South Korea Now Officially Taxing Virtual Worlds 70
Next Generation is reporting that the South Korean government's goal to get their cut of the real money transfer industry is now in the works. Folks who sell over $6,500 worth of virtual goods or currency in a given year will have an automatic Value Added Tax (VAT) withdrawn by the service they contract through. That is, the middleman service will remove taxes automatically for these repeat customers. If a South Korean sells over $13,000 worth of goods or currency in a given year, the government considers them a small business. As such, individuals in that position are required to obtain a business license and take care of taxes themselves. "An NTS official claims the organization will be able to monitor all transactions as RTM mediators have agreed to share clients' transaction details with the authorities. 'NTS would be able to track all transactions for taxation of virtual items,' Mr. Choi said. 'This is not about defining RMT legal/illegal; we don't see any contradictory facts to Amendment for Game Industry Promoting Law - we are not about to judge if RMT is legal or not,' he added."
Re:Should I RTFA? (Score:5, Interesting)
No, I'm not asking for personal legal advice, all you lawyers out there. I'm just asking if information disclosed this way has some special legal protection. It won't apply to me, since I don't sell drugs, so don't fret.
I might as well mention what the real problem is here, since people keep saying, "if you make a profit in terms of real dollars, that should be taxed, case closed". But if virtual money becomes liquid and convertible enough, government will *have to* tax it directly, even in-game. Why? Imagine this:
I want to defer taxes on dividends, like, you know, every investor with a taxable account wants to do. So let's say the stock exchange sets up "exchange dollars" (EDs), a special currency created and destroyed at will, simply by depositing a dollar or withdrawing it. The EDs are functionally identical to normal dollars, it's just that they only trade on the exchange. Whenever a corporation pays a dividend, it takes its normal dollars, buys EDs, and distributes the dividends. Whenever a corporation raises funds in an IPO, it takes the EDs and converts them to normal dollars. Now, should the investors still pay taxes on the ED dividends they got?
If you say no, then you don't think dividends should be taxed, because this scheme could be implemented today on the stock market -- but obviously, the government wouldn't fall for it.
If you say yes, then you agree that sufficiently-convertible virtual dollars should be taxed even if the profit exists only in-game. At some point, the virtual dollars become like the EDs or a foreign currency.