Linden Lab why are you charging VAT to one customer while waving this tax for other customers?

[Count Burks]

1 hour ago, Ceka Cianci said:

I understand the frustration of how it may not seem fair and  how they should have spread things around a bit more.. But honestly, I can't think of any laws they could be breaking or any reason the tax man is going to pull anyone in for an audit and be in trouble for not having to pay for server space  that was part of a membership perk..

If they aren't breaking any tax laws or other laws, then there really isn't anything wrong they are doing , unless it's that you feel it's unethical. That or you can see laws being broken doing this.

Customer A is a citizen of the UK and subject to 20% VAT

Customer B is a citizen of the UK and subject to 20% VAT

 

Customer A and Customer B both own a private region in Second Life 

Customer A uses his region for his personal home for him and his partner and pays 209 + 20% VAT or 41.8 US$ Per month or 501.6 US$ annually in tax.

Customer B on the other hand uses his region for his club, he rents out shops and also does live singing in his club gathering more than enough income to pay his tier.

Customer B can now just sell his Linden Dollar income to pay for his tier and only pays 209 USD and not a single amount of tax or VAT on his region.

Customer B is not declaring income and revenue he generates from his activities, he is not a VAT registered business either. And more importantly the TAX office is not getting their 501.6 US$ per year from Customer B. This is how income is not being declared and how virtual currency which has no RL value is being used to circumvent payment of VAT or GST.

 

Like I mentioned above in my first post. Others are required to be a VAT registered business and be compliant. Linden Lab is asking for your VAT number. Linden Lab is also asking you to identify yourself as the owner of your business. But now a magical wormhole is discovered where certain people such as creators or store owners or mini rental infrastructures are exempt from paying VAT on their region.

 

 

 

[Dragon Mommy]

I think the answers to your questions are more likely to come from a tax specialist in your area than LL themselves. 

[elleevelyn]

10 hours ago, Count Burks said:

Customer A is a citizen of the UK and subject to 20% VAT

Customer B is a citizen of the UK and subject to 20% VAT

 

Customer A and Customer B both own a private region in Second Life 

Customer A uses his region for his personal home for him and his partner and pays 209 + 20% VAT or 41.8 US$ Per month or 501.6 US$ annually in tax.

Customer B on the other hand uses his region for his club, he rents out shops and also does live singing in his club gathering more than enough income to pay his tier.

Customer B can now just sell his Linden Dollar income to pay for his tier and only pays 209 USD and not a single amount of tax or VAT on his region.

Customer B is not declaring income and revenue he generates from his activities, he is not a VAT registered business either. And more importantly the TAX office is not getting their 501.6 US$ per year from Customer B. This is how income is not being declared and how virtual currency which has no RL value is being used to circumvent payment of VAT or GST.

Linden would have done their due diligence on the VAT component I would think.

What we don't know is the outcome of Linden's due diligence vis a vis VAT.  It may be that Linden still does pay VAT even though they receive payment from Customer B in L$. Customer B paying tier inclusive of VAT.  Might not be either.  Customer B can determine this by requesting a VAT receipt for the L$ tier payment

If a correlated argument is that Linden is discriminating against region owners who are not also Premium Plus members (i.e pay tier in L$ reserved to Premium Plus members) then the argument is seemingly valid in a universal context-free  sense, but not necessarily so in the directed sense (contextual) of structured paid membership benefits

for example a structured benefit of Premium Plus is that one can tier a homestead without also tiering a full region. A argument can be made that this is also unfair in the universal sense (i.e discriminates against non Premium Plus members). Yet this is not unfair in a structured system of paid memberships as Customer A can also obtain Premium Plus the same as Customer B.  As Customer A is not denied the ability to do this then Customer A is not discriminated against

 

 

   

Edited March 8, 2023 by elleevelyn
remove repetition

[Jules Catlyn]

If i sell any service or goods, i am allowed to charge a compensation that i see fit. If these are monetary, real life transactions, the tax office will probable wants to know about it. But if both the service and the compensation take place in a closed eco-system ( like for instance the barter system) , i don't think the tax office will bother with it. Virtual game currencies are still something most tax laws in countries haven't caught up with yet. So yes, if you use rl funds with an rl currency, your local tax man will be interested. If it is all handled in this closed eco system, the whole deal had no rl monetary value and they probably cannot do anything about it.

I am no tax expert but as far as i know, that's how it works.

[Adam Spark]

12 hours ago, Count Burks said:

Customer A is a citizen of the UK and subject to 20% VAT

Customer B is a citizen of the UK and subject to 20% VAT

 

Customer A and Customer B both own a private region in Second Life 

Customer A uses his region for his personal home for him and his partner and pays 209 + 20% VAT or 41.8 US$ Per month or 501.6 US$ annually in tax.

Customer B on the other hand uses his region for his club, he rents out shops and also does live singing in his club gathering more than enough income to pay his tier.

Customer B can now just sell his Linden Dollar income to pay for his tier and only pays 209 USD and not a single amount of tax or VAT on his region.

Customer B is not declaring income and revenue he generates from his activities, he is not a VAT registered business either. And more importantly the TAX office is not getting their 501.6 US$ per year from Customer B. This is how income is not being declared and how virtual currency which has no RL value is being used to circumvent payment of VAT or GST.

 

Like I mentioned above in my first post. Others are required to be a VAT registered business and be compliant. Linden Lab is asking for your VAT number. Linden Lab is also asking you to identify yourself as the owner of your business. But now a magical wormhole is discovered where certain people such as creators or store owners or mini rental infrastructures are exempt from paying VAT on their region.

 

 

 

The only reason they collect VAT is because legally, they HAVE to. What are the odds that they made this change without making sure it was not legally a scheme to get around tax collection?

Spoiler alert: Less than zero. They are a business with a ton of oversight. Once it became illegal to gamble in many US jurisdictions, they were FORCED to close casinos fast. LL does not have the freedom or lack of oversight to do things that get around laws. If they are messing with tax collection, there is a perfectly legal and lawyer cleared reason its happening. Further, its a beta program you have to sign up for, even if you have a qualifying subscription. If red flags are raised (by governments that impose these rules), it will get scrapped. The same thing happened with banking schemes back in the day. Banking got wiped from the grid when legal authorities got involved.

Neither Customer A or B has legal reason to declare anything unless he cashes out his Linden Dollars, as only then does it become something of value (real world currency). At this point, he pays all the pertinent taxes. If either withdraws, then he pays taxes. With this feature, neither customer has to withdraw.

Basically what this does is allow users who do not withdraw or purchase many/any Ls (which in-world have no value) to use them to pay for land from LL in a similar way we all pay for texture uploads or mesh uploads. Its the real world income that you convert your lindens to that gets taxed. L's generated in world can now be used to buy land, and that only makes basic sense in my opinion.

[Count Burks]

1 hour ago, Adam Spark said:

Neither Customer A or B has legal reason to declare anything unless he cashes out his Linden Dollars, as only then does it become something of value (real world currency). At this point, he pays all the pertinent taxes. If either withdraws, then he pays taxes. With this feature, neither customer has to withdraw.

The point remains that the VAT office receives 501.6 US$ yearly in tax from Customer A and nothing from Customer B unless Linden Lab would secretly pay the VAT owed by Customer B to the tax office. And this because Customer B is earning income from virtual currencies inside of a virtual world without declaring this income and that scheme is how the VAT tax is circumvented.

I am aware there isn't any tax on user to user transactions inside of a virtual world, still in this case it is different because the platform provider Linden Lab is setting up a scheme to facilitate and bridge virtual world earnings to real world currency US$.

This scheme allows a flow of money where customer A is paying VAT tax and gets billed VAT while Customer B is not (at least not in a transparent manner).

 

 

Edited March 8, 2023 by Count Burks

[Ceka Cianci]

3 minutes ago, Count Burks said:

The point remains that the VAT office receives 501.6 US$ yearly in tax from Customer A and nothing from Customer B unless Linden Lab would secretly pay the VAT owed by Customer B to the tax office. And this because Customer B is earning income from virtual currencies inside of a virtual world without declaring this income and that scheme is how the VAT tax is circumvented.

I am aware there is not tax on user to user transactions inside of a virtual world, still in this case it is different because the platform provider Linden Lab is setting up a scheme to facilitate and bridge virtual world earnings to real world currency US$.

This scheme allows a flow of money where customer A is paying VAT tax and gets billed VAT while Customer B is not (at least not in a transparent manner).

 

 

From the sound of it ,it's because customer A isn't generating lindens in world..

So customer B who is generating lindens in world, Sells their lindens which go to the tilla wallet as credits.. Never withdraws them to a third party service like paypal or whatever one they use..Then turns around and pays their sim with their 209 credits and doesn't get charged VAT?

If this is the case then anyone that generates enough lindens  in world could do that with their credits without getting charged VAT the whole time..Even before this new perk was put in place.

Because if nobody gets charged VAT or Taxes on their Tilla wallet credits from selling the lindens on the lindex, then customer A just need to generate enough lindens.

If the UK is getting charged VAT on credits before they are withdrawn  to a third party service, then you guys have been getting a raw deal the whole time.

Income is not generated in world because linden dollars are not real income, they are a closed loop digital currency so they have no value outside the world..

If user A and user B generate  enough in lindens, and those lindens stay in world, they won't get taxed on them.. if they won't get taxed on them then they aren't generating taxable income.

 

 

[Adam Spark]

22 minutes ago, Count Burks said:

The point remains that the VAT office receives 501.6 US$ yearly in tax from Customer A and nothing from Customer B unless Linden Lab would secretly pay the VAT owed by Customer B to the tax office. And this because Customer B is earning income from virtual currencies inside of a virtual world without declaring this income and that scheme is how the VAT tax is circumvented.

I am aware there isn't any tax on user to user transactions inside of a virtual world, still in this case it is different because the platform provider Linden Lab is setting up a scheme to facilitate and bridge virtual world earnings to real world currency US$.

This scheme allows a flow of money where customer A is paying VAT tax and gets billed VAT while Customer B is not (at least not in a transparent manner).

 

 

The VAT office receives everything they are owed. They are not owed money from those who pay with $Ls, because $Ls have no value. They would not ask for customer Bs money if they looked into it. Your problem is with the tax regulators in your country for not forcing a tax on Linden Dollar payments, not with Linden Lab.

[Count Burks]

11 minutes ago, Adam Spark said:

They are not owed money from those who pay with $Ls, because $Ls have no value.

Yet they are accepted by the company as equal funds to the USD$ to pay for products and services.

A company sells their identical product to two customers.

Customer A pays in USD$ and also pays the VAT

Customer B pays in currency that has no real world value and skips the VAT payment.

And according to your logic the tax office would be ok with the fact Customer B has not paid VAT for the product because he just paid with virtual currency that has no real value?

[Adam Spark]

5 minutes ago, Count Burks said:

Yet they are accepted by the company as equal funds to the USD$ to pay for products and services.

A company sells their identical product to two customers.

Customer A pays in USD$ and also pays the VAT

Customer B pays in currency that has no real world value and skips the VAT payment.

And according to your logic the tax office would be ok with the fact Customer B has not paid VAT for the product because he just paid with virtual currency that has no real value?

Exactly, otherwise they would not be allowed to do this.

[Count Burks]

4 minutes ago, Adam Spark said:

Exactly, otherwise they would not be allowed to do this.

So the VAT office is totally fine now with not receiving their 20% in value added tax anymore because Linden Lab is just accepting their worthless virtual currency they printed out of thin air?

 

My god I am learning so much here today, incredible. Printing turtle coins out of thin air, selling turtle coins to users and accepting them for payment and no longer having to collect taxes.

 

I am utterly amazed.

Edited March 8, 2023 by Count Burks

[Adam Spark]

Just now, Count Burks said:

So the VAT office is totally fine now with not receiving their 20% in value added tax anymore because Linden Lab is just accepting their worthless virtual currency they printed out of thin air?

They are fine with receiving their 20% in VAT on anything bought with currency of value, which Linden Dollar tokens are not, yes. Either that or they have not yet stepped in and said they are not yet.

[Count Burks]

1 minute ago, Adam Spark said:

They are fine with receiving their 20% in VAT on anything bought with currency of value, which Linden Dollar tokens are not, yes. Either that or they have not yet stepped in and said they are not yet.

They are fine if these are user to user transactions inside of a virtual world or metaverse. 

Here you can read about a case on this particular topic and the outcome when trades are being made between users inside of a virtual world.

Gaming & e-sports: the virtual world remains sales tax-free (for now) - Oppenhoff

In this case it is a different situation as this is not about trades made in digital currency between users but the platform provider setting up a scheme allowing certain users to use their "worthless game currency" to pay for the company product and not charging VAT while others who pay in real world hard currency are in fact being charged VAT.

 

This particular paragraph is most interesting in this context:

Sales tax upon exchange into real money

According to the BFH, this changes as soon as game currency is exchanged for real money. This is because a distinction must be made between the relationship between the players among themselves and the relationship between the player and the company operating the game. The game currency is basically a contractual right. This was transferred for real remuneration on the gaming company's internal exchange. Thus, this transaction was no longer confined to a mere participation in the gaming event, but took place in the real market.

[Caeruleiae]

15 minutes ago, Count Burks said:

According to the BFH, this changes as soon as game currency is exchanged for real money.

You answered yourself right there.

Customer B, or whatever you want to call them, never exchanges those lindens-fake currency you keep saying, for real money. It's never turned into real money by that customer. That customer isn't obligated to pay vat, because, it's not real money, real income, or a real payment for anything. If ll wants to later turn those lindens-fake currency tokens, into real money, ll will be the one paying the vat, because they're the one now making a real transaction using real money.

You literally spelled it out for yourself the entire time. Customer a is using real money, in exchange for the same product sure, but real money. Customer b never involves real money. That's not a loophole, magic wormhole or anything like that. Yes ll does have a legal and financial team that will have gone over all of this with a fine toothed comb long before we ever heard of it, especially given the history experience and knowledge of its investors-it's in finances, in case you were not aware, so they understand the legal ramifications and intricacies better than all of us and the rest of ll combined. 

[Count Burks]

50 minutes ago, Caeruleiae said:

You answered yourself right there.

Customer B, or whatever you want to call them, never exchanges those lindens-fake currency you keep saying, for real money. It's never turned into real money by that customer. That customer isn't obligated to pay vat, because, it's not real money, real income, or a real payment for anything. If ll wants to later turn those lindens-fake currency tokens, into real money, ll will be the one paying the vat, because they're the one now making a real transaction using real money.

You literally spelled it out for yourself the entire time. Customer a is using real money, in exchange for the same product sure, but real money. Customer b never involves real money. That's not a loophole, magic wormhole or anything like that. Yes ll does have a legal and financial team that will have gone over all of this with a fine toothed comb long before we ever heard of it, especially given the history experience and knowledge of its investors-it's in finances, in case you were not aware, so they understand the legal ramifications and intricacies better than all of us and the rest of ll combined. 

There is because Linden Lab receives 209 + 20% VAT or 41.8 US$ Per month or 501.6 US$ annually in tax from Customer A but not from customer B unless Linden Lab pays the 501.6 US$ for customer B out of their own pocket. Why would Linden Lab become so generous and pay 501.6 USD$ per year out of their own pocket so they can upsell a Premium+ membership package that makes them 109 USD in a year?

[Rowan Amore]

1 hour ago, Count Burks said:

They are fine if these are user to user transactions inside of a virtual world or metaverse. 

Here you can read about a case on this particular topic and the outcome when trades are being made between users inside of a virtual world.

Gaming & e-sports: the virtual world remains sales tax-free (for now) - Oppenhoff

In this case it is a different situation as this is not about trades made in digital currency between users but the platform provider setting up a scheme allowing certain users to use their "worthless game currency" to pay for the company product and not charging VAT while others who pay in real world hard currency are in fact being charged VAT.

 

This particular paragraph is most interesting in this context:

Sales tax upon exchange into real money

According to the BFH, this changes as soon as game currency is exchanged for real money. This is because a distinction must be made between the relationship between the players among themselves and the relationship between the player and the company operating the game. The game currency is basically a contractual right. This was transferred for real remuneration on the gaming company's internal exchange. Thus, this transaction was no longer confined to a mere participation in the gaming event, but took place in the real market.

The thing is, LL is not buying  your Ls when you cash them in, other residents are.  The only thing LL collects is the transaction fee for the exchange.  As far as LL is concerned, Ls are a non fiat currency.  If LL WERE buying your Ls for RL money, that would be entirely different.  

From the knowledge base...

Note: Unlike market buys, market sells do not necessarily complete instantly. Sell orders complete once the L$ are purchased by other Residents, so it may take a short while for a market sell to complete depending on how many Residents are buying L$ at that time.

[Count Burks]

1 minute ago, Rowan Amore said:

The thing is, LL is not buying  your Ls when you cash them in, other residents are.  The only thing LL collects is the transaction fee for the exchange.  As far as LL is concerned, Ls are a non fiat currency.  If LL WERE buying your Ls for RL money, that would be entirely different.  

This is not about the Lindex or how the Lindex functions or how the system has been functioning for the previous decades.

This is about Linden Lab now accepting directly Linden Dollars for payment of private regions. Linden Lab is in fact now collecting Linden Dollars for payment which they will transact for USD currency through their own exchange or will destroy but then just print the same amount and sell that on their own exchange.

Linden Lab is now accepting Linden Dollars as an equivalent for RL money and by doing so demonstrating the Linden Dollar has RL value.

My issue is certain people need to pay VAT or GST on their regions while others do not because of this scheme. So it is discriminating towards certain users.

[Rowan Amore]

15 minutes ago, Count Burks said:

This is not about the Lindex or how the Lindex functions or how the system has been functioning for the previous decades.

This is about Linden Lab now accepting directly Linden Dollars for payment of private regions. Linden Lab is in fact now collecting Linden Dollars for payment which they will transact for USD currency through their own exchange or will destroy but then just print the same amount and sell that on their own exchange.

Linden Lab is now accepting Linden Dollars as an equivalent for RL money and by doing so demonstrating the Linden Dollar has RL value.

My issue is certain people need to pay VAT or GST on their regions while others do not because of this scheme. So it is discriminating towards certain users.

No...regardless of how many times you say it...No.

  Whether YOU think it's fair that LL is allowing people to pay with Ls therefore avoiding the VAT,  is irrelevant when it's perfectly within the laws as I (and obviously LL's legal team) understand them.

 

[Love Zhaoying]

On 3/7/2023 at 12:44 PM, Count Burks said:

Customer A can use fake game currency to pay for PRODUCT 1 without being required to pay 21% VAT. 

Customer B on the other hand has 5 times PRODUCT 1 with the company but is forced to pay 21% VAT when paying in legal tender using USD$.

..because only 1 Private Region can be paid for the new way. Per user.

 

[Count Burks]

20 minutes ago, Rowan Amore said:

No...regardless of how many times you say it...No.

  Whether YOU think it's fair that LL is allowing people to pay with Ls therefore avoiding the VAT,  is irrelevant when it's perfectly within the laws as I (and obviously LL's legal team) understand them.

 

My question remains (see the thread title) as to why Linden Lab is setting up this scheme. Even if Linden Lab is paying the VAT out of their own pocket for some reason and everything is legal.

And yes I have strong doubts how it is fair to let one person pay more than the other by using this kind of scheme. Nice signal to give to your customers. I think this is a shady construction no matter how you twist or turn it. I am also bothered by this graph as it does not properly display the correct market value either of the currency rate (again manipulation and shifting of value).

Region Type	Price US$	Price L$
Event Elite	$599	L$164,725
Event Pro 30k	$479	L$131,725
Event Pro	$449	L$123,475
Full 30k	$239	L$65,725
Grandfathered Full 30k	$209	L$57,475
Full	$209	L$57,475
Grandfathered Full	$179	L$49,225
Homestead	$109	L$29,975
Grandfathered Homestead	$95	L$26,125

 

If Linden Lab would like to accept L$ for region payments and it is all legal they should allow anyone to pay for their regions using Lindens if they would like to offer this and at the normal exchange rate and also respect the VAT payments and VAT status on the account. 

[Rowan Amore]

8 minutes ago, Count Burks said:

why Linden Lab is setting up this scheme

As a perk for being Premium Plus, I'd imagine.

8 minutes ago, Count Burks said:

I have strong doubts how it is fair

LIFE isn't fair.  

Anyway...

[Ceka Cianci]

Nobody has to pay the VAT if they aren't charging real world money for the service or paying real world money for the service..

Not linden lab and not the players.. If players with a certain membership achieve a certain goal, they can use in game play money to pay for  their in world region..

Linden lab is not obligated to charge real world money for the use of their things.. they are also allowed to offer certain perks to different memberships..

Discrimination would be if only certain users were allowed to become premium plus members ..That isn't the case since anyone can upgrade.

[Solar Legion]

Read it. Read it again. Read it AGAIN. Continue to read it until it dawns on you that this is a pilot program.

After that, sit back down and stow the misplaced, faux outrage.

[Count Burks]

1 hour ago, Ceka Cianci said:

Nobody has to pay the VAT if they aren't charging real world money for the service or paying real world money for the service..

Not linden lab and not the players..

And again the magical wormhole where VAT goes up in thin air.

Every business on the planet should start to print their own coin, sell it to their customers and let their customers pay for the service with their fake coins that have no value to then sell those fake coins to the next customer that comes along so they do not have the charge VAT. It's genius, why didn't anyone else came up with this idea before? 

 

 

[Ceka Cianci]

48 minutes ago, Count Burks said:

And again the magical wormhole where VAT goes up in thin air.

Every business on the planet should start to print their own coin, sell it to their customers and let their customers pay for the service with their fake coins that have no value to then sell those fake coins to the next customer that comes along so they do not have the charge VAT. It's genius, why didn't anyone else came up with this idea before? 

 

 

Magic is usually what people call something when they don't understand it, so I understand.

I'm leaving the leaven now because it's going in circles.

Have a good day.

 

Edited March 8, 2023 by Ceka Cianci