Mindark answers Skatteverket

[aridash]

Originally Posted by Jake Rogue

I believe that you misunderstood my point entirely here.

I never meant to infer that income made inside a virtual world cannot be taxed, my point was that it should only be taxed at the point of withdrawal into real life currency (i.e. the poker game is over and we convert our chips back into real life cash, what happened in between during the game regarding how many chips we won/lost during a specific round is irrelevant, the chips were just part of the internal "system" of the game).

But the whole point here is that the Swedish tax office is saying otherwise. They are stating that, in principle, avatars within a virtual universe operated by any company with an office in their jurisdiction, which carry out economic activity over the specified threshold will be liable for VAT as if the avatar were actually in Sweden. They are removing the line between virtual and real, the VAT rules apply within the virtual. (And remember you dont have to make a profit to be liable for VAT)

This whole parallel example of casino chips or other tokens is a myth. if you go to blackpool () and come out of the casino with a bag of chips then go into the nearby cafe and pay for lunch with them (assuming they would except them) then they use that to pay their suppilers who in turn pay their workers, do you think the tax man will a) say that isnt real money, never mind, or b) they have a face value of £xxxx and will be taxed accordingly? In he marvellous city of Brighton they used to have (they might still) "pink pounds" in circulation. You exchanged £ for them and the idea was you got discouted rates at certain establisments by paying with them; you think the taxman discounted these virtual/fake notes when looking at peoples personal and business income? When you have a company car the value is counted in your taxable income, it is a token but still has a real and transferable value. Many companies, particularly US based ones, pay their employees in shares, you think they pay no income tax due to this (although it is very tax efficient)? When the very rich fall into debt with the taxman, such as cant pay inheritance taxes, they will give valuable items in lieu, such as paintings and jewelry which is appraised and given a real value at the point of settlement. money itself is barely real, its just a means of exchange of value. The taxman just converts your "token" into the local currency for purpose of neat and transparent accountancy. if you still dont beleive me, think of the swindles you could do, noone would ever pay tax.

(actually, interesting point about gold, but i suspect there is a difference between gold held on account ie for trading and actual gold in your hand. you certainly pay VAT on a gold braclet or other jewelry)

[Darkaner]

Originally Posted by Jake Rogue

It seems to me that many are missing an important point here:

Project Entropia Dollars (PED) do not constitute a real currency, it’s a virtual game currency (much like monopoly money, amusement arcade tokens, raffle tickets or casino chips). The only time that this wealth actually becomes realized and “real money” is when we initiate and receive a withdrawal.

You are saying that money transfered to EU becomes a virtual item, and therefore we do not own them? I am not so sure about this... We do own the tt value of our account.

I think this is a common misinterpretation of the EULA. That part in the EULA about items and that we do not own them is to point out that we can't claim ownership of the virtual representation of our peds, but this doesn't mean the items tt value doesn't belong to us. So if MA decides to remove the mod fap because it is unbalanced, they can do this and then give the fap owners the tt value in return.

So to the point . I think the peds on our account can be seen as real money, and I think MA and the Tax office sees it as real money.

[Lavawalker]

At the end of the day, MA has very little to worry about.
If the Swedish Tax Office gets heavy handed with them on the issue,
MindArk, simply splits itself into an umbrella Group corporation.

MindArk Group - Registered in a country where the taxation laws are such that it suits the international arena and does not impede upon their own operations with any great level of inconvience.

- MindArk Reseach, Design & Development - Current offices in Sweden running as an operational expense within the group, business development along with platform design and development goes on here

- MindArk Entertainment - Entropia Universe service offering, accounts payable and receivable along with short term investment management. Best located at the same location as the MindArk Group, all financial holdings are converted to that countries currency and maintained within that country upon with is the entry and exit point for any transactions into or out of EU. Also the wing that pays all operational costs of the MindArk Group worldwide.

Problem solved, legit, done by most large scale organisations that have had to face this issue and not a thing the swedish tax department can do about it as the swedish office is now purely an operational expense which employs people to work for them.

That way MindArk will not be required to report to anyone in relation to such information;

Meaning if the Swedish tax department makes this new ruling, then it will be the responsibility of those participants within Sweden to report what taxes they are required to pay, not MindArk.

I do not see any real stress from what the Swedish Tax department has come up with other than to get attention in my honest opinion.

Yes eventually regulations will be set for the virtual RCE space, yet this will be done on the world stage and agreed to by all countries. Not something any one country will have a say as to this is how it will be period.

~ Sparkz

[Jake Rogue]

Originally Posted by aridash

But the whole point here is that the Swedish tax office is saying otherwise. They are stating that, in principle, avatars within a virtual universe operated by any company with an office in their jurisdiction, which carry out economic activity over the specified threshold will be liable for VAT as if the avatar were actually in Sweden. They are removing the line between virtual and real, the VAT rules apply within the virtual. (And remember you dont have to make a profit to be liable for VAT)

Unfortunately, I don’t speak Swedish but I'm with Jan Welter Timkrans and the US Congress on this one. Skatteverket may be trying to suggest this, although that doesn't mean that their statement from this review is well thought out, logical or even legally accurate. I got the impression from Mjukis' translation that they themselves were still trying to figure out this whole issue and that nothing is definitive yet.

Nonetheless, VAT (or whatever the Swedish equivalent is) should only be due where real life funds are actually made, and that requires the withdrawal of intangible virtual world "currency" (an internal mechanism of the given online world) into real life funds. It is then, at that point of real world tangible profit, that any tax mechanisms should be applied. "Economic activity" only exists where a real world profit/loss has been made, not a virtual profit within the "system" of an ongoing virtual world.

Originally Posted by aridash

This whole parallel example of casino chips or other tokens is a myth. if you go to blackpool () and come out of the casino with a bag of chips then go into the nearby cafe and pay for lunch with them (assuming they would except them) then they use that to pay their suppilers who in turn pay their workers, do you think the tax man will a) say that isnt real money, never mind, or b) they have a face value of £xxxx and will be taxed accordingly? In he marvellous city of Brighton they used to have (they might still) "pink pounds" in circulation. You exchanged £ for them and the idea was you got discouted rates at certain establisments by paying with them; you think the taxman discounted these virtual/fake notes when looking at peoples personal and business income? When you have a company car the value is counted in your taxable income, it is a token but still has a real and transferable value. Many companies, particularly US based ones, pay their employees in shares, you think they pay no income tax due to this (although it is very tax efficient)? When the very rich fall into debt with the taxman, such as cant pay inheritance taxes, they will give valuable items in lieu, such as paintings and jewelry which is appraised and given a real value at the point of settlement. money itself is barely real, its just a means of exchange of value. The taxman just converts your "token" into the local currency for purpose of neat and transparent accountancy. if you still dont beleive me, think of the swindles you could do, noone would ever pay tax.

It appears here that you have misunderstood what I meant by the word “token”. I was referring specifically to an arbitrary item of no real intrinsic or tangible real world value outside of its specific intended use within the establishment, private company, group or association that issued it. (i.e. something such as a plastic coin that has no value outside out of the casino/arcade that produced it and isn’t recognised as legal tender in its country of origin).

A car, a painting or a piece of jewellery is a tangible asset with an associated real world intrinsic value, and is quite separate legally from the concept of a “token” in this context.

Using the example of Gold Bullion, as gold is a tangible asset with a real world intrinsic value it is seen as an extremely attractive investment in times of uncertainty or volatility in the wider financial markets, precisely because it has a meaningful real world value.

http://en.wikipedia.org/wiki/Intrinsic_value
http://en.wikipedia.org/wiki/Tangible
http://en.wikipedia.org/wiki/Tangible_property

Your example of using tokens (casino chips) in a café is flawed as they are not a viable legal tender, but even if they were accepted by the owner this would constitute a barter trade and the onus would be on the business owner to declare this. Although, in real life this rarely happens as it’s very difficult for authorities to track and tax goods or services exchanged in this way (unless large scale money laundering is taking place!).

The use of “Pink Pounds” in Brighton or “Disney Dollars” in Disney World is exactly the same as purchasing a gift voucher from a department store that can only be used in one of their stores, and should legally have no value outside of that specific business or organisation, and is certainly not recognised as a legal form of currency by the state.

Originally Posted by Darkaner

You are saying that money transfered to EU becomes a virtual item, and therefore we do not own them? I am not so sure about this... We do own the tt value of our account.

I think this is a common misinterpretation of the EULA. That part in the EULA about items and that we do not own them is to point out that we can't claim ownership of the virtual representation of our peds, but this doesn't mean the items tt value doesn't belong to us. So if MA decides to remove the mod fap because it is unbalanced, they can do this and then give the fap owners the tt value in return.

So to the point . I think the peds on our account can be seen as real money, and I think MA and the Tax office sees it as real money.

I wouldn't be so sure about that Darkaner, MindArk reserve the right to close or lock an account at any time and for any reason, and they could keep the TT value of your entire account if they chose to do so.

Technically, at the moment (until a legal precedence is set) you have no legal ownership rights to the items in your account whatsoever. Philosophically, the only difference between a 1 PED coin in Entropia Universe and an item/tool with a TT value of 1 PED is the icon/graphics used to represent that item.

[aridash]

Originally Posted by Lavawalker

At the end of the day, MA has very little to worry about.
If the Swedish Tax Office gets heavy handed with them on the issue,
MindArk, simply splits itself into an umbrella Group corporation.

MindArk Group - Registered in a country where the taxation laws are such that it suits the international arena and does not impede upon their own operations with any great level of inconvience.

yes, it really is that simple. so why are HSBC, BHP Billiton, Microsoft, BP and all the other big companies in the world are based in countries where they pay tax? It doesnt work like that, you can only shuffle so much off shore. they would have to move their whole main office and workforce.

Originally Posted by Jake Rogue

Unfortunately, I don’t speak Swedish but I'm with Jan Welter Timkrans and the US Congress on this one. Skatteverket may be trying to suggest this, although that doesn't mean that their statement from this review is well thought out, logical or even legally accurate. I got the impression from Mjukis' translation that they themselves were still trying to figure out this whole issue and that nothing is definitive yet.

Nonetheless, VAT (or whatever the Swedish equivalent is) should only be due where real life funds are actually made, and that requires the withdrawal of intangible virtual world "currency" (an internal mechanism of the given online world) into real life funds. It is then, at that point of real world tangible profit, that any tax mechanisms should be applied. "Economic activity" only exists where a real world profit/loss has been made, not a virtual profit within the "system" of an ongoing virtual world.

heres a link to a translation of the summary i ran though a web based app. once again i will highlight that what is at issue here is not what you or i think is right and wrong or "should" be taxed, when and where, it is what the Swedish authority has decided is eligiable for tax. The representitive of the Skatteverket may have acknowledged there is a problem with actual enforcement, but that doesnt mean they cant or wont.

As for tokens, tangible or intangible makes not difference. A share in a company is intangible, a futures contract on the price of soy beans is intangible yet this is how the world goes round. does your money suddely cease to exist once its in your bank account, stored as a bunch or intangible data on their systems? 10PED=$1 which makes it just as real as anything else. As for legal tender, that is a concept of what you obliged to accept, you may accept payment in any form. If Disney paid French/Floridian workers in Disney Dollars you can be sure they would still be taxed on them (other wise the workers would be paid in Disney Dollars to avoid any tax, qed.)

[Darkaner]

Originally Posted by Jake Rogue

I wouldn't be so sure about that Darkaner, MindArk reserve the right to close or lock an account at any time and for any reason, and they could keep the TT value of your entire account if the chose to do so.

Technically, at the moment (until a legal precedence is set) you have no legal ownership rights to the items in your account whatsoever. Philosophically, the only difference between a 1 PED coin in Entropia Universe and an item/tool with a TT value of 1 PED is the icon/graphics used to represent that item.

I know, I am not sure, it's just what I always assumed that part of the EULA ment. But no matter what, this is not enough to discourage the Tax office. The PED is treated like a real currency and I think that matters more than some EULA that has close to no legal value.

[Jake Rogue]

Originally Posted by aridash

yes, it really is that simple. so why are HSBC, BHP Billiton, Microsoft, BP and all the other big companies in the world are based in countries where they pay tax? It doesnt work like that, you can only shuffle so much off shore. they would have to move their whole main office and workforce.

heres a link to a translation of the summary i ran though a web based app. once again i will highlight that what is at issue here is not what you or i think is right and wrong or "should" be taxed, when and where, it is what the Swedish authority has decided is eligiable for tax. The representitive of the Skatteverket may have acknowledged there is a problem with actual enforcement, but that doesnt mean they cant or wont.

As for tokens, tangible or intangible makes not difference. A share in a company is intangible, a futures contract on the price of soy beans is intangible yet this is how the world goes round. does your money suddely cease to exist once its in your bank account, stored as a bunch or intangible data on their systems? 10PED=$1 which makes it just as real as anything else. As for legal tender, that is a concept of what you obliged to accept, you may accept payment in any form. If Disney paid French/Floridian workers in Disney Dollars you can be sure they would still be taxed on them (other wise the workers would be paid in Disney Dollars to avoid any tax, qed.)

I no longer really have the time or patience to point out your misinterpretations, misconceptions or the flaws in the semantic arguments that you are using here.

All I can suggest is that you consider and contemplate the historical precedence set by governments in the discrepancies between what they publicly state to be the law and what in reality is actually practically enforced (wilfully or otherwise), especially regarding tax laws, and try not to worry until the day arrives when cutting a neighbour’s/family member’s lawn/feeding his pets/cleaning his car requires him to keep a VAT receipt for the pint/meal/bottle of wine/gift he bought you in exchange.

Until I find Skatteverket breaking my front door down, I’m going to take this press statement as little more than a gentle warning/reminder to the Swedish public that they should be good little citizens and always make sure that they pay their taxes.



Oh, and good luck using those stolen casino chips to buy a meal in a restaurant.

[Legion]

hmm what would happen if you would claim the funds you withdraw is a gift from a friend ingame? i know for a fact you can get a gift of x amount of cash and not have to pay tax for it but is that for a total amount of /person giving you a gift? :P

[billairboy]

To clarify a common missunderstanding, it's not only swedish companies/people who is gone be forced to add VAT (moms). Sellers from outside Sweden can be forced to pay VAT too.

[Dorsai]

This reminds me of a film I watched, name long forgotten (If i ever knew it), long time ago.

Man interviewed by IRS.