Dutch designers: SL as income, how to with taxes?

[Senzati0n Domenitzo]

Hi all,

Lately my store is going pretty well, so I decided that it is time to transfer my SL earnings to RL and see it as a RL income. I just have a lot of questions about how that works with paying taxes. I've searched a dozen of times through Googles pages but couldn't find any clear information except from 2007 that nobody knew how but that, of course, you have to pay taxes.

I contacted a Dutch designer here in SL, she told me she pays 30% tax income and another 21% tax. That would be 51% tax on my earnings, which seems a lot to me, but hey, it is Holland right! I discussed this with my father and he came with the idea to not transfer the money to Holland, but keeping it in the US. So opening a bank account in the US (which is possible since I have family living in California, so I can provide an address), spending lots of my earnings there and bring the rest with me in my suitcase to Holland and never put it on a bank account. Has anyone done this? Or could it be done anyways?

If so, what kind of taxes do you have to pay in California, can or how should I pay certain taxes since I am not an US resident? And what is all this 1099, w9 and brick and mortar law?

If all of this is not possible and I can only transfer my money to Holland is it really true that you have to pay 51% tax in total (that Dutch designer told me this because that was how it was back in 2009 she said). Do I need to have a KvK number? (Don't know how that is called in English). Do I need to pay taxes after every payout or do I wait until April when filling in my taxes and wait for their answer how much I need to pay back exactly? What kind of forms do I need to fill in for SL or for the Dutch IRS?

At the moment I cannot work, will things change for me when I am able to get back to work?

I did had contact with a Dutch tax person, but he didn't know either how this would work with SL/online earnings.

I am sorry for asking so many questions, probably more will come up later, but it's just a big mystery to me. I hope some of you can help me out with this.

Thank you for reading all of this.

[Ethan Paslong]

if you want to pay the tax on yearly base you can simply add it at the tax form as extra earnings. If you never did this before you can download the program for this at the website www.belastingdienst.nl .

It makes no difference you have a account here in the netherlands or in the usa, as you are citizen here and you have to pay your taxes here. This would only be different when you have a job or company in the usa and pay your taxes there. But think having a bussiness adress and ontacts in the usa won't make it much cheaper... and are you aware of all business laws in the states?...if you say you have family there they have to be carefull not to get taxservices after them when they host your account. And i htink as most western countries the usa and europe exchange account information, if the account is on your name, the dutch tax office will know exactly what your earnings are.. posssibly even better than you

Keep in mind, when you pay your taxes and social fees over your earnings you also have the right for using it when you loose the earnings... of course it has to be a substantial amount before you need to think about this.

If you don't mention the earnings to the tax service you can get in trouble when you are picked as testcase, or have to send in details to inspect your filled forms,  as so many every year have the fun of.... i recommend you make a appointment with your tax inspector from the service itself,  not a private one, you might be able to make a special agreement with him/her and pay less or even nothing. Many people don't know tax inspectors have the abilitiy to make agreements that are different than general taxlaws.

If your earnings are about a few dollars... don't seek any trouble and let it go.

[Senzati0n Domenitzo]

Thank you for your reply Ethan.

But no, I am totally not aware of any laws in the US concering this issue, and I certainly don't want any troubles with tax services for my family, so I will skip this idea. I guess it sounded to good to be true.

My earnings are (luckily) more then a few dollars, the IRS (Belastingdienst) will consider it already as an income, that is why it is important to me to get things straight so I won't make any mistakes that will cost me even more. I didn't know that tax inspectors could make special agreements with you, so I will make an appointment and hope for a nice thing to come out. Otherwise I'll just have to go with the 51%.

Thank you a lot for your explanation

[Dixie Barbosa]

Hi Senzation,

I completely uderstand your question and I've seen this issue before. As a bookkeeper, I have some professional interest in this matter (I know, I'm a nerd LOL), so here comes my 50 cents. 

As for income tax: is it necessary to have a real business? If it's no more than a bit of pocket money, I wouldn't worry about it at all. If it's more than that, but not enough to go all formal, put it on your IB tax form as 'inkomsten uit overige werkzaamheden'. If you do this, you can use your regular tax form (or software) and you can still deduct costs. If you have a sizable income and spend a sizable amount of hours on your business (at least 1225 hours per year), it's time to think about that KvK registration.

As for VAT (BTW in the Netherlands, at a rate of 21%), this is where I'm not sure. It all depends on the question: who is my customer? If Linden Lab is considered to be the customer (because at the time you're taking it out of SL, they are the person to deal with), you don't have to pay VAT. If every single avatar/account is considered to be your customer, there's a serious issue. Under the new rules (as per January 2015) you have to add VAT according to where your customer is. But LL doesn't reveal this info, so there's no way to do this. 

I'm stating this, because you said that you talked to another Dutch designer who said she pays 30+21%. That 21% has to be VAT/BTW, can't imagine that being income tax. But that can't be right. The only way I see this happening is if she has to pay 21% VAT and 30% income tax. But then again, the VAT would lower her taxable income, so the 30% would be calculated on a lower amount. Effectively this would actually be 21% VAT and 23.7% Income Tax, so effectively 44.7%. Still high though.

I would love to get in touch with that Dutch designer. Are you willing to share the avatar name with me so I can ask her if she's willing to talk to me for a bit? Or would you be willing to ask her if she can IM me?

As for USA IRS tax forms: I got triggerd for taking out money and had to fill out that form. Easy peasy, no harm done. I talked to LL and they said that it's not a problem at all and just a way for them to get out of having to deal with all kinds of US based taxes for foreign people. The trouble starts if you have any kind of fysical representation in the US. And opening a bank account there, in your name, might trigger a bunch of questions in that direction. Worst case is that you would have to charge Sales Tax, pay Federal, State and Local income tax (and file them all separately), etc.

All in all I agree with Ethan. Look at the amounts and make a decision. Serious enough to call it a real income? Do something with it. Otherwise let it go.

One other thing: If you take it out through paypal, you can also not do the last step to transfer it to a Dutch bank account, and just use it (from paypal) to pay for RL things. Start searching for stores where you can pay with paypal. 

I hope this helps.

Best regards, hartelijke groet,

Dix

[Dixie Barbosa]

One more quick comment: if you would like to talk more about this, I'm game. Feel free to IM me inworld: dixie.barbosa. Dutch or English is fine with me, so is voice or typing (your choice).