Current “EU VAT Implementing Regulation 282/2011” proving as troublesome in terms of VAT accumulation for resales of digital goods in Metaverse
As new business concepts continue to thrive in Metaverse, and new virtual marketplaces keep appearing, tax legislation all over the globe is struggling to keep up with all these developments.
The newest challenge that has arisen has to do with indirect taxes, such as sales tax and VAT. Namely, undesirable consequences such as the accumulation of VAT have been observed in transactions between private users taking place on metaverse-like platforms.
Resales of digital goods in Metaverse
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Metaverse
Author: Kristina Dosen
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Fiscal subject related
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394
Content accuracy validation date:
20.09.2022
Content accuracy validation time:
16:08h
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An example of these transactions would be reselling of the unique "second-hand" digital goods, which is a novel concept that wasn't possible before the introduction of NFTs.
Current EU VAT Implementing Regulation does, to an extent, apply to resales of digital goods where they've been sold to private users before and are then resold through a metaverse marketplace. However, this legislation doesn't offer a solution for VAT accumulation that can happen in cases like the abovementioned.
Namely, the Regulation prescribes a margin scheme rules for the sale of second-hand goods in order to avoid VAT accumulation. However, the VAT directive also states that this margin scheme doesn't apply to the sale of services or digital products.
As there is an obvious legal gap in handling this matter, this represents a unique opportunity for businesses to work proactively with tax authorities on how to draft the most appropriate tax legislation for handling businesses in the metaverse environment.
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