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Entropia profits and taxes

Crone

Crone

Prowler
Joined
May 12, 2006
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1,267
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Netherlands
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CRT
Avatar Name
Joshua Crone Craftson
How do you people deal with taxes of your in game profits or wins? Ofcourse Crone is most interested in Dutch and EU stories, he does consider other countries to be useful as well. As tax rules are more or less the same in any country.

Crone would see any profits as income from a hobby which in itself is not taxable (in the Netherlands) as long as it is within reason and not your major income. this leaves a large grey gap since "major income" probably depends on your other incomes.

It could be income from work, incoming money always comes from the same bank account from MindArk, the relationship between the player and MindArk could be considered defined in the EULA. MindArk and the player are both able to terminate the relationship by a ban or request. There is a written agreement each time you click on accept. The work MindArk offers is defined within the software itself and a 0 hour contract is totally normal in many countries. This would make MindArk responsible for any wage taxes, therefore not the player's problem.

This leaves profit as in being self employed. Crone also denies this since that would mean invoices, which would mean names and VAT numbers from customers and himself. No way a trader will get those from his suppliers.

Income from other activities could be reasonable as well. Be it, this is essentially a game. This means hobby, which means no taxes.

Then there is the occassional very lucky player. He is in the top of the ATH list. This is very tricky. It could be considered what we dutch call kansspelbelasting (gamble tax). This will be hard to beat, except that MindArk will be at your side defending this is not a casino like game.

Interesting. Any other thoughts?
 
Just spend all peds in game and never withdrawal. Problem solved. :)
 
In sweden, there's no tax for Entropia Withdraw. That is all I can confirm.
 
WhiningSkeptic said:
Hmm.

Doesn't it go under income tax if your withdrawal exceeds your deposits?
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No, it does not. I have asked Swedish IRS about it and they do not see it as an income of work, nor do they see it as lottery winning. They have no established tax rules for this form of payout as for now.
 
in germany we have a tax on incomes (Einkommenssteuer) and no taxes for gambling profits, so ofc for me entropia is gambling :yup:
 
e-lite said:
No, it does not. I have asked Swedish IRS about it and they do not see it as an income of work, nor do they see it as lottery winning. They have no established tax rules for this form of payout as for now.
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Is that really true? I know they have made statements that all buying/selling in Virtual Universe should be tax with VAT. So that also means that it should be counted as an enterprise and taxed as an income from business. But logic say it totally impossible to do as they have said we should do. But i would not count on that it's free from tax, I would say it should probably be taxes as income from enterprise. But as you say, it's a very new kind of payouts so it will probably be unclear for a while before some clear rules are established.
 
Crone said:
How do you people deal with taxes of your in game profits or wins? Ofcourse Crone is most interested in Dutch and EU stories, he does consider other countries to be useful as well. As tax rules are more or less the same in any country.
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Problem is that even if you are not living in Sweden,you can be forced to follow Swedish tax-law if you are doing business with people form Sweden or if you are selling to an other EU member land. For example, an american company selling to a Swedish buyer that are not a company must add VAT (moms) to Swedish custumer. So a player from US that are doing so much selling inside the game that they are counted as a "business" and are selling to a Swedish player should pay Swedish VAT on all these sells. It's practical impossible, but that is how the rules are.
 
billairboy said:
Problem is that even if you are not living in Sweden,you can be forced to follow Swedish tax-law if you are doing business with people form Sweden or if you are selling to an other EU member land. For example, an american company selling to a Swedish buyer that are not a company must add VAT (moms) to Swedish custumer. So a player from US that are doing so much selling inside the game that they are counted as a "business" and are selling to a Swedish player should pay Swedish VAT on all these sells. It's practical impossible, but that is how the rules are.
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Not quite.

Since you aren't part of the vat registry (momsregistret, f-skattesedel, helvetes engelska) you are passing on the burden to the buyer, aren't you?

Anyhow, I'm very doubtful purchases within the game can be compared to real life ones. Since no actual money is passed between people (PED not a proper currency and the MA owns everything clause). If any taxation at all, it would probably just be the normal income tax upon withdrawals (or the other type I can't figure out a translation for, vinstskatt).
 
Any income of $10k or more will be taxed in the US...
 
WhiningSkeptic said:
Not quite.

Since you aren't part of the vat registry (momsregistret, f-skattesedel, helvetes engelska) you are passing on the burden to the buyer, aren't you?

Anyhow, I'm very doubtful purchases within the game can be compared to real life ones. Since no actual money is passed between people (PED not a proper currency and the MA owns everything clause). If any taxation at all, it would probably just be the normal income tax upon withdrawals (or the other type I can't figure out a translation for, vinstskatt).
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It depends if the seller is from a EU country or outside of EU, and if the buyer have a business or not. But Swedish "Skatteverket" have written a statement that sells between players with virtual currencies that can be withdrawn as real money should count as normal "real money" sells.

And it does not take much activity to be classified as a "business" and be taxed as such both with income tax and VAT. I would say if you have earned enough money so that you can withdraw money, and a big part of that comes from selling items to players, you would be classified as a business for income tax and VAT purpose.
 
Actually recently laws changed in the EU regarding VAT on games etc. If you know buy a game from steam steam will charge you VAT according to the laws of the country where the buyer is. This because "delivery" (download) takes place in the country of the buyer. Logically, Crone is the one downloading it on his pc, located in his house, in his country. This is actually consistent with physical goods. But this is business to consumer. The trades Crone offers is consumer to consumer unless one of them is actually a registered business.

A business would be very hard to proof. This means a player would need to come up with annual accounts. How will you value your EU goods? How will you deal with "going concern" in a game that guarantees nothing? Can one base the going concern of a single player on the going concern of MindArk? How is Planet Calypso an issue here? Can MindArk exist without Planer Calypso? There is a difference between "it isn't likely" and "facts and guarantees". If MindArk guarantees anything at all, it is just the trade terminal value.

Crone will put some efford in reading the Denmark notes, these seem official and therefore might be a guideline to other european countries.

Wealth or capital tax could be an issue. But most countries have a minimum amount before wealth is taxed in the first place. Second, with the guarantees Entropia Universe gives you, the value is minimal and will not be considered. For dutch tax laws virtual wealth is not considered yet. This will most likely become an issue at some point.

Currency speculations is a nice one and very interesting since the dollar is worth a lot more than like 2 years ago. But currency speculation in the Netherlands is taxed under wealth/capital tax. Which cannot be an issue if the value is minimal. You might have 100,000 dollar worth of PED, but Crone doubts it can be valued as such as long as it is game money. There is no going concern which means the value is 0. By buying and selling PED you could have made a "fortune" without much costs if you are in a no USD country.

So far Crone does not see anything convincing yet. Tomorrow Crone will read Danish.
 
This VAT thing is pretty simple: it doesnt apply to Entropia. VAT is applicable to goods and services, and you dont sell any goods in EU. you trade a virtual item for virtual currency, there's no real transaction as you dont own either. possibly offering FAPing services migh attract VAT if the Swedish authority wanted to get serious. im pretty certain someone took professional legal advise and this was the verdict and it certainly make sence. the other thing to consider is MA dont levy any VAT on our transactions.

more interesting question is whether MA are charging/paying VAT on sales from the webshop, because if they do have to thats a big chunk of revenue they lose.
 
Dollymaus said:
in germany we have a tax on incomes (Einkommenssteuer) and no taxes for gambling profits, so ofc for me entropia is gambling :yup:
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In Germany u have to pay taxes in one way or another. Either u have to put it as Currency trading profits, or trading profits, or u can declare it as a regular Business income.

The only way to get it free in Germany would be to declare it as Casino Profits. But MA denies it to be a Casino, and EU would also be forbidden then in Germany.

So... if u take out more than u put in, u have to declare it as income in one way or another...

If u do not, its just a matter of time till they find out about EU and scan all Bank Transactions for EU users. And YES, they are allowed to look into your bank account in Germany :handgun:
 
billairboy said:
Problem is that even if you are not living in Sweden,you can be forced to follow Swedish tax-law if you are doing business with people form Sweden or if you are selling to an other EU member land. For example, an american company selling to a Swedish buyer that are not a company must add VAT (moms) to Swedish custumer. So a player from US that are doing so much selling inside the game that they are counted as a "business" and are selling to a Swedish player should pay Swedish VAT on all these sells. It's practical impossible, but that is how the rules are.
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No, it doesn't work like that. You always pay tax according to the country which you are a citizen of or the country you work in. Playing Entropia is not considered as you are working in Sweden.
 
billairboy said:
It depends if the seller is from a EU country or outside of EU, and if the buyer have a business or not. But Swedish "Skatteverket" have written a statement that sells between players with virtual currencies that can be withdrawn as real money should count as normal "real money" sells.

And it does not take much activity to be classified as a "business" and be taxed as such both with income tax and VAT. I would say if you have earned enough money so that you can withdraw money, and a big part of that comes from selling items to players, you would be classified as a business for income tax and VAT purpose.
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Not quite correct that either. Selling things in Entropia to other players counts as the same sort of sale you would do if you sell a used car, a watch or whatever on "blocket" in Sweden. You are not paying tax on private trades between private people.

I can go to the beach and pick up a rock and then sell it to someone for a million dollars without needing to pay tax. As long as you are not marketing yourself as a commercial business.
 
In Poland in PIT form there is "incomes from other sources" field ( also other than non farming bussines activity, as we have quite a few "other" ). So Entropia incomes go straight there as they not fit any other mentioned in PIT categories.

However during one of tax controls inspectors were concerned if such income shouldnt be shown in "financial sources incomes" ( diferent tax % for that 19% vs 18% )

VAT is irevelant as this kind of income is not generated by seling and buying any goods.
 
e-lite said:
No, it doesn't work like that. You always pay tax according to the country which you are a citizen of or the country you work in. Playing Entropia is not considered as you are working in Sweden.
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Crone believes this has recently been changed within the EU.

Business to consumer for internet purchases within the EU: business pays VAT in the country where the consumer is. Please compare game subscriptions and such. Crone believes outside the EU, you are right and there is no VAT.

But Crone doesn't think VAT is applicable at all.
 
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For Norway any activity of a "certain scale" should be considered a business and one would therefor have to pay tax. There is no definition of what that "certain scale" is though, and on direct question year by year so far I have not had to pay any tax. It is all classified as Hobby. I still need to report it though. This is directly from our "IRS" :)
 
e-lite said:
Not quite correct that either. Selling things in Entropia to other players counts as the same sort of sale you would do if you sell a used car, a watch or whatever on "blocket" in Sweden. You are not paying tax on private trades between private people.

I can go to the beach and pick up a rock and then sell it to someone for a million dollars without needing to pay tax. As long as you are not marketing yourself as a commercial business.
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Well, if you would sell a 1000 rocks to various customers at least in NL you will be considered and treated like a business. Since swedish and dutch tax laws are about 90% the same, Crone thinks it is the same in Sweden. Otherwise, why start a business at all?

But the problem is that one cannot proof the deals were made unless MindArk actually keeps track. If MindArk does keep track they cannot confirm the identity of a lot of players since they just don't know. Crone never identified himself to MindArk. However he did use a creditcard, bank account and such. But those are not valid identification methods.

Then VAT would only be applicable in the country of the consumer/buyer... this will lead to a huge administrative mess for any countrie's tax authority. There are no records, they have to force MindArk to work with them, and MindArk will definately try to avoid this, since it would cripple the game's economy. They will have to work out IP addresses which is not mandatory, at least not in the Netherlands. This will be complete chaos and unworkable.
 
Akoz said:
For Norway any activity of a "certain scale" should be considered a business and one would therefor have to pay tax. There is no definition of what that "certain scale" is though, and on direct question year by year so far I have not had to pay any tax. It is all classified as Hobby. I still need to report it though. This is directly from our "IRS" :)
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Yes, Crone believes it is the same in The Netherlands. It is considered hobby.

"Als uw activiteiten zich afspelen binnen de hobby- of familiesfeer, bent u geen ondernemer voor de inkomstenbelasting."

google translate

"If your activities take place within the hobby or family environment, you are not an entrepreneur for income tax purposes."

dutch tax authorities'

Crone would think a game can be considered hobby.

In the past Crone dealt with a musician facing a likewise problem. The consulting accountant told him not to worry for the first fl 20k, about € 9.5k. Given that this was not the musicians main income.

So how does this influence a social security (benefits)? The rules for that in the Netherlands are very different.
 
Crone said:
Well, if you would sell a 1000 rocks to various customers at least in NL you will be considered and treated like a business. Since swedish and dutch tax laws are about 90% the same, Crone thinks it is the same in Sweden. Otherwise, why start a business at all?

But the problem is that one cannot proof the deals were made unless MindArk actually keeps track. If MindArk does keep track they cannot confirm the identity of a lot of players since they just don't know. Crone never identified himself to MindArk. However he did use a creditcard, bank account and such. But those are not valid identification methods.

Then VAT would only be applicable in the country of the consumer/buyer... this will lead to a huge administrative mess for any countrie's tax authority. There are no records, they have to force MindArk to work with them, and MindArk will definately try to avoid this, since it would cripple the game's economy. They will have to work out IP addresses which is not mandatory, at least not in the Netherlands. This will be complete chaos and unworkable.
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Yes, you are correct. But when it comes to Entropia you are a user of the game and a "customer" to it's service. At least in Sweden it does not qualify as business or work.
 
Crone said:
I believe this has recently been changed within the EU.

Business to consumer for internet purchases within the EU: business pays VAT in the country where the consumer is. Please compare game subscriptions and such. I believe outside the EU there is no VAT.

But I don't think VAT is applicable at all.
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This is correct, VAT is payed to the country where the consumer resides not where the business is located, the new laws governing this came into force in January 1st this year. It is worth noting that this only concerns VAT though "ordinary" taxes are still payed to the country where the business is located regardless of consumer location.

e-lite said:
In sweden, there's no tax for Entropia Withdraw. That is all I can confirm.
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I really doubt that this is accurate, all income that isent covered by either income tax or capital gains tax is pretty much covered by "Hobby verksamhet" which has a incredibly broad definition, all that is needed for you to be required to pay a 30% tax is that it happens somwhat regularly and even if its a one off sale you are only fine as long as its below 50,000SEK(~5900Dollars) above that and your taxed at 30% no matter if its the first time your selling.


General rule of thumb i follow:

You are going to be taxed there is no question of that, the correct question to ask is how much. ;)
 
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melander said:
This is correct, VAT is payed to the country where the consumer resides not where the business is located, the new laws governing this came into force in January 1st this year. It is worth noting that this only concerns VAT though "ordinary" taxes are still payed to the country where the business is located regardless of consumer location.



I really doubt that this is accurate, all income that isent covered by either income tax or capital gains tax is pretty much covered by "Hobby verksamhet" which has a incredibly broad definition, all that is needed for you to be required to pay a 30% tax is that it happens somwhat regularly and even if its a one off sale you are only fine as long as its below 50,000SEK(~5900Dollars) above that and your taxed at 30% no matter if its the first time your selling.


General rule of thumb i follow:

You are going to be taxed there is no question of that, the correct question to ask is how much. ;)
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Yes, but Entropia is not a "Hobbyverksamhet", it's entertainment. As I stated in this thread before, I have already asked Swedish IRS (Riksskatteverket) about it, and they could not define it and hence stated to me that it is tax free.
 
e-lite said:
Yes, but Entropia is not a "Hobbyverksamhet", it's entertainment. As I stated in this thread before, I have already asked Swedish IRS (Riksskatteverket) about it, and they could not define it and hence stated to me that it is tax free.
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I dont doubt that you talked to them or what they told you i just think you talked to someone who was not in a position to answer the question properly, There are interview articles with the specific department at Skatteverket dealing with this issue dating as far back as 2010 where virtual universes where you can run a surplus from simply playing is considered taxable hobbyverksamhet at the very least if not a business, Mindark is even brought up as a example.


Zweshi
 
So in Sweden you have a tax on hobby income?
 
melander said:
I dont doubt that you talked to them or what they told you i just think you talked to someone who was not in a position to answer the question properly, There are interview articles with the specific department at Skatteverket dealing with this issue dating as far back as 2010 where virtual universes where you can run a surplus from simply playing is considered taxable hobbyverksamhet at the very least if not a business, Mindark is even brought up as a example.


Zweshi
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Well, even though the "hobbyverksamhet" tax is not applicable to Entropia Universe, you are right, you do have to pay tax on hobby income. But only if it exceeds approx €1300 euro per year in profit. HOW EVER, you are also allowed to subtract the costs and economic deficits you have had previous years. So if I payed €2000 to Mindark the previous year without withdrawal, I can withdraw €3300 this year completely tax free.

If you want more detail on this, you can read this document: (swedish) http://www.skatteverket.se/download/18.353fa3f313ec5f91b95213/1369144681445/34411.pdf
 
Here in Canada, EU funds are not taxed at all. Unless you're stupid enough to claim it as income. I know one person that took out over 50k USD and was never bothered. I've taken out much as well over the years and never once had a problem.

Cheers,
Chad
 
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