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

Even simpler than that...if I printed my own currency, I wouldn't accept payment in it. Only governments are that dumb...everyone else knows what paper is really worth.

Then give the customer a choice:

Either billed in US$ from the account or with L$ at a rate of 280 for example.
They already use this rate for certain purposes.

Then Europeans could choose what they want and LL wouldn't lose anything.

Btw: I can "buy" parcels in L$ auctions at LL and am not charged VAT, why shouldn't this be possible for tier fees? In both cases I buy something at LL directly.

As business owners you are legaly allowed to open and have your business anywhere you like, make a company in Bali, US, Bahamas, etc and register from there it is 100% legal, then bring in your profits into your country and declare it as is stated by YOUR country law and pay any taxes you are responsible for, millions of business owners do this world wide. This is not a Linden fault or problem, it is YOUR own contries problem, when you relieze that you can stop running around in circle anf find a solution to help you best, Lindens cannot help you and are not at fault.

PS if you need any help message me.

Now we're 12 pages in and still no Linden response of any substance. In what dictionary should I look to find the Linden's definition of "Discussion"?

DanielRavenNest Ni

Both are correct. We accrued the expense of VAT, but we have not yet paid it. The expense grew very rapidly & we began collecting it from customers to stop the growth of the liabiliey. We are in the process of paying the historical VAT liability now.

Sorry sir, I have been reading but I did not have time to respond until now. Thanks for your patience.

I've been casually monitoring this thread, not because VAT impacts me personally, but because I was keen on seeing more involvement from Linden in 2-way discussion with residents over & above office hours and limited blog posts.

While there's a littany of complaints around the implementation of VAT taxes, I think for many residents, its not the taxes themselves (which are inevitable), but the way in which this policy change was communicated.

I'm still trying to keep an open mind, and hold off on reserving judgement - but it appears that some of these same communication challenges are continuing right now. I understand it can be extremely busy around the office with meetings & such... but it seems that a blog post announcing a 2-way discussion with Linden on these forums, on this issue - was a bit premature.

If Linden is unavailable for comment over the weekend, and actual Linden involvement in this discussion wont begin until Monday at its earliest, this thread will likely devolve into unproductive ugliness before Katt or Zee can chime in with any substance. Its a shame Catherine couldn't have held off on making this announcement until the appropriate Liasons were poised & ready to participate in the discussion.

Perhaps my expectations were set too high - but when Catherine blogged about "a "live discussion” with us, in the Forums, where we’ll read along and answer questions, for the next 3 days" led me to assume that Lindens would be active participants in the entire discussion.

Ninja-Edited to add: Thanks for responding, Zee! You responded while I had this post in Edit mode

Its not yet clear whether or not we need to charge VAT for fees charged in world in Linden Dollars. Currently charges in Linden Dollars are small, if we charged for monthly recurring maintenance fees L$ charges could become significant.

Certainly if you buy land from another consumer, you are not obligated to pay VAT. I do not believe consumers are required to charge VAT for person to person sales. If you buy land from a business that is complying with the regulations, then they should either be charging or covering the VAT.

Linden Lab will charge sales and other indirect taxes like VAT where we we are required to as recommended by our tax and legal advisors. At present we are not aware of other governments that have regulations requiring us to collect taxes from our customers.

We believe that the downloadable PDF available in your account a page on Secondlife.com and having a UK VAT ID for a non-resident EU business is sufficient. If you are having trouble finding that downloadable PDF and our VAT ID, please contact support. I'm not exactly certain where to find that.

At present, we believe we are too small and do not have the resources to invest in lobbying and changing the minds of tax authorities.

I think so many posts in such a short succession means that either Zee had too much coffee today or that even Lindens need to pad their post count (7 posts for Zee total on the forums at the time of this wring) sometimes... Or more likely Zee is like me and his thoughts are so fragmented that he has to resort do doing tiny micro posts whenever an idea pops into his head.


Zee, are there hard and fast rules on what needs to be VAT taxed and what doesn't in relation to SL transactions or because the rules are broad and were never intended for a situation like Secondlife is this mainly just interpretation by your tax experts? If it's the latter then I can see how it can be confusing to the residents in VAT countries because it's already been established in the past 12 pages that you can go to 10 experts and get 10 totally seperate opinions that are all divergent.

I agree with Travis btw, LL could have done a much better job with communication and implementation of this. You obviously can't make everyone happy and people like to make LL out as the always bad guy (I'd say more fragmented then bad in most cases and in the worse case incompetent maybe) but if I may give a suggestion even though LL have made progress communication is a major failing point in LL.

At present we have one global price plan expressed in USD. Since we have implemented VAT in Q3 of 2007, because of the decline in the value of USD relative to EUR, our prices to European residents have declined by 12% partially offsetting the VAT charges.

Thanks Kittrannia for being a happy parcel owner! I'm sorry that the price of a full region is too high for you. We recently launched the discounted Open Space product for "light use" regions where a full sized low prim region is sufficient at 1/4 of the price. That has been a low enough price for many residents and the product has been extremely popular.

With regard to how much profit we make, overall we are marginally profitable as we continue to invest a significant amount in software development. Software development is a much larger cost than buying and maintaining servers. As a private company, that's all I can really say.

We collect and remit VAT according to what is colloquially known as the "VAT Special Scheme". Basically as a non-EU corporation, register in one country (in our case the UK because we have several employees there). Then we charge residents the VAT rate as specified by where they live. So unfortunately only Luxembourg residents can take advantage of their lower tax rate.

European residents are only paying VAT for the services they purchase from us according to the Special Scheme. EU residents would never have to pay sales taxes assessed by individual states in the US. There are no sales taxes charged by the US government as a whole.

Linden Lab is required to pay other forms of taxes in San Francisco and other locations in which we are domiciled, but these are not direct taxes that are passed on to residents. Rather - these are just a cost of doing business to Linden Lab just like paying rent and salaries.

Surely, if L$ are as claimed by the TOS a license and not a currency, then VAT shouldn't be due on inworld transfers of L$.

If on the other hand VAT is due on L$ transfers then surely L$ is a currency, and the Lindex a currency exchange. In which case VAT should not apply to the purchase of L$ (or at least only apply to any commision LL might charge for buying L$, not on the entire transaction!)

Matthew

I am not sure about this one...could you please submit your SL name and your Alt's SL name to support in a ticket and they will look into it?

Two corrections:

1. You do not pay VAT when you purchase Linden dollars
2. You do not multiply the 17.5% by the number of times you pay it to get 70%. You pay 17.5% on each transaction, and because multiplication is distributive over addition, its also 17.5% of the sum of what you paid, not 70%. http://en.wikipedia.org/wiki/Distributive_law

Currently, in terms of the UK, you do not. I was more interested in the effects of the economy as a whole, rather than whether you could, you clearly can charge tier this way.

Thanks we're trying to be responsive here.
At present we do not have anyone working on new features for our billing system as we are more focused on grid stability. Hopefully these features will be available in a new billing system at some point.

We send the VAT money to the UK quarterly including a schedule of which countries we collected the VAT for. I presume that under an EU agreement under the special scheme then the UK distributes the fund according to that schedule to your respective countries.

As crazy as it sounds to me and you and many others on this forum, the special scheme in the EU directive described on the Europa site requires non-resident EU companies to charge VAT of EU residents. As a good corporate citizen we strive to abide by the laws of the countries in which we operate and provide service to our customers.

On another question, its also unfortunate that in some countries in the EU that gambling is allowed, but because our servers are all in the US these residents cannot gamble. This is something we can fix and we're working on it. In the meantime, unfortunately no gambling.

If that would work we would do it. But unfortunately it wouldn't work.