“VAT are you talking about?”

Many European Residents have asked for clarification about VAT (Value Added Tax) in Second Life and how it impacts them. While each case may be different, I’ve tried to answer the questions in the Knowledge Base and to make it easier, I’ve also attached the VAT FAQ here.

The questions fall into a few categories, which I will try to address in this post. I’ll also be available in-world at a Town Hall meeting on Monday October 8 at 11:00AM PDT at The Pooley Stage to answer additional questions as well. Please come prepared with voice enabled so you can hear, as I’ll be answering by voice and chat questions by voice to be more efficient with the time.

First there’s been some debate as to whether or not we have to charge VAT and why.

The best place to get full details about European legislation is at Europa, “the portal site of the European Union”. It provides up-to-date coverage of European Union affairs and all legislation currently in force or under discussion.

The relevant section on that site is called “VAT: Special Arrangements Applicable to Services Supplied Electronically”. The Directives were implemented to create a level playing field for European Union (EU) businesses with regard to the indirect taxation of electronic commerce. Essentially, prior to this Directive non-EU-based companies providing electronic services to EU customers had an advantage in that they were not required to charge those customers VAT:

“The objective of this Directive is to introduce new harmonised rules and thus eliminate distortions in competition for radio and television broadcasting services and electronically supplied services within the EU. The absence of a clear and fair tax regime was a disincentive to investment and put EU business at a competitive disadvantage.”

Second Life classifies as an electronically supplied service in the definition below:

“Electronically supplied services include services such as cultural, artistic, sporting, scientific, educational, entertainment, information and similar services as well as software, video games and computer services generally.”

Under the Directive, Linden Lab is required to register with the tax authority and then to charge non-business customers VAT at the rate prevalent in their EU country:

“Non-EU businesses are able to register with a tax authority in a Member State of their choosing. They are required to charge VAT to non-business customers in the EU according to the standard tax rate in the Member State where the customer lives.”

I’ll leave it to your local tax advisor to help you interpret its implications for you personally, but basically this means that companies that sell to EU consumers must charge VAT regardless of where the companies are domiciled. We understand that it was implemented to require companies, such as AOL, to charge VAT, just like domestic EU providers of similar services, so all could compete equally.

Ironically, this Directive was put in place to create a “level playing field” but in Second Life it may cause EU based virtual businesses inside Second Life to be less competitive. This is because the Directive was designed with a view that end customers are the final consumers of a particular electronic service. The tax authorities could not have imagined a service like Second Life which enables Residents to develop and sell land, content or other forms of intellectual property within an ecosystem even though they are not official VAT-registered businesses. This means a side effect of the law is that VAT could put those Residents at a disadvantage compared to non-EU counterparts.

Related to this question, we have been asked quite a bit why we haven’t charged VAT before now. The simple answer is that Linden Lab was able to absorb the cost of VAT on behalf of its EU customers. Our business in Europe has quadrupled each year since 2004 and already it has more than quadrupled in 2007 through September. As a result, we can no longer afford to absorb these costs for European Residents.

The next set of questions has been about how we determine who resides in the EU.

To comply with the EU Directive, we are obligated to take reasonable care to ensure that we have identified the actual residency of our consumers. This includes, but may not be limited to, self-reported country of residence, address of billing information including the address of the bank which issued the payment mechanism, IP address predominately used by the consumer and other mechanisms. This is the same set of information that we use evaluate the fraud potential of a particular user, so if this set of information doesn’t match, then it’s probable that we would put the account on hold until we could reconcile the differences.

The third category of questions has to do with VAT numbers and invoices. Second Life Residents who operate businesses may be eligible for a VAT exemption. If you are, you can provide us with your VAT number here. We will also provide you with invoices downloadable within your account page (this feature is coming soon) so you have records of the VAT you have paid us for your own tax reporting purposes. Our VAT number for your records is: EU826011179.

One of the most interesting questions is about why we don’t charge VAT on L$ purchases on the LindeX.

The LindeX is a marketplace where Residents can buy and sell L$ from and to each other. Because Linden Lab merely facilitates the transaction, we do not assess VAT on the purchase. Consumers are not normally responsible for collecting and remitting VAT between each other, but your situation may vary and you should consult a tax professional.

And finally, some residents have noted that Mainland Maintenance fees are charged in arrears. To lessen the burden, and to provide Mainland residents with some additional notice, we will be not be passing on the VAT charge until October 27th for mainland maintenance fees.

 

If you have more questions, I encourage you to download the VAT FAQ, refer to our knowledgebase, send me a message in-world, or come to the discussion Monday (again, please come prepared with voice enabled so you can hear, as I’ll be answering chat questions by voice to be most efficient with the time.) Of course, I can’t give you tax advice and nothing here should be taken as such. In summary, We’re obliged by law to charge EU Residents VAT. Hitherto we’ve paid it ourselves. As Second Life grows, that becomes less sustainable. Taxes are rarely popular, and I’m sorry to be the messenger for this one. By their very nature, they also distort markets as some Residents have noted. We did manage to shield our European Residents for a number of years, which I hope is some small comfort.

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99 Responses to “VAT are you talking about?”

  1. Fluf Fredriksson says:

    So you should have given us notice then.

  2. Bradley Bracken says:

    Excellent blog. Great job on extending the date to October 27th. It is the right thing to do.

    Regardless of what LL shoulda done, they are taking steps to correct it. There will be plenty of “I told you so’s anyway” such as in comment #2.

  3. Vincent Nacon says:

    No…. not LL should have given you a notice before it happened… EU’s governments SHOULD have notice you. They went to notice all other companies like LL, Blizzard, Maxis, EA, etc etc. but didn’t notice you.

  4. Detox Watanabe says:

    the whole purpose of VAT for Internet services is to enable equal chances for european and non-european internet services.

    since you do not allow 3rd-party sim hosting, the VAT on SL works totally the other way around.

    simply said: Your land is too expensive, and now it’s way more expensive for europeans.

    This will simply lead to less land buying from europeans, bites you in the end.

    Open the grid, or lower the prices, I’m fine with both.

  5. Hugh Hanson says:

    Well sad to say this I was here for fun but sl has become very much rl, this is one tax to far I’m sadly pulling out…… its not the money its the principle!

  6. Tony says:

    @2 it looks like they have given us notice if we’re not being charged until October 27th.

    Thank you very much for the information Zee. My biggest objection to the way you guys have handled this was with regards to the lack of notice. I’m glad that you listened to our complaints, even though at times they have been rather noisy, off target and full of venom.

    Thanks for the additional information and explaining things in a rational matter although you have threw a new worry in for me but I’ll leave that for now and bring it to the town hall.

  7. Furo Lane says:

    I am NOT a European!
    I live in ENGLAND
    I am a citizen of the UNITED KINGDOM OF GREAT BRITAIN AND NOTHERN IRELAND!
    I already renounced EU citizenship under affidavit!

    So you can put the VAT charges where the sun does not shine.

  8. Dekka Raymaker says:

    “Ironically, this Directive was put in place to create a “level playing field” but in Second Life it may cause EU based virtual businesses inside Second Life to be less competitive. This is because the Directive was designed with a view that end customers are the final consumers of a particular electronic service. The tax authorities could not have imagined a service like Second Life which enables Residents to develop and sell land, content or other forms of intellectual property within an ecosystem even though they are not official VAT-registered businesses. This means a side effect of the law is that VAT could put those Residents at a disadvantage compared to non-EU counterparts.”

    So what are you going to do about this then, what’s your solution?

  9. Jessica Holyoke says:

    This was a very responsible response. Thank you for referring people to their own tax professionals.

  10. Hiro Queso says:

    Zee,

    It used to be the case (a while ago, granted) that tier charges for private islands were considered to cover the month leading up to the date that charge was made, just like the maingrid. At some point you guys have obviously changed this (as the wording now used indicates – free month of tier included in setup), but I have never seen any formal announcement of such a change. Why is that? Since the setup fee for older private islands did not include ‘a month of free tier’ within setup, will the owners of older islands also not be expected to pay VAT until 27th Oct?

    Kudos to you and LL on this announcement, Zee, just what the doc ordered!

  11. Alyx Sands says:

    #8: Veeeery funny. No one asked ME whether I want to join the EU or whether I wanted that bloody Euro because the German government didn’t even ASK the population.

    I still say the prices should have been INCLUDING VAT, i.e. it would mean making the original US prices cheaper now. And if these already include US sales tax, this would have to be deducted from the European prices as well, right?

  12. Matthew Dowd says:

    There’s bound to be “I told you so”‘s

    Unfortunately this blog post is about a week late. If LL had posted the above and included the notice period as above, a lot of the last weeks anger could have been avoided. True, those from the EU would still be facing an increase in costs, but the anger would have been more aimed at the EU than LL. It would have taken only a little forethought and common sense to have realised this in advance rather than in hindsight.

    LL do need to radically review their customer relations policy – this is not the first unnecessary miscommunication from LL although possibly one of the worse. As it stands, this blog entry is probably too late, and LL has alienated and permanently lost many EU customers. These will be replaced by new sign ups, but there is not an infinite supply of new customers to replace all those who have left due to poor communications and customer relations.

    Matthew

  13. Reg Mannonen says:

    /me just wonders where the world is going with this.

    Good lord, now in addition to keeping paperwork and doing the hours of tax stuff i have to do for my own country, i have to worry about other countries too???

    Lets all lobby our law makers to stop the madness. I understand the need for taxes, but to put hte burden on those selling a service and not on your own residents is just insane.

    If this type of thing continues it is going to stifle business on the internet and make it so that only those businesses with the resources to hire armies of tax lawyers to keep up with it all will be able to conduct business on the internet.

    Besides, what exactly is the EU going to do if businesses outside thier borders DONT pay the tax? Block them? Arrest them when they arrive on vacation.

    Big brother is here my friends!! This whole situation just sucks.

  14. Lindal Kidd says:

    “So what are you going to do about this then, what’s your solution?

    Dekka, as I see it, it’s up to the people of the EU to take this up with their representatives. If a tax is unfair, you should let them know about it in no uncertain terms.

  15. Darth Juniper says:

    Every time I think about going premium and getting some land, something comes along to make me change my mind. This is the latest.

  16. Dirk Felix says:

    Looks like LL got a big spanking on the lawsuit. Let freedon ring 😉

  17. Deltango Vale says:

    Thank you for this information.

    Your business has quadrupled. Your revenues have presumably quadrupled. You say you can no longer afford to absorb VAT. Why? VAT is a percentage of your sales and thereby remains proportional to them. Unless I’m missing something, I see no reason to pass VAT on to residents now.

    Presuming I have missed something, would it not be more intelligent – certainly more diplomatic – to spread the cost equitably across the population? Simply dumping it on European residents is not only crude and cowardly, it creates a massive distortion in the economy (not least by wiping out the European real estate industry) and generates a hell of a lot of bitterness.

    As for running a business properly, let me offer a word of advice:

    “Business on a money-making basis is most insecure. It is a touch-and-go affair, moving irregularly and rarely over a term of years amounting to much. It is the function of business to produce for consumption and not for money or speculation. Producing for consumption implies that the quality of the article produced will be high and that the price will be low – that the article be one which serves the people and not merely the producer. If the money feature is twisted out of its proper perspective, then the production will be twisted to serve the producer. The producer depends for his prosperity upon serving the people. He may get by for a while serving himself, but if he does, it will be purely accidental, and when the people wake up to the fact that they are not being served, the end of that producer is in sight.” – Henry Ford 1922

  18. ISayNO says:

    If you LL are SO DAMN legal (as i am as well), i understand you are responsible for the CONTINUED lack of service which was PAID on time (referring to premium accts), for the CONTINUED lack of customer care (general) and for the PRICE PAID for the items YOU LOST and never gave us back (due to your famous ‘database issues’, ‘asset server issues’ and your HUGE catalogue of ‘issues’). So, let’s become legal EVERYONE and pay VAT if that’s what law says but GET PAID BACK by LL for everything we LOST BECAUSE OF LL.

    Also, at least here where i live (Europe), the UNILATERAL change of a CONTRACT implies the AUTOMATIC DISSOLUTION of it, so…. if we BOUGHT and PAID FOR goods we had in our lands/inventories at the moment when YOU LL changed the ToS and FORCED US to accept it in order to keep the PROPERTY of our land and goods, you SHOULD offer a TERM or ECONOMICAL offer to those who DISAGREED with the new ToS and were FORCED BY YOU LL to accept those new conditions.

    Also, if you want me to believe that you were as generous as necessary to absorb the VAT of the Euro people since 2004, definately you live in another planet, maybe you think RL that you can go flying from the latest fashion shop to the nicest club. You´re so funny, guys.

    Law is for everyone and you use it at your convenience. You suck.

  19. Kira says:

    Alyx says “And if these already include US sales tax, this would have to be deducted from the European prices as well, right?”

    well no in the US SL is considerd a service. we dont pay tax on services. so the price that is shown is the price we pay…That is something i dont understand.VAT being charged on a service..Seems like an unneccsary tax . LL is complying with there laws but can you guys not vote on what is taxed or not taxed? just cuirious.

  20. Dekka Raymaker says:

    So no comment from the US citizens on having to pay for the European VAT in the fees in the past?

  21. concerned says:

    Simple solution.Allow fees to be deducted from linden balance.

  22. Wake UP says:

    So now LL gives you the response you have all been asking for but instead of accepting and understanding what was obvioius anyway, you still find reason to complain with the “You are still too late, you should have given us notice earlier,” or the “VAT should have been priced in,” or the “why do europeans have to pay more than everybody else” whaa, whaaa, whaaaaaaa…

    All of these childish excuses are the reason why it really did not matter whether they gave you a notice or not. You still would have cried and whined anyway.

    How about you grow up and pay your taxes or take it up with your own government instead of blaming LL for your displeasure with your own governments taxing laws, which you voted in btw.

  23. Deltango Vale says:

    @18

    And before US residents complain about absorbing some of the VAT, remember that gambling is legal in Europe, yet we have to absorb US law.

  24. Linde Labs have not done Europeans a favor because according to EU VAT laws, “Once a company’s annual sales revenue reaches the £60,000 threshold, it is required to register with HM Customs and Excise for Value Added Tax (VAT). The HMCE requirement is for a company to register for VAT if it expects the total sales revenue for the year to equal or go beyond the threshold amount.”

    I doubt LL has reached that amount now per country in the EU. In actuality there is no real reason to prematurely charge a VAT other than to protect your own asset (at the point, nothing to protect and at this rate with google creating their own 3D world.. will have nothing to protect.) Infact, you are charging Europeans a VAT when there is no need.

  25. Wake UP says:

    @ 18 & 24

    Petty you for putting your hands out and expecting the world’s population pay for YOUR COUNTRY’s taxes.

    Shame on you!

  26. concerned says:

    @23 It i not a fact that Lindens have to abide by laws i certainly do not blame them for this,what i do think is wrong the fact that vat was applied to my account before i was even told this was coming.

    Now imagine you wake up one day and your charges have increased by 17.5% with no notice and tell me you would feel like this was handled correctly.

    A little warning that this was going to happen is common decency.Island owners pay in advance so this could mean some people were charged this with as little as a day or 2’s notice.

  27. Euclidean Surface says:

    So, which sim will the virtual Boston Tea Party be held in?

  28. Wake UP says:

    @27

    ok so now they’re saying you don’t have to pay until October 27th. You’ve been given notice and a one month waiver on paying YOUR taxes. So what’s the problem now?

  29. So where is the mass European exodus from SL if this is such a terrible hardship?

  30. concerned says:

    @30 my next bill date is 14th and the amount due has VAT included.It is mainland teirs that are in arrears.Read the blog.

  31. Thanks for the information, Zee. It would be good and wise customer service and corporate policy to search for measures to ease the pain of the EU population. I do not know how LL can do this and still make a “reasonable profit” but I am confident there is a way.

  32. Wake UP says:

    The bottom line is,

    Just pay your taxes!

    How much clearer can it be than that?

  33. CM says:

    Deltango Vale Says:

    “would it not be more intelligent – certainly more diplomatic – to spread the cost equitably across the population? Simply dumping it on European residents is not only crude and cowardly,…”

    I think you guys are lucky they absorbed the VAT this long. They could have given better notice, but VAT is not a US problem and if you don’t want to be burdened by it then try to do something within your government to change it. People hate LL on this but they have to do what they have to do. If they want to keep doing business in EU they have to follow the laws. The gambling ban was due to a US law that says you can’t facilitate online gambling. The VAT is a EU thing, and as long as they want to do busniess they have to follow the LAWS! I am sure they will have to bend to the law at some point again on something else and everyone will be mad yet again. Lets just stay mad at the things LL does we do not like that they have total control over.

  34. ISayNO says:

    *lives the nice life of a basic acct, while waits for someone more reasonable as Google to develop their own 3D world* *yawns*

  35. concerned says:

    I have no problem paying my taxes my friend all i ask is the decency to give people a decent notice this is coming,If your land went up over night without a word of warning im pretty sure you wouldn’t be smiling.

  36. ISayNO says:

    To US people: gambling is not a EU problem. *keeps yawning*

  37. Me says:

    So I was billed with VAT on Sept. 28 and my next bill is due Oct. 28, both bills with full VAT – so I really can’t see how that should “lessen the burden”, at least not mine – unless I will be refunded the VAT that was charged on Sept. 28…

    An answer to that would really be appreciated – everyone who has already been billed from Sept. 28 until today does really have a disadvantage here.

  38. Wake UP says:

    @37

    Once again, they’ve now given you your warning, plus a one month waiver.

    Get over it!

  39. Deltango Vale says:

    @9, 15, 18, 21, 23, 24, 26, 35

    So, with apologies for the multiple postings, LL *IS* to blame for this mess: bad strategic planning, flip-flop policy decisions, poor customer relations and price increases without concomitant increases in the quality of service.

  40. ISayNO says:

    @37: to expect decency from LL is the same as to expect to see pink elephants flying over your house. They (LL) demonstrated a lot of times what kind of business are, so what happened with VAT it’s just the natural evolution of their behaviour. Nothing new under the sun.

  41. concerned says:

    @40 My word you really are clueless,I had 16 days notice if an island owner was charged on 29th they will be charged that day.

    Quote”some residents have noted that Mainland Maintenance fees are charged in arrears. To lessen the burden, and to provide Mainland residents with some additional notice, we will be not be passing on the VAT charge until October 27th for mainland maintenance fees.”

    This does not apply to island owners.

  42. Ian Banach says:

    PLEASE CHANGE FEES IN L$, WHY DONT YOU CHARGE IN LINDENS?

  43. Pingback: Lindens admit there’s a problem, SAVE LAUK’S NEST event still on! « Second Arts

  44. Ian Banach says:

    CHARGE*

  45. Delgado Cinquetti says:

    I hear there is going to be a virtual movie about all this! Can’t wait to see it! Cheers! DC

  46. Me says:

    @40
    At least I wasn’t given any notice before I had to pay my VAT – I was already billed with it (a few hours after the email was sent) and since my next billing date is the 28th I won’t “profit” from the “not passing on” AT ALL – like many other people as well.

    They didn’t say anything about refunding the ones that have allready been billed – without any prior notice…

  47. alf lednev says:

    13. Well put. If some prior thought and planning had come from LL, then much of the stresses and anger would have been averted. Perhaps next time they will actually consider the customers first. On previous instances though the answer is already known, they seem incapable of learning that customers matter.

    They need to understand that by treating people with what borders on contempt, means those people leave and tell their friends of their experiences, they in turn tell others. The result may still be a slight temporary increase in free accounts but not paying ones, as people who will hear negative things won’t commit money up front. There is a finite market.

    LL seems to suffer the bane of all businesses who let computer nerds and accountants run them, both sub-species seem to dislike humans.

    So no level playing field? EU members are disadvantaged but its the EU faullt, I accept that part (exept Lindens wiggling to avoid answering why the VAT isnt built into the price as per EU law). Lindens can do nothing, except PROFIT by extra monies to play the short term money markets.

    for 15. A simple solution of course would be for Lindens to “register” all EU members at their EU Offices in the UK (put some servers there as portal). The members would STILL have to pay EU taxes but they should be exempt from any US taxes applied then ie the Californication Sales Tax of 7.5%.

    Lindens wants to go global, it had better start thinking globally, constructing a customer service baseline that taxes fairley. EU pays EU taxes, US pays US taxes, that would be fair. For one group to pay both isn’t. Lindens can do something for its members if it wanted to.

    Taxation without representation is tyranny, so what is dual taxation when an option may exist to fix it?

    The sad part about this blog though is those who wrap themselves so tight in their flag, bake apple pies and cram Big Macs in their mouths . and sneer at others. Remember that a viable competitor HipiHi is in beta testing and many SL’ers will move there, the gamblers for starters and now the EU members have good reason to go. If they provide quality customer service and have a stable system, and LISTEN to their customers, lots will flock and start a new virtual world. The nerds need to understand (they won’t) the vast majority of members dont care about the latest cutting edge shiny gadget, they come to play and interact and have fun. Lindens long ago forgot that fact.

    LL will be left looking at any empty world that it has only itself to blame, but there will be lots on Big Mac wrappers blowing around their PG world and sad little groups of Lindenites huddling trying to sell apple pies to each other.

  48. It strikes me that this is the sort of communication Linden Lab should have made a week, or even better, a month ago. The sheer ineptness of the customer relations and corporate communications from this company is a delight to behold. It’s almost as if Linden Lab only remember they have customers – sorry, “residents” (although I prefer the more accurate “beta testers”), when there’s a baying pack howling at the front door demanding to know exactly what the hell is going on.

    I mean really – flip out an e mail saying “Oh by the way – you’re going to pay 25% extra from now on”, and get all surprised when the customer coughs and says “Excuse me”?

    Furious backpedalling ensues.

    It gives us the impression Linden Lab doesn’t know what its doing and it’s not professional.

  49. Wake UP says:

    @40

    That looks like a typo. So when they come back and correct it will you come back and apologize?

    I’m sure you won’t. Then it will be something else, won’t it.

    Paying our country’s taxes is all of our responsibility. How embarassing must it be to come on an international blog and complain about your country’s taxes?

    Just pay your taxes, man!

  50. Linden Lab did not absorb anything. They were not and are not presently obligated to charge EU residents VAT. They were advised by their financial advisors to charge VAT in anticipation of a continuing growing EU community. Eu residents are not obligated to pay VAT at this point because LL does not even meet the min threshold financial status per country they choose to charge… not even as a whole. All countries in Europe are also not part of the EU. LL should not charge EU residents VAT until actually obligated to charge.. that is if they care as much as they claim.

    Furthermore, if LL states that they must abide by the laws of California and then in the same breath by the laws of EU and other countries.. let us see them apply these application of laws with balance and fairness. For example, in Europe gambling is legal.

  51. LilyNeeAnne Hilite says:

    I would trust that Linden Labs is attempting to work with the EU to level the playing field again. It seems patently unfair to allow US laws to disenfranchise one set of business owners (casinos) and then to allow another set of national laws to place our European friends at a competitive disadvantage.

    I would have preferred that LL simply charge a little more for all customers and continue absorbing VAT for EU customers in the simple spirit of fairness.

  52. concerned says:

    @51 Why would i say sorry for a typo i never made?,lol get a point!…i am not going to talk to you anymore because this is using up blog space others might need.Get facts right then get a point then make a comment.Don’t get $ signs infront your eyes im gonna absorb vat and not pass it on to my customers i am in a position to do so,many people here are not and those are the real people who lose.

  53. Wake UP says:

    @53

    You know not what you speak!

    Why should everyone else pay for the EU’s taxes? Will they pay for my health care, or my state taxes, or my sales tax?

    Or better yet, will i benefit from paying their taxes?

    No they won’t, and no I won’t!

    It’s a tax specific to their country based on the level of service given to them by their country. IE, they benefit from it, not everyone else in the world.

    I’m through trying to reason with you people. Bye.

  54. bobbyb30 zohari says:

    At least one reason not to live in Europe. =D

  55. ISayNO says:

    As everyone can see, there’s some talibans wrapped in their flag and eating BigMacs & Coke tirelessly (Rambo, please save us LMAO). Fortunately, the most of people are different.

  56. Lukas Mensing says:

    hello Zee, hello Everybody

    The main problem with VAT is this, and I think you are conscious of it as everyone is:
    -Lack of information from Linden lab to its european customers
    -Disrespect for us and contempt in the way you took this decision.
    It put many people in difficulties and scpecially many cultural cites.
    I myself am obliged to sell Lauks Nest that is a non commercial, cultural and historic site of SL because I can not manage to preserve it. I will probably be moderated again. But at least i expressed my concern in this.

  57. Luther Spectre says:

    Sorry Linden Labs this is out of order if you are going to abide by our tax laws you should also abide by our retail laws!

    You quoted prices incorrectly without the VAT included, it’s was your mistake and now you should honour them!

    If British companies did the same they would not hear the last of it by all the comsumer groups here!

    Linden Labs you should of really thought about what you were doing before you chose this course of action. It is a really foolish thing to do!

    And to those who say pay the tax and be damed just should try living in a country which you are over taxed all the time then complain!!!!!

  58. Anonymous says:

    @ Deltango…

    What planet did you come from??? I work in this platform, and you want me to pay for YOUR tax? Just because LL advertised to the EU market in several pushes, does that mean I get to pay part of your tax??? Wow…Warped thinking I must say… If your country imposes that tax on you; SO BE IT; IT SHOULD NOT BE IMPOSED ON ME… You dont pay my income tax do you??? So why the hell would I WANT TO PAY YOUR TAX??? Like others said; if you dont like the laws, get them repealed. Maybe if you partially pay my rent I will then pay your VAT 😉

  59. Ursa Henley says:

    ummm,…. yea what they said 🙂

  60. Ursa Henley says:

    i cant help but think of that whole “blurring of the line between RL and virtual life” then i laugh.

  61. Ursa Henley says:

    and all those saying pay others taxes and all, think about it we americans have been paying for alot other stuff for a long time its called the WELFARE system.

  62. Zee, thank you very much for the thorough explanation. I might have some qualms on a few tiny details (if you did indeed pay VAT in the past 3 years on behalf of the EU residents, can I get a receipt? It would surely help with my accounting — also, my VAT ID # is not recognised, neither is my company’s, so I’ll have a hard time in getting valid invoices), but overall, I truly appreciate the extra effort to present everything clearly enough to understand the issue.

    Now do us all a favour, and next time, don’t push Robin all by herself into the fire 🙂 Give her some well-deserved support and backup 🙂 Help her to help us, and you’ll see that we all will give you kudos for the effort in being patient with us and explaining things how we wish (or even deserve) to hear.

  63. concerned says:

    As i will not be able to make it to pooley on monday if anyone is heading there would you please ask this question?

    Why was the post about VAT posted at around 1-2am european time when it directly concerns them and most will be in bed?

    Thanks anyone who can.

  64. Ursa Henley says:

    @65

    thats standard LL protocol, always do something when no one is around to see what you did, and then mess it up when they are around.

  65. ISayNO says:

    I agree with the fact that US ppl shouldn’t be taxed or overcharged because we are, but applying the same logical, we are big enough to gamble without drama and controlling our pockets, so we shouldn’t be affected by an US law that we the EU ppl consider a stupidity. If Uncle Sam doesn’t allow you to play your favourite bacarra, you can come to Europe and play until you get bored of, so hey, in European sims, gambling should be permitted. I’m pretty sure LL will shut up about this.

  66. ISayNO says:

    I agree completely with @66.3 and that’s what i did.

  67. Braden Darkstone says:

    Post 23 hit it right on the head, with the comment that whining will get you nowhere. If you are going to play business in the world of LL, then don’t throw a tantrum like a five year old when your business landscape changes.

    The business landscape in RL fluxuates constantly in response to larger and largely uncontrolable influences. Sound planning requires re-evaluation of your situation and deployment of a new plan when this happens not tantrums and venom. I hope you people are a little more professional in RL.

    If you are that upset about the situation stop trying to take advantage of a game and manipulate to your own ends. Play at the scale that you can afford not one that puts youre mental well-being in jeopardy or your RL finances at risk.

    Just food for thought.

    One last thought. There is no perfect I.S. system be it a game or a RL LAN or WAN. They all have issues, they all need regular maintenance and they all crash at the most inconvenient times. If you want a system you have better control over stop whining and get off the Grid already.

    Braden

  68. Bibi Book says:

    @ Zee:

    “please come prepared with voice enabled so you can hear”

    Would it please be possible to think of those who have no voice? In addition chat is much easier to understand for non native speakers and one can reread it.

    @concerned:

    Mainland owners have been charged already, too. The started to add the VAT at 27th of september.
    Wonder what will happen to those accounts now…

  69. Maximilian Proto says:

    Finally, a message from LL that is of the standard one could reasonably expect from a professional company. I think it would have been beneficial for all parties (incl. LL) if everybody had gotten that kind of communication right from the start.

    I’m all for constructive criticism, but could some of you stop bitching around? The EU law is (i) pretty clear, (ii) binding, and (iii) actually makes a lot of sense in general. In the case of SL it unfortunately results in a situation that adds some complexity for European residents if they are running larger business operations.

    However, registering for a VAT number and subsequent processing of the payments is not the most difficult thing in the world – and if it is in your country, complain to your administration for not running the place efficiently. Or is the real reason why you are still upset the fact that it is not so profitable anymore for you to evade taxes?

    Get over it and start to deal with it.

  70. martin magpie says:

    Will LL be asking for Social Security Numbers any time soon for business purposes also? Claiming income has been left up to the individual thus far. However will LL also be reporting this income to the IRS.

    Also are we to expect the L$ to be considered legal tender from this point on.

    Thanks;

    Mar/Cat

  71. Deltango Vale says:

    And so, LL has managed to generate almost open warfare between its residents/customers. US gambling law is applied to NON-US players, causing fury; EU tax law is being applied to EU players, causing fury. The suggestion that variable costs (labor, rent, utilities, taxes) be treated as a single input in a global company causes fury. What a way to run a company.

    Me, I look forward to Third Life where the servers are off shore and there are no laws and no taxes – the way SL was when I joined a year ago. No one should worry about paying my VAT because I am closing my real estate business, selling my land and transferring what little tier remains to my US girlfriend. Then I shall withdraw all my investment money and go dancing. SL is no place for entrepreneurs.

  72. martin magpie says:

    Ppl fear change, I don’t think it’s right to call adults “whiners” when they are obviously concerned about this sudden change in charges to their accounts. Let’s do try to handle things a little more adult all the way round please.

    I would of also been very concerned if I had been affected. Big hugs to all those who were caught off guard.

    Mar/Cat

  73. concerned says:

    @71 I know and support you,unfortunatly i can’t make it to pooley to ask about these issues,Hopefully you will be reimbursed because as far as i know nobody’s charges have been changed so far hopefully this will be rectified sometime today,I am not here for my own gains or loses although i will lose but can absorb for the time being at least.

    I am here because i have lost 3 long term friends over grid issues and this has been final straw that broke them.I do not believe other nations should absorb our taxes and i do not blame lindens for having to do this,i do however think 30 days notice would have been decent for all users and the option to pay your fee via Linden dollars would put paid to most of these problems.

  74. @66 Rat, on your Point 2, please take a look at: http://www.out-law.com/page-3684

    It’s a pretty thorough explanation with a link to the FAQ on European Directive 2002/38/EC, in force from 1st July 2003.

  75. Simeon beresfoed says:

    Thanks for this post. It might be late but it is welcome. sometimes its best to face up to an issue you did the right thing in confronting this one with honesty. Instead of the denial we have become used to.

  76. Lukas Mensing says:

    We have been already charged with Vat. I m supposed to pay 25% more soon. will this be taken off?

  77. The problem here is that LL jumped into creating SL 4 years ago, but apparently ‘forgot’ to abide a few laws. I do believe VAT already existed back then and I also have suspicions there was a law on online gambling back then. If LL had charged EU VAT from the beginning, if LL had had a gambling ban from the beginning, and not letting people first build businesses on it, there wouldn’t have been a single problem.

    Imagine LL had allowed copyright infringements when they started 4 years ago. And even worse, they had put on the website the line “You can build a business using other people’s copyrights!” (like they said you could be a casino owner), then people would have taken that freedom and had build businesses on it. Then 4 years later, LL would’ve said, “oh sorry, copyright infringement is illegal.” You would get 100 blog comments on each post saying “OMG, they killed my business! You bastards!” –==EVEN THOUGH==– LL was right in enforcing it.

  78. mimi says:

    @66 “Would anything have *really* changed if they’d given you all a month’s notice? Personally, I think not. I think all the same whining would have occurred. If you don’t like it, refuse to pay the extra amount on that bill and cancel your service.”

    With 3 months notice in advance people could have sold their island *before* beeing changed extra money.. now people lost money before they have been given a chance to resign.. just imagine your an estate owner.. own several sims.. get charged 300-1000$ extra all of a sudden, without any further notice, without a chance to resign…. wouldn’t you be mad? Honestly I don’t understand how people in this situation can say “hey you shouldn’t whine”. Some people are so very selfish..

  79. CM says:

    Iv’e heard a lot of people from other countries say they shouldn’t have to pay for our laws either. The gambling ban is brought up. Well LL is a US company. If they let ANYONE on thier service gamble weather they be in the US or not they are still violating the law. So yeah, you shouldn’t have to pay for that, but you do. LL would have to move to another country.
    And we don’t pay taxes on internet stuff unless youre an unlucky few and even if we did those prices would be seperate. No one is paying a US tax.

  80. CM says:

    I just wanna add that because of lack of government regulation on the linden stock exchange I would bet in the end they would have to shut that down too. It seems more like gambling when it is not regulated. Of course they make money on it so…

  81. Wyald Woolley says:

    For the benefit of the Second Life community, the Parties have mutually agreed that the terms of their resolution shall remain confidential. The Parties ask that this confidentiality be respected.

    Uh-huh, methinks LL got hosed and hence the VAT Tax was born to *ahem* create a level paying field. 🙂

  82. jasmin wise says:

    i am afraid you don’t know how to read and understand this directive,i will be much more than happy to develop this after oct 20TH
    you do not read four lines in an eu directive

  83. ISayNO says:

    So… an EU resident who pays for a sim and makes it EU, has to pay VAT and is unallowed to gamble…. interesting. *keeps living the nice life of a basic acct and yawning, as he sees how the € flow to California decreases…*

  84. Saadi Zadeh says:

    I always missed the golden days when I used to hang out in Sandbox Island in my basic account days. Good old days, when Linden support would even respond to a basic account one-to-one basis, and I was living a free life as in beer 🙂 Over the period so much has deteriorated.

    And, now I am suddenly missing those days 17.5% more.

    Anyone wanna buy a sim?

  85. Carl Nemeth says:

    I get bored by all this, definitely too much is too much.
    Each European has to think for its own situation (and its own VAT lol as there are as much VAT than Counries in EUrope, here in France it’s 19.6%)

    For your information :
    15% in Luxemburg and Cyprus, the lowest VAT
    17.5% for UK
    25% in Sweden, Denmark and 21% in Eire and 22% in Poland..
    The first who say i’m lucky, i @%!§ him ;-(

    They say they absorbed the European VAT, mhh why not ?
    But with the Lndens, i learned to become as Saint Thomas : show me the proof, publish your Business counts.

    Do i think about buying a new SIM ?
    – Certainly not, 350 dollars more money to buy an Island is way too much uncompetitive in comparison with US and other non-EU countries buyers.
    I couldn’t handle a potential customer telling me : “oh you should be European i guess, your overrated prices show that”, thanks…:-(

    Do i think about keeping my own Sim ?
    – Well, i’ll anounce soon an increase of 50-60% on the Tier prices to the residents and i’ll support the rest (good boy ;-(

    Will i continue to support SL ?
    – Certainly not (for lot of reasons), i’ve already downgraded my account to basic, will take all my businesses to an end and just try to keep my Sim – if i can..

    It’s not a little thing that happened with this VAT, if Europeans were like 5% or even 10% of SL..but they’re close or over 50% of the total population as i read…

    Maybe it’ just time to think about my Second Life : is it worth a first one, a real one ?
    Sure no, time to leave SL with no regrets.
    And all my SL dreams, Your world, your imagination, what a surtaxed joke !

    Good luck all Euro’s 😉

  86. Yuo Rang says:

    Ok we’ve grumbled and joined in the passing around of information and figures on how unfair this is. Now what? Do we rely on LL to come up with solutions? Or just roll over grumbling into our cornflakes? If we are to appeal for something it should be soon or the system will just get accepted and entrenched therefore harder to create change by negotiation and lobbying, our only real tool besides voting with our Euros (which is radical and solves little).

    So I’ve been trying to brainstorm some solid, realistic solutions to ask for while watching group chat, so not all of them are my own ideas, however I say up front that I propose asking LL to take tier in L$ as the crosspoint of being reasonable, achievable and effective.

    Things we know:

    1) VAT is not going away. It looks a valid charge from what I’ve read, so there is no hope of a legal challenge anytime soon.
    2) This hurts LL. It costs them to process it and they lose revenue from downgrades and lost tier & sales, future losses, a flat economy and reductions in goodwill.
    3) It creates a barrier to competition for EU SL business. Primarily affected is Tier. Private island tier increased by £250 (US$500) per year, overnight.
    4) Purchases of L$ from Lindex are exempt from VAT. All L$ to L$ transactions are also exempt.

    Assumptions I can make:

    1) LL needed a haven away from the US$ and by choosing a European based system, it increased tier, land and membership fees to some 30% of active SL residents.
    2) LL may quietly be feeling guilty so may be pro-change to some degree.

    ——————————
    Good and bad solutions to VAT.
    ——————————

    1) LL should absorb the VAT themselves.

    Notes: Likely to be unpopular with LL.

    Pros: Solves the problem instantly.
    Cons: Will cost LL a LOT of money, money that they dont want to pay or they would have done it already.

    2) LL should remove their billing office from EU.

    Notes: Moving billing on the scale of LLs must have taken some long term behind the scenes planning and I cant believe they were inept to the point of not knowing about EU VAT laws.

    Pros: *May* allow LL to again ignore EU VAT.
    Cons: Something LL doesn’t want to do. Will take time even if they agree.

    3) LL should allow tier payments to be made in L$.

    Notes: Lindex purchases are exempt from VAT. Would allow savvy EU businesses a way to compete again. Everyone can still pay tax on land purchases and memberships, plus some will still opt to pay tier in US$ leaving plenty of tax money for Brussels.

    Pros: It’s doable. L$ to L$ transactions are exempt within existing tax rules. LL only has to chose to organise their business slightly differently.
    Cons: LL would have to reshuffle their economy. EU avatars number more than any other continent (some say up to 30% of active) which must be treated as sink. It would make the economy a little more volatile.

    3a) Variation on a theme. A minimum threshold on tier payments, set at say, a 1/4 sim and larger. Those can be made in L$. That would be seen as targeting help at the people that VAT hurt the most, business owners, while still retaining VAT payments on smaller private plots and smaller commercial. Less volatility but a more even and healthy economy for businesses.

    4) LL should allow Tier payments to be made by 3rd parties.

    Notes: Untying tier payments from credit cards would create an external market of non EU tier paying and land buying companies that have no requirements to pay EU taxes.

    Pros: Doable. Lower costs to Europeans. e.g. 2.5% for the USD at our end, the payment company would cream off maybe 3%-7% as a fee and we get a healthy savings.
    Cons: Potential fraud by sham companies when the market was young.

    5) LL should accept GB£ and Euro payments via FREE BACS/CHAPS/Interbank transfers.

    Notes: With billing on UK soil why am I charged initially 2.5% by my bank to buy US$, then to get swiped for the VAT and LL transaction charges.

    Pros: Saves a small amount that is usually not noticed.
    Cons: Does not address the tax issue. Does not help the purchasers of LL services that pay by cashing out L$ from inworld.

    6) Lobby our deputies in Brussels to change the rate for metaverse purchases.

    Notes: Even at a basic rate of 5% it would be bearable.

    Pros: Does not involve LL directly although they *might* help.
    Cons: Brussels takes 6 months to wipe its nose. Could take years, a LOT of money and time, and still we might lose.

    6a) Lobby your local parliamentary candidate to name an internet savvy finance minister from your country that you can write to about the problem.

    Pros: Creates a channel of communication. May get the minister on your side and provide intel on how best to approach the issue.
    Cons: Politicians deal in letters, you have to write real letters to get anywhere. Takes time and ultimately solution 1) applies

    ——————————
    The DO-Nothing options.
    ——————————

    7) Wait for the US to remove internet sales tax exemption from US ISPs.

    Notes: It is unkind and mercenary to wish bad upon your competitors but it would even the field a little financially.

    Pros: Would take no intervention.
    Cons: Only 6% is talked about plus they may continue the exemption.

    8 ) Cry in our beer and leave the metaspace to leaner more hungry nations.

    Notes: I’m not going to qualify that with pros and cons, but I suspect thats what many will end up doing.

    ——————————
    My Say
    ——————————

    Tier is the main stopping point to being competitive globally. Covering tier is the minimum a business has to do to stay in profit therefore I suggest we all ask LL to help us with that. Our alternatives are to let the rest of the world own the land and we just rent it.

    There are estate lands out there. Rent or buy, most estate is island with 30% more tier to LL to start, plus the estate owners have to make a profit. Estate land comes with other challenges than just higher fees (the occasional dishonest landlord that kicks you off, the incompetent that doesn’t pay his tier one day after you renew your lease etc etc), thats almost a tax in itself. Are Euro residents now relegated to paying for overpriced land that’s never really our own?

    Asking LL to accept tier in L$ is reasonable, they can chose to make what they like an internal or external, there are no laws to say how they run their business, as long as every penny of the external US$ based amounts are paid on to the VATman, then everyones happy.

  87. concerned says:

    Actually stating VAT was absorbed sounds like we were being done a favour,Fact is under the same laws they are applying to tax us they must have stated that tax was excluded on each of our purchases and charges.

  88. Saadi Zadeh says:

    I hear so many people presenting the solution of being charged in L$. I don’t understand. Are you presuming that LL wont have to charge on L$ Payment of Service and why???

  89. Jeff says:

    As virtual worlds grow and more options become available, the only true asset you, LL, will have for the expansion of your service is customer loyalty. Customer loyalty is built partly out of trust, and as such it is earned, not given. In order to earn that trust and loyalty you have to interact with your customers in a way that builds those bonds.

    Sudden and immediate policy changes with no notice is self-damaging to your product and its reputation. To allow people to gracefully adjust and change how they do business in order to cover their own behinds before changes hit lets people know you are on THEIR side and actually care about their experience and builds trust and loyalty.

    The recent blog updates have been helpful, perhaps there is a change in how communications are being handled in the future, although we’ve seen this all before after an uproar. You should never have to implement ‘damage control’ if your Lawyers, PR and Policy groups are working together and handling things appropriately. Your customers are not your competitors, do not treat them like that by ripping the carpet out from under their feet when you didn’t even have to.

  90. Saadi Zadeh says:

    I think LL will have to charge VAT even if the payment is made in L$. So, I don’t see it as a solution.

  91. concerned says:

    @91 read terms of service Linden dollars have no value and is not out of world currency meaning the only value they have applys to people wanting to buy some,that is a personal transaction of selling a non valued figure for what they want to pay,In most countries this is exempt from tax as it is uninforcable private sale.This is not true for all countries but it leaves the tax issue up to the reciever of funds to declare so this would make you responsible for your own taxes.

  92. Carl Nemeth says:

    Two little things before i’m going to bed 😉 :

    A new joke ppls won’ resist before buying a land to an European sim owner :
    – Mhh i see the price, so let me guess : you’re from Spain, no i’m sure from Italy, but sure you aren’t Danish otherwise you lose a bunch of money !

    The second VAT effect :
    Your tax isn’t high enough ?
    Pay your Sim monthly bill with Lindens dollars
    1st – you’ll pay more (eh the EU VAT boys 🙂
    2st – you’ll pay the Linden sale tax, increased of course, the sale tax based now on 354 US$ for instance instead of your previous 295 US$

  93. ISayNO says:

    Hey folks, this is just a game. Becoming from landowner to a basic acct. isn’t a drama anyway. I suffer by the business people who trusted in SL and invested a lot here, but finally, SL it’s what it is, a videogame.

  94. Mister Wobbit says:

    [/b]If you (Linden Lad ) did indeed pay VAT in the past 3 years on behalf of the EU residents, can I get a receipt???[b]

    I would really like to see that :))
    Don`t bullshit us !!!
    By the way i`m not afected by the VAT because i have created my acount today :)) but i would really like to have an answer and a prove just for my information 😛

  95. ISayNO says:

    Sorry, i meant i suffer ‘for’, and i want to add that LL is making their own nice pantheon treating this way to the 50% of their residents… we will put flowers some Sundays on it.

  96. IntLibber Brautigan says:

    Brautigan & Tuck Holdings will NOT be charging our EU customers VAT and will not recognise the jurisdiction of any european tax authority to force us to do so. We are not residents of Europe, and they have no power over us as an American business.

  97. concerned says:

    If in 3 months your laws change with pressure from european union and you have a 10% sales tax will you make same promise?or is this advertising?

  98. Saadi Zadeh says:

    @94 The moment LL accepts L$ as an alternative to US$ for payment, it gains value and may become taxable. Apart from that, it is way too easy to prove that L$ DOES have value as it is traded in ebay and everywhere. LL ToS do not dictate laws and courts, they are subject to them.

    Thats the way I look at it, but may be you are right, and I wish you’re right.

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