Unlawful MMO gold peddler cultivates around half a million dollars in income, triggering a tax dispute, followed by developers unveiling strategies to clamp down on real-world transactions
In a recent case, EU advocate general Kokott has issued an opinion on the taxation of RuneScape gold sales, a controversial topic that has been under debate for some time. The case, involving Lithuanian gold farmers trading ill-gotten gold in the massively multiplayer online role-playing game RuneScape, has shed light on the complexities of taxing virtual goods.
At the heart of the case are two questions: whether the sale of RuneScape gold falls within the scope of the exempt transactions set out in Article 135(1)(e) of the VAT Directive, and if not, what should be the taxable value of in-game Gold according to the provisions of the VAT Directive.
Kokott proposes that RuneScape gold is "already a consumable benefit" and therefore outside the scope of the VAT tax exemption. This stance is based on the idea that RuneScape gold is used within the game to enhance a player's experience, much like consumable items in other games.
Despite the gold sellers' attempts to argue for an exemption from normal taxes, specifically Value Added Tax (VAT), the Lithuanian court has ruled that the gold seller, whose income exceeded the €45,000 threshold for small businesses under Lithuanian law, became liable to pay VAT due to their operations' size. The gold seller was ordered to pay VAT in the amount of EUR 46,688 due to failing to do so.
The operation, which earned significant income between 2021 and 2023, totaling €415,484 ($488,000 USD by current conversions), was carried out through various online platforms such as Facebook, Discord, and Skype.
Jagex, the company behind RuneScape, has taken notice of this issue and announced a sweeping crackdown on real-world trading, which is fueled by gold sellers, in both RuneScape and Old School RuneScape games. Jagex is redoubling its work to address the "demand-side" of gold selling, not just the suppliers, by escalating punishments for buying gold, threatening permanent bans, and confiscating items from offenders.
The case highlights the need for updated interpretations of EU tax law, covering transferable non-tangible objects traded in legal transactions. RSM UK, an audit and tax consulting firm, has offered a summary of the case in a press release, suggesting that VAT law needs to catch up with technological advances and gaming companies must bear in mind that in-app purchase innovation might create unforeseen VAT consequences.
In a touching display of community spirit, hundreds of MMO players showed up to support a father mourning his infant son, who shares a name with an NPC in Old School RuneScape, demonstrating the game's community's compassion.
It is for the referring commission to determine whether this is the case for in-game Gold. The Lithuanian court decision regarding the taxation of gold from the game RuneScape as a taxable service was made by a judge or panel of judges at a Lithuanian court, but the specific individual’s name is not publicly disclosed.
Kokott's suggestions could pave the way for a new era of taxation for in-game currencies and virtual goods, as more and more games incorporate complex economies and in-app purchase systems. As the digital world continues to grow, it is crucial that tax laws evolve to keep pace with these changes.
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