VAT: Estate to be broken up, SIMS going cheap

Hi all,

The straw has finally broken the camel's back. As an Estate owner in SL I now cannot afford to compete with my US competitors, with an extra 19% German VAT on top. It was bad enough trying to compete with the US$100 differential with grandfathered tiers, but with an extra 19% on top, it is the road to ruin and is already draining my bank account.

So, the Estate is breaking up, and this owner is off for pastures new.

Some of the most popular private island sims are now up for sale and will go to the highest offer before 12noon PDT Monday.

So, if you want a private island sim, class 5, cheap, IM me in world. All offers over US$1000 per sim will be entertained, but, make sure you have the money available, and are prepared to exchange support tickets the same day.


Rock
Disillusioned, lagged, borked, Ruthed, and now, financially insecure

well that sucks hey.

if you're running a biz, you do know you can claim your VAT id and not pay it, right?

*shrug*

Wrong. If all your transactions are on VAT exempt supplies, you have nothing to claim back. You can't offset VAT that way.

Oh, yes you can. LL is a service originating outside my country, so its not VATable to other businesses. You supply your VAT number. Hence why LL has the form to do it.

I put mine in and I'm all squared away

Sorry about your troubles.

Seen this forum yet? : /114/1.html

Just an additional > I'm not claiming back anything. I'm only *not paying the VAT* on my premium account to LL at point of sale. (if I owned mainland or private estate, it would be the same there, too)

This has been the case for years on other ecommerce sites. Amazing the disinformation. If you have a business, do your taxes on your income. Declare what you do. If you're not doing that all along, then I understand I guess why some of you haven't done this.

Me, I've been doing 3d art and making a little cash from it in some capacity for years, so I declare what I do, declare what I make, and VAT on transactions originating outside the EU are not vatable to other EU business. Only EU customers. It's only B2B inside the country I am in. It's B2C for non-EU businesses selling to EU customers. (same goes for EU business selling to EU customers in a different member state - you claim your VAT ID too)

They did figure this stuff out, to even the playing field... otherwise, yeah, you wouldn't be able to compete internationally!

LL is not in Germany, so Rock should not be paying VAT on his business expenses. If he was a private customer - then yes he should be paying VAT. He should be giving LL his VAT id, if he has one. There's a form for it on the account page.

You're suggesting that those who are not VAT registered do not declare their income? There are plenty of small businesses in the UK who are not registered for VAT but still pay *income tax*.

know the feeling of having to do this rock as i`ve been there and stopped the transfer, gl with it all

No. I'm suggesting they not pay VAT on supplies that are not VATable.

Income tax is a totally different thing. I pay income tax on all my income. All of it is declared, as I stated before.

Now, if some of you are doing land barony and not declaring your income, and now faced with the decision of suddenly having to get a VAT id (which then sends a red flag to the tax office if you have not been declaring your income) or fold up, then I guess I see what is happening. But that is not the fault of LL charging VAT.

BTW - Rock is not in the UK. He's in Germany, so he says.

OK now I understand your point, but also understand there are many other reasons for someone who does declare to not want to get involved with VAT registration.



I understand that; I was just pointing out that in the UK it is possible, in fact very common, for someone to declare income yet not be registered for VAT, as I had understood you to believe that those not registering for VAT must not be declaring.

You're also liable to charge VAT to your customers and remit that to the taxman. Which actually works out to be more in total than if you weren't bat-registered at all. At least, it does if you are running at any kind of profit.

Sure, I understand that. But not LL's fault at all. Anyone could have seen it coming eventually, at least if you're doing business in Europe for any length of time.

Actually, I see the situation being a bit of a boon for the private island rental market, as Euro customers pull out of mainland and move into rentals that charge in Lindens. (and boy do I thank my lucky stars I pay for a rental on a private island!)

Pulling out when your business may actually take off due to changes in market conditions seems a bit odd to me.

Well I can only speak for myself: I never expected there to be a 17.5% hike at any point. I assumed that the charges already made either a) were VAT inclusive, or b) were not VATable.



For those who do not have to pay VAT, and to those who are registered for VAT, then yes, maybe it will be a boon. But many are not VAT registered, and do not have any intention of registering for VAT, and for good reason. For those, it is completely understandable. I'm not sure what you are missing?

yes, I do know that no way around that with the other things I do. Have to charge VAT. My business in RL is not entirely an SL business (it well predates SL), though the SL stuff does get rolled into it as it's also internet graphics/development/design.

/me wonders how many more camel's backs will be broken in the next month and what it means for the SL economy...

/me will survive some how...






Wanted: Rich old fart
Requirements: silent, unable to do anything, monthly budget of atleast L$150,000, no accounting expirience & to busy IRL to logon

Just to clarify. I do not have a rl business, I am a full-time employee. I am therfore not VAT registered and have no VAT number. My only 'business' is the one I have in SL, and to date I was happy about reporting any profits as part of my tax return, which to date has been zero profit, and I never intended my rental businesses to be a p&l driven enterprise, it was na dhas always has been a virtual home away from home for myself and my tenants. As we have only 12 rentals in each sim we enjoyed (there at least) a relatively lag-free sl.

As I said in my OP the 19% VAT was the straw that broke the camel's back. So what was the load the camel was carrying previously? The list is now quite enormous, but it inclued the total unreliability of the 'service'. In the UK we have a legal safeguard for consumers, where goods or services have to be 'of merchantable quality' and 'fit for purpose'. The SL service is neither of these. Virtually every day I see what LL euphemistically call 'issues', and whereas I used to look forward to the weekends, I now dread them, as the lag ensures that I am now a virtual prisoner on my sims, as any trip to the mainland to shop or club inevitably means lag-hell, crashes, or any one of the multitude of 'issues' that LL reports in their blog (not to mention all the ones they do report on).

I have had my sl freedoms continually eroded away by LL, as they bow to more and more pressure from the US government, and now even from the EU. I am told that it is MY responsibility to ensure that LL are kept blameless (all the ooh-aah about Mature sims, and the policing thereof), and while my sl rights are being eroded the service deteriorates, the costs go up, I am foorced into accepting new terms and conditions imposed unilaterally by LL or I am denied access to all my inworld assets and revenues, and while a US judge calls their TOS 'unconscientable'.

I have had land swooped by landbots, my assets plundered as a result of the activities of the Electric Sheep grid shepherd, the music streams stopped, gaming stopped, scripts crashing due to new 'updates' (who remembers all the teleporters failing?) and while I put up with all of this my money has reached LL on time, in full, with no excuses. can i say the same about their service to me, their side of the deal? The answer to that is a resounding NO.

The only reason I have stayed in SL has nothing to do with LL, it has everything to do with the wonderful people who I have met in SL. Therein lies LL's biggest achilles heel. Any world that is conceived and created by its residents can be recreated elsewhere, and it is an open secret that many people in Sl are just waiting for an alternative service to open elsewhere (anywhere, except the US), and I can foresee residents leaving in droves.

And while the latest straw is actually not of LL's origin, VAT, it is the way they handled it that is the issue for me. LL was bearing the cost of the VAT payments, but decided not to anymore. They openly admit in the blog that this will place the European sim owners at a disadvantage with the US sim owners, but they went ahead and decided to stop absorbibng the cost and pass it on to their European customers anyway. I could have been warned that this was the case, and that LL might decide to change their policies on this, but there was no forewarning whatsoever, and nothing in the TOS, and nothing was mentioned when I bought my last sims. This is deceit in my opinion.

So, my US$295 per month/sim, will no longer be going to LL, I have found an alternative.

I cannot tell what a relief this brings.

I shall maintain one sim only for my own private space, and support those who have made my stay memorable. My best wishes and regards to you all,

Rock

If you're from the UK, why are they charging you German VAT rates? Couldn't you at least get the rate according to your country of origin?

And you're very likely to get a very nasty bill. I'm sorry, but you're talking balderdash. Having a VAT id is not a get out of jail free card. You have to prove where have been business expenses and within SL, L$ transactions are VAT exempt.

Anyone following your advice is likely to get a poke in the eye.

He could be a resident, you pay tax according to the country you are a resident in, not the country you are from, in the EU. There's no other reason for being charged a German VAT rate.

But yes, this is one major reason we'll see European small land businesses fold - if they're not profitable, and not VAT registered, this can be the final straw that takes them out of the game. Overall though, I think we'll see a shift of average players in Europe paying for land rentals as opposed to paying in cash for mainland.

Which will hurt the mainland, but not necessarily your large established European land barons. I quite certain we won't see Otherland (Dana Bergson) leaving the game, for instance. (she's German based)

I can also see a situation of people who are paying via Paypal for land, those land barons having to charge VAT to their European customer accounts. So a shift to charging in Linden is probably inevitable.

You still don't get it.

Its called the reverse charge mechanism, and I would normally have to pay the VAT, and then reclaim it from the German tax office. Because I have to pay the VAT, not LL. It's done via a different assessment process.

As LL is not in Germany, I can't do that. That's why it exists.

I get it very well but you still need to be selling services where VAT applies to be able to offset your VAT. That's how it works.

It's the same as trying to claim back VAT for corporate hospitality, it's not going to happen. They'll pay VAT on hotel bills, but they won't pay for your food.

Exactly - this is just the problem I've been talking about elsewhere.

If your only business is in Second Life, you can't _get_ a VAT registration number, because a) transactions in Linden Dollars probably aren't going to be legally eligible to meet the requirement for you to collect real VAT from European customers, and b) even if they were, you have no way of finding out if the avatar you are selling to is European or not.

Thank you for writing all up all of those thoughts in an organized way. That was a worthwhile read.