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Author Topic: Responses by German ministry of finance concerning Bitcoin and VAT (fulltext)  (Read 3719 times)
edmundedgar
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August 27, 2013, 11:13:14 AM
 #21

actually there might already be examples of this

i don\t play 2nd life, but it seems that VAT is only applied to service fees and not for purchases&exchange of linden dollars.

Right, IIUC the logic there is that two individuals, who presumably aren't registered for VAT, are trading with each other, so as far as Linden Lab can tell VAT is only payable on the trading fee that the parties pay to them, not what the buyer buys from the (presumably non-VAT-registered) seller.

Somebody can correct me if I'm misunderstanding this, but technically I think VAT would be due if:
1) You're a VAT-registered business buying L$ or BTC from someone outside the EU, because you'd be "importing" the L$ or BTC.
2) You're a VAT-registered business selling L$ or BTC to someone inside the EU. However, if that EU buyer is also a VAT-registered business, they'd be able to claim back the VAT you collected from them.

Overall it seems like it can be worked around with appropriate planning, ie VAT-registered businesses need to:

1) Get bitcoins by:
 a) Buying them from a non-VAT-registered seller inside the EU, and nobody pays VAT.
 b) Buying them from a VAT-registered seller, who charges you VAT, which you then reclaim.

2) Get rid of bitcoins by:
 a) Selling them to someone outside the EU, and nobody pays VAT.
 b) Selling them to a VAT-registered buyer, charging them VAT, which they then reclaim.

Some traps for the unwary there, and maybe some interesting arbitrage opportunities for somebody...
perhaps i was not clear...

according to the linden labs website they only charge vat on the trading fee, buying services such as game service fee and virtual land, etc there is no vat collected on purchase of in game currency except for the vat on the trading service fee...

no offense to your logic but they are based in SF and can afford the best lawyers in the world...

What page are you thinking of? I'm seeing this:

Quote
When I purchase L$ on the LindeX, is there a VAT applied?
No, because you are purchasing L$ from another Resident, not from Linden Lab.

http://wiki.secondlife.com/wiki/Linden_Lab_Official:Value_Added_Tax_(VAT)_Frequently_Asked_Questions

They don't talk about what theoretically happens if you or the seller on the other side of the transaction are VAT-registered, and I'm sure nobody's going to bother to track that down, but that doesn't mean nobody technically has a liability to pay it. What Linden Lab and their SF lawyers will be bothered about will be that even if somebody involved in the transaction does have a theoretical VAT liability that nobody can be bothered to chase up, that somebody isn't them.
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August 27, 2013, 03:24:53 PM
 #22

right I get your point regarding the tax liability, so what this is saying is the that onus falls on the seller/buyer and not the exchange to be compliant.

i think this is getting a bit more complex because it is not typical for a business to be able to establish a foreign account as far as i know without registering some organizational structure in the country where the foreign account is located.

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