Implementing payment

[Goffdahl]

Hi there,

We are currently implementing payment in our very first game and there are several issues we are uncertain about. We start off with a simple Paypal payment system, allowing people to use credit cards even when not having a Paypal account.

We are based in EU - how do we go about VAT for EU/non EU users? Will we have to pay the usual 25% for anyone?

Are there any standard rules and regulations about consumer rights when purchasing the premium packages/in game currency? Do users have rights to have second thoughts about their purchases and claim their money back?

Are there any other issues we should be aware of?

[Harkins]

Speaking only for the US: no, you don't need to collect VAT, and consumers have no legal right to second thoughts.

However, American credit card companies tend to have very easy 'chargeback' procedures that allow customers to retroactively cancel payments. This usually only happens when a person is (or feels) defrauded, but it's a serious problem for online businesses - there's a significant hassle to the merchant to re-claim their money and a significant number of chargebacks will have your payment processor/bank angry with you. You're probably going to be trying hard to keep users happy with their purchases anyways so that they make more purchases, but it's worth being aware of - especially if you have anything like gambling in your game, players may pay to take their chances and, if they lose, chargeback to return their money.

[Goffdahl]

Thanks for the warning. We don't have anything like gambling in our game, so I guess this will only occur with banned multis and such. This shouldn't be too big a problem.

Still, I would very much like to know about any other legal issues considering payment to a EU based country.

[JGadrow]

My advice: Take a look at some of the Terms & Conditions documents for some of the EU-based games: AstroEmpires and OGame are EU-based I believe. They've been around for a while and have a fairly large user base, so if there's a problem, they've probably encountered it and put something about it in their Terms & Conditions pages.

[dsheroh]

Speaking only for the US: no, you don't need to collect VAT, and consumers have no legal right to second thoughts.

Speaking as a US citizen living in the EU and working as a freelancer for a primarily-American client base:  The EU only requires you to collect VAT from EU residents.  You do not need to collect it from people in the US.

Speaking as someone who has spent too many years hanging out on the internet in general and Slashdot in particular:  I am not a lawyer.  I don't even play one on TV.  If you actually care about getting the right answer, hire an appropriate legal professional who is licensed to practice law in your jurisdiction and ask them.

[Goffdahl]

Speaking only for the US: no, you don't need to collect VAT, and consumers have no legal right to second thoughts.

Speaking as a US citizen living in the EU and working as a freelancer for a primarily-American client base:  The EU only requires you to collect VAT from EU residents.  You do not need to collect it from people in the US.

We spoke to the official tax/VAT instance today and and they confirmed this. But how on earth are we supposed to find out how to charge VAT from EU citizen? Hehe, I guess we will make payment available with two prices - one for EU citizens and one for others. And then let it be up to people to "decide" where they live

[Goffdahl]

My advice: Take a look at some of the Terms & Conditions documents for some of the EU-based games: AstroEmpires and OGame are EU-based I believe. They've been around for a while and have a fairly large user base, so if there's a problem, they've probably encountered it and put something about it in their Terms & Conditions pages.

Yeah, I took a tour around some Bigpoint and Gameforge games today and have collected some standard phrases for our rules of conduct and payment conditions.

[dsheroh]

We spoke to the official tax/VAT instance today and and they confirmed this. But how on earth are we supposed to find out how to charge VAT from EU citizen? Hehe, I guess we will make payment available with two prices - one for EU citizens and one for others. And then let it be up to people to "decide" where they live

That's essentially what Skype does, although they go based on your bank account address.  If I pay for skype with my US credit card, they don't charge me VAT, and if I use my Swedish debit card, they do.

[Goffdahl]

We have thought about adding an IP tracer to the payment page. So, prices will always comply with your current location. We will - of course - add a button where you can choose to change this location if you are temporarily away from your country (or just don't want to pay VAT).

[Murzim]

If you use PayPal, it provides the user location with IPN so you can grab the location from there.

The standard way for this kind of thing in Greece, which is a EU country, is to register the payment in your cashier/block (approved by tax office) describing the product and then send the printed invoice digitally signed to the buyer. The vat rates used were 4,11%.
The invoice brings a unique number which is later given to the tax office, where you pay the tax commission. I believe this is for everyone although you could skip non-EU citizens and win the case in the worst scenario.

It is your responsibility to take care of this procedure (for automatic procedure of what I described you need a computer open 24/7 just for this job so even large companies here assign this kind of work to the logistics office). All they care (the tax office) is not that you send the invoice, but you pay them the vat. The vat as summed by the total of the invoices you issued.

In this sense, perhaps it is fine if you can issue one invoice for the whole month with total amounts. Of course, at a future check, it would be better to have all the invoices instead of one.

I do not think that any thing such instant electronic tax invoice registered by the state exists anywhere, so this procedure must be the universal one. Surely, this will be created at some point and we won't have any such worries, we will just pay up either we want or not.

[Chris]

My advice: Take a look at some of the Terms & Conditions documents for some of the EU-based games: AstroEmpires and OGame are EU-based I believe. They've been around for a while and have a fairly large user base, so if there's a problem, they've probably encountered it and put something about it in their Terms & Conditions pages.

Be aware on this. For example the ToS written by me is quite spreaded among BBGs. I have seen in in several games already I wrote it to my needs, for the legislation of my country. And, have I mentioned that I'm no lawyer and some parts of the ToS were written to attract players, not for legal purposes? Still, surprisingly lot of people copied it and used... I really advise to not use ToS that plenty of people use or sounds right, the odds are it might be ToS written by someone like me and you don't want it
Even if you copy from big companies, be aware that they wrote it for legislation of their country and it might be simply illegal ToS in another country.

Are there any standard rules and regulations about consumer rights when purchasing the premium packages/in game currency? Do users have rights to have second thoughts about their purchases and claim their money back?

In theory they can not. In practice they can chargeback and you can do nothing about it.

About VAT:
1) You pay VAT only if you run a company (might also differ slightly depending on type of company you run, generally sole trader type has it easier).
2) There is a certain volume you need to reach before you need to pay any VAT (at least 10,000 euro yearly, usualy much more, depending on country and on YEAR when you ask the question).
3) Do not ask on internet about VAT (especially if you do not mention about VAT in which country you want info), do not ask accountants either. Go to *YOUR* local government institution that is dealing with collecting taxes (even small cities have one) and ask them. It is because it will be them who will be interpreting your financial reports and their personal interpretation is far more important than the interpretation of UE or country government.

About income tax:
Since we are talking about taxes, do not forget to pay that one too
Income tax, in wrongly named, it is a profit tax. It is equal to "income(excluding VAT you paid) - costs = profit", then % of the profit is paid, but only after a certain "fee quota". For example if you earn 1000 have cost of 100, the tax is 10% (assuming linear or flat tax rate) the free quota is 500; you are to pay 1000-100=900(profit) - 500(free quota, but add it only at the begining of a fiscal year, not each month!)=400 which is your tax base of which you pay 10%, so 10% of 400 is 40, which is your income tax (remember that since you exerted your full free quota on the example first fiscal month, the next month you will pay a different tax amount). Income tax is from personal income, not company income, you pay it as a human being, so if you work (and get salary) and also run a company (and get company income) you add these as your personal income and use sum to calculate the tax (take a note on the free quota and the tax percentage in case of non linear tax in your country).

BUT, do not confuse it with no VAT volume, which is calculated for company only, so if tou earn in your other job 20000 and your company generates 30000 and the no VAT barrier is 40000 you still do not need to pay any VAT, since your other job income is not from selling stuff so it does not add to your companys volume that affects VAT obligation.

Be also very careful with reporting costs, internet is full of stories of people who were forcecd to sell their cars and stuff to pay old costs because they included them wrongly (the most common mistake is including meal for a client as a cost, which is not allowed in most countries - do not look here for a logic, you just need to remember the rules by heart, food is not a cost, fuel is Of course it might be other way in your country

Note: this is assuming sole trader company or equivalent, other company types pay their own income tax (which is called otherwise).

[Goffdahl]

If you use PayPal, it provides the user location with IPN so you can grab the location from there.

Thanks, this should be helpful!

Be aware on this. For example the ToS written by me is quite spreaded among BBGs. I have seen in in several games already I wrote it to my needs, for the legislation of my country. And, have I mentioned that I'm no lawyer and some parts of the ToS were written to attract players, not for legal purposes? Still, surprisingly lot of people copied it and used... I really advise to not use ToS that plenty of people use or sounds right, the odds are it might be ToS written by someone like me and you don't want it
Even if you copy from big companies, be aware that they wrote it for legislation of their country and it might be simply illegal ToS in another country.

Thanks a lot for your insightful answer!

Ok, I only did so to find inspiration. I will make my own rules of conduct with more or less generic wordings.

About VAT:
1) You pay VAT only if you run a company (might also differ slightly depending on type of company you run, generally sole trader type has it easier).
2) There is a certain volume you need to reach before you need to pay any VAT (at least 10,000 euro yearly, usualy much more, depending on country and on YEAR when you ask the question).
3) Do not ask on internet about VAT (especially if you do not mention about VAT in which country you want info), do not ask accountants either. Go to *YOUR* local government institution that is dealing with collecting taxes (even small cities have one) and ask them. It is because it will be them who will be interpreting your financial reports and their personal interpretation is far more important than the interpretation of UE or country government.
.

We do run a company. But I didn't know there was a lower cap. I will check this with the local institution. Thanks!

About income tax:
Since we are talking about taxes, do not forget to pay that one too

I think we are all good regarding income taxes. It will take a long time before we are able to produce a surplus revenue. And when that time arrives we will just start paying wages to ourselves. I think it will take some years before we need to worry about this.

[JGadrow]

Be aware on this. For example the ToS written by me is quite spreaded among BBGs. I have seen in in several games already I wrote it to my needs, for the legislation of my country. And, have I mentioned that I'm no lawyer and some parts of the ToS were written to attract players, not for legal purposes? Still, surprisingly lot of people copied it and used... I really advise to not use ToS that plenty of people use or sounds right, the odds are it might be ToS written by someone like me and you don't want it
Even if you copy from big companies, be aware that they wrote it for legislation of their country and it might be simply illegal ToS in another country.

I am in complete agreement on this. This won't 100% cover you. I assumed that everyone knows that the answer to anything involving legality it to hire a lawyer / barrister / whatever-your-contry-calls-them so that you can be guaranteed to have the appropriate verbage and concerns covered (I know there are some countries which require very specific handling of user data). My suggestion was meant to give you some coverage without requiring a fee. But, if you can afford the attorney, definitely go that route!

[Goffdahl]

Heh, we cant afford an attourney

So, we'll see how long our homemade rules and regulations will bring us before we run into problems. And then we can alter things according to this. I guess this is also how many other smaller developers have done.