well until here.



This bit however is complete bunkum, there's no tax on books.

You're right (in the UK, and the distinction between exempt and zero-rated notwithstanding), I meant DVDs. My bad.

(Used to buy them from Amazon.com all the time back when I lived in the UK, and saved money doing it, up until the bloody EU directive came along.)

If you're in the UK is guess....

Keep in mind, VAT laws and tariffs are distinctly different from country to country.
Not just in VAT on books either. (6% VAT in Holland for example, but we even have VAT on bread here.)

If you want total Bizarre... In the construction industry in the UK and other EU VAT countries.. you can build a building and some parts of that building may be exempt from VAT. When you apply, it is presided over by a 'VAT Expert' who can declare the exemption, later to be overturned by another 'Expert' if they interpret the laws different. Now if you have not charged VAT to the client based on the previous ruling, you have to go back to your client and demand the back owed VAT. If they fail to pay it, and you have invoiced them without the VAT, it is you that becomes liable!!!

After you have paid it, it can take up to 18+ months to gain a new ruling through appeal to have your VAT payment returned, or worse, costs, if the new ruling stands. Talk about have their cake and everyones eleses to eat.. watch as they gorge themselves.

Value Added Tax was supposed to be only charged on Luxury goods.... I don't call electricity, water and gas to be a luxury. I don't know why they would charge VAT to be in SL, should I purchase LL land. If I make a 'profit' on it, then I pay taxes on declared income, when I withdraw the money into real currency.

I totally agree with this. I said in a very early blog on the subject that LL will regret that they apply VAT direct to the resident and not absorb it, that they will in the long run lose far more income by alienating much more than 25% of Europeans that won't 'pay to play' because the fees become excessive and they can see that it puts them at a disadvantage trading in SL. I really can't understand why LL couldn't see this coming especially when players outside of the US were increasing faster than their home market!

LL can't "absorb" it. They could if the VAT countries would accept lindens as payment. Either the people in those countries pay what their countries demand, or everyone in SL pays it in the form of higher fees.

Think about what it means. The price for everyone else has to go up in order to maintain the same level of profitability. Now you're talking much more than the 25% of Europeans who won't pay to play tiering down slightly or out of the game. It is not a charity, it's a business. People already complain about tier being too high. Want to make it even worse?

What I say I don't know if it's true or not, but I believe LL loses more money in the long run by charging VAT direct rather than absorbing it, so is your statement "LL can't "absorb" it" fact?

I would also like to receive a printed invoice from Linden Lab with their own VAT number clearly displayed, so I may present that to HM Customs and Excise when I file my three-monthly returns.

No it doesn't! If they make more money by having more European players than the cost of vat why would they have to increase fees, they would 'in theory' already made more profit?

If 75% of people have to pay more for 25% of the population, what do you think happens? Do you really think the 25%'s fees would cover the base charges plus VAT for all Europeans? I think not.

arrggghhhh you don't get it and I'm too tired to explain, time for bed.

Edit: also because I'm tired I may well be wrong in my logic, I'll give you that!

More European Players = more VAT to pay. LL isn't going to take a discount on its base fees, which is ultimately what you are asking them to do. It doesn't come from nowhere. So they would make a little more in base fees, holding rates static, because they would have more players, but how much of that would get eaten up by VAT? Those extra players are basically just there to pay VAT plus some extra, and may not make up the revenue needed to provide servers and employees to maintain them.

Yes your right, the amount of extra European players to compensate for the loss would have to be much higher than a few percent over 25%, probably more like 42.5% extra European players would be needed.

My advice is what can we do to prevent us to pay VAT - we all. It saves our moneys and Lindens moneys. If LL dont have to purge VAT our game would be cheaper over a certain time, all can be win at the end. I think for this special case of tax cause a vat specialist is needed!

Yes it's fact. Businesses can't magically "absorb" costs. Every cost that they have is paid for by their customers. Either the customers living in the VAT countries pay it or everyone does.

I don't hear anyone in the VAT countries demanding to have their prices raised when the US$ declines in value. 25% in VAT along with a big drop in the value of the dollar, and the Europeans still come out ahead.

Maybe SL should have different prices for every individual based on their local taxes, cost of living, and RL income. Would that make it fair?

I'm glad I dont have to pay VAT. "Americans" didnt like Great Britain taxing it, so they fought against it. If you're in Europe and you dont like VAT, then get involved with government and seek to have laws changed or leave the country and go somewhere that isn't so taxing.

While harsh, I have to say this is pretty much accurate. I think it's kind of wierd to blame an American company for following the bad laws on the books of your respective countries.