Lab ends VAT charges on Premium subscriptions

secondlifeIn a further more to sweeten Premium memberships, Linden Lab has announced that with immediate effect, those Premium members who have traditionally have had to pay VAT on their membership subscriptions will no longer have to do so.

The announcement is coupled with a reduction in the Monthly billing plan for Premium from US $9.95 a month to US $9.50, and reads in full:

Being Premium comes with many perks, including a weekly L$ stipend, more privacy with a Linden Home, exclusive gifts and experiences, and now, live chat with the Concierge Support team at Linden Lab.

If you missed your chance to take advantage of our recent 50% off monthly Premium Membership offer – there’s no reason to worry! Now, we’re reducing the standard cost of a monthly Premium subscription to just $9.50 a month. Enjoy all the benefits of Premium Membership for less!

We will also no longer charge VAT for Premium subscriptions. If you live in a region where VAT applies, this means an effective savings in some countries of more than 20% below what you would have previously paid!

VAT payment were introduced by the Lab in 2007. At the time, there was a widespread  – and mistaken – belief that the Lab were having to pay VAT as a result of holding offices and European (notably Brighton, UK). Further misconceptions were voiced (and sometimes still are) about the Lab charging VAT “unnecessarily” on the grounds that they no longer have offices within Europe.

However, as Forbes noted in 2014 when changes were being made to the basic requirements, the EU has, since 2003, always levied VAT against the delivery of electronic services (which Second Life is) from non-EU countries, including the USA. The difference was that prior to 2007, the Lab opted to absorb the VAT charges rather than passing them on to their European customers – at last until things reached a point where it was no longer economically viable for them to do so.

With immediate effect, those Premium members previously liable for VAT on their subscriptions will not longer have the charge passed on to them by the Lab. In addition, the monthly billing plan for Premium is reduced to US $9.50 a month
With immediate effect, those Premium members previously liable for VAT on their subscriptions will not longer have the charge passed on to them by the Lab. In addition, the monthly billing plan for Premium is reduced to US $9.50 a month

With the announcement, it would appear that  – in part – the Lab is once again willing to absorb VAT charges, and in doing so, offer a very credible benefit for EU members who may have been put off upgrading to Premium as a result of the VAT surcharge.

Speaking as an EU resident, I’m more than happy to see my annual subscription reduced from US $84.00 to the standard US $72.00. Together with the perks and bonuses recently introduced – such as the move of Premium live chat support to the Concierge team, this is precisely the kind of creative thinking by the Lab which could go some way to making Premium membership more popular among some sections of the existing user base.

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17 thoughts on “Lab ends VAT charges on Premium subscriptions

  1. I had a quick look at the VAT rules, and I wouldn’t like to say whether Second Life is even liable for VAT. There’s a long and rather fluid list of what is an electronic service, and what might have looked pretty obvious a decade ago might not be now, after the usual flow of court decisions to decide what the words mean.

    With the changes that came last January, it’s probably a good thing for everybody who sells goods in SL. It could all mean that the Place of Supply is in the USA, which gets each in-world and marketplace seller free of some horribly complicated VAT paperwork.

    I used to do VAT returns, The transactions were, compared to everything but SL land, gigantic. And I wasn’t having to deal with EU borders. When I say “horribly complicated” I am not scaremongering. It makes the people who handle Sales Tax in California look all warm and fuzzy.

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    1. The rules ebb and flow. The last revisions were in July 2014 (I believe). Could be that these have allowed the Lab to relax things, or they’re simply absorbing things.

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    2. I know a calculator can be a scary thing for some folks, but maybe this will help…
      $72/year = 18,000L$ <-Premium Membership
      1,500L$ <- Bonus Lindens give you back after 30 days as Premium Member
      300L$ <- Weekly Stipend give you has Premium Member
      512m <- FREE monthly tier you are alloted as Premium Member

      Now for the calculator bit…
      18,000L$
      -1,500L$
      -15,600L$ (that's $300L$ X 52 weeks)
      = $900L$

      That means Premium Membership costs just 900L$/Year!!

      WHICH MEANS you can have a nice little plot of land all to yourself for 18$L/week*

      PLUS the other perqs, not the least of which is huge Premium Sandboxes with great performance, lots of space, and a distinct lack of dweebs and griefer wanna-bes messing things up!

      *You get 560sqm of land with 128prims. You can accept a free home and land in Linden community, OR you can apply this to your tier anywhere you want to buy land.

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      1. you can make your 512m parcel group owned and then you get a 10% bonus in tier, and consequently prims. the group can be any ol’ group you want to create. just another little trick to maximize your perqs. i know it is only an extra 50m and 11 prims, but i like to squeeze all i can out!
        this is in the realm of micro-real estate so maybe not everyone interested, but your 560m dont all have to be in one region, you could own a few beach front parcels just big enough for an air mattress, or you could scatter 16m parcels all over the grid and put up signs to your store or event or something. and if you do keep all your land in the same region the prims are cumulative. meaning you could have a tiny 16m parcel with 128 prims.
        anywho, kinda esoteric, and this is all explained in LL pages, but lotsa folks miss the details. it can be kinda fun to be a micro land baron!

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    1. They can stop passing the VAT on; that’s their choice. I gave up trying to wade through the July 2014 updates that followed the 2014 start-of-year changes for electronic service…

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      1. Well they can stop passing the VAT on, but they aren’t doing that, it still applies to tier and other services.

        I wonder if they are absorbing it or have they discovered that it doesn’t actually apply to Premium Membership for some technical reason.

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        1. “Well they can stop passing the VAT on, but they aren’t doing that, it still applies to tier and other services. ”

          Slight non-sequitur there. Just because they’re not absorbing VAT in all cases, doesn’t mean they’ve not opted to absorb it once more in this case.

          Again, as you and I know – both of us having blogged on it in the past, and cited the same EU / C&E documentation – the Lab most likely stopped absorbing VAT because of the burden of doing so as SL numbers grew – so they’re hardly likely to want to return to that again. Given the numbers involved at present (Premiums accounting for around 20% of revenue, and not all of the Premiums being EU-based), it is possible the Lab see this as something that is manageable as an additional overhead, and therefore something they feel reasonably comfortable in handing. That said, however…

          “I wonder if they are absorbing it or have they discovered that it doesn’t actually apply to Premium Membership for some technical reason.”

          The latter is possible, hence my use of “appears” in the article. My own thoughts on the matter are that given there is no actual necessity to pay to access the service, the Lab may have been able to argue Premium is non-VAT applicable, although that seems to be bordering on an edge-case argument where EU bureaucrats are concerned.

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  2. Premium membership always made perfect sense to me, be by having live support (and it does work) but most, cause like said above, one can trade their ll house by 512m2 and therefore using the group + 10pct manage to get at least a 1024 m2 plot at mainland.
    On Auctions if one looks well and spend some time, it is always possible to get that plot, be near ll road and rezzing zone, water (more harder but possible) and so on.
    And if one starts to search and buy their 1st plot, one will mostly wish to have more and will move to a diff tier level.

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  3. Linden Lab need to transfer VAT on the total income. When Linden Lab has 40000 European premium members at 2 Dollar VAT per month = 80000 US$ a month VAT or 960000 US$ VAT per annum. You can be sure the tax man will want their 960000 US$ from Linden Lab

    It is a sales technique some car dealers use. Buy a car without VAT, The car dealer of course pays the VAT but it is a discount they give.

    Also the 45 cent less which is a 5% discount is rather strange. 5% discount how generous.

    Linden Lab is obligated to pay VAT on every cent they receive from European customers. The tax man looks at the total revenue generated from Europeans. Not based on individual products.

    Inara Pey I suggest you take a good look at the Lindex. The Lindex is out of balance. The stipends are to boost the economy which is the reason why Linden Lab is doing everything they can to get more premium members. Because Linden Lab cannot hold the Lindex up anymore and is could crash. You did not see that did you Inara. Trying to get more Premium members is the only reason Linden is doing this to prevent the Lindex from crashing.

    Normal rate 247 L$ Sell and 256 L$ buy. Look at the Lindex Inara look at the numbers.

    More premium members is a reason to pull more Lindens from the Lindex to keep the economy up that is the reason for the promotions and the reductions because Linden themself are not making money on the premium members.

    Now that you know all this why is the Lindex out of balance Inara?

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    1. “Linden Lab is obligated to pay VAT on every cent they receive from European customers. The tax man looks at the total revenue generated from Europeans. Not based on individual products.”

      More correctly, the Lab is obligated to pay the total VAT due on all applicable services, as per your opening comment. Whether the opt to pass all of those charges on to their EU customers, or pay a portion out of their own pocket, is down to the Lab. As noted in the article, between 2003 and 2007, the Lab opted to take the latter approach towards VAT payments in their entirety. After 2007, they then moved to passing the VAT burden directly on to their EU customers. Obviously, if the burden on Premium subscriptions becomes too great – and assuming there is not some other change in the EU legislations which means Premium subscriptions may no longer be VAT-applicable – they could always re-establish passing the burden on to EU customers once more.

      Allowing for your figures, if anything, they would suggest that VAT may well no longer be applicable to Premium subscriptions – but I’m honestly not entirely clear on whether or not that is the point you are trying to make.

      As to the rest, I don’t have anything to say, simply because this article wasn’t intended to be any kind of examination of Premiums and their fiscal (or otherwise) benefit to the Lab or of the methods by which the Lab might “boost” the LindeX. It was simply to pass on the news that the Lab no longer pass on (/ have to levy) VAT charges on Premium subscriptions.

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