As you can see, Linden Lab has decided to try and provide some helpful information about the very recent move to “comply with EU tax regulations” in the Official Linden Blog. The post can be found here : Questions about VAT?
Here are my comments as posted on their blog :
I fully understand that the current EU tax laws are not a choice of LL to implement, but rather a necessity, though this will affect the following residents and virtual companies I believe :
1. premium users based in Europe will now be charged their local VAT percentage on a) their account fee b) any tiers paid to LL c) see the article about VAT for other services. For most European users this will mean an increase in cost of 17% to 25%, depending on their locality. The only way out of it, is by having a RL company controlling and paying for the fees and file for tax exemption.
2. virtual companies based in SL, and not residing in the EU will need to find out if their “customers” are EU based and if so, charge them VAT as well. While transactions in L$ are – according to the page on the LL website – exempt, if you for instance allow your residents to pay tier in USD or Euro, the situation could be much more complicated.
However, in order to charge VAT, you would need to be registered as a company. I can only guestimate how large of a percentage of the “virtual companies” in SL are actually individuals. When exactly does an individual that offers services on a regular basis become a company? The plot thickens, I tell you…
3. this puts all European based “companies” or “service providers” at a direct disadvantage, as they’ll have to take the increase in cost into account when setting a price for the services they provide. As outlined before, 17% to 25% depending on their locality.
4. Any US based “virtual corporation” that has already made statements that they are tax exempt, I would advise to seek legal council in order to make sure about that. Tax laws are not easy to understand, and if someone decides to check into certain aspects of the tax regulation and how that “virtual corporation” is handling it, things may turn out ugly.
5. If LL feels bound to comply with international and EU tax regulations, I can’t wait for some other regulations to come into effect, or to be forced into effect. My Second Life seems more and more like my Real Life : regulated and limited, though there is one major difference. In RL some laws protect me as well, in SL we only seem to get the limiting ones. I hope that being able to fly and Teleport in my Second Life offsets the increasing regulations and limitations.
I know LL can’t do anything about EU Tax laws. However, some European based residents have brought up a couple of interesting points I hadn’t thought of yet :
- Why did LL absorb the VAT previously, and how come they suddenly decide to charge their EU based customers?
- Prices are – as required by law in the EU – always tax included when advertised, except when the majority of the customers would be companies, who are exempt from tax. In the case of LL, fees were always advertised as is, without mention of VAT being excluded. Hence, all European users would assume that according to EU regulations, VAT was included. If that assumption stands in court, LL can’t now decide to add VAT to the fees. If they want to compensate their absorbed cost, they’d have to raise their fees.
Comments are welcome.
