Sales of game items in online games levied on VAT

I want to talk about a new and rather interesting judicial precedent, which can change a lot for game developers. I will not overload the text with legal vocabulary, I will try to state the essence as clearly as possible.

It will be about case A40-91072 / 14-90-176 ( Mail.Ru Games LLC v. IFTS No. 14), the final decision on which was made on November 24, 2014 by the Moscow Arbitration Court

Essence of the matter


At the beginning of 2014, the Inspectorate of the Federal Tax Service No. 14 (hereinafter - the Inspectorate of the Federal Tax Service No. 14) conducted a desk tax audit at LLC Mail.ru Games. The audit the IRS №14 found that for the 2nd quarter 2013 revenue of "Meyl.Ru Geymz" from "implementing additional game functionality" was 1,622,671,985 rubles. In other words, Mail.ru Games for one quarter of 2013 received 1.6 billion rubles from players as payment for the acquisition of premium accounts, artifacts, etc.

Here, the Federal Tax Service Inspectorate No. 14 thought, rather than accrue 1, 6 billion rubles VAT 18%?

And it accrued, thereby obliging Mail.Ru Games LLC to pay 292,080,957 rubles (in such cases the tax is still fined. A fine of 58,416,191 rubles was probably charged, but the court decision was silent about this).

All this happened despite the fact that the income received from the "implementation of additional gaming functionality" was related to the computer program in the form of an online game, the granting of rights to use which, in turn, was exempted from VAT on the basis of paragraphs. 26 p. 2 Article 149 of the Tax Code.

In other words, the Inspectorate of the Federal Tax Service No. 14 considered that the sale of virtual game items in online games should be subject to VAT (though not by gaming, but by the present).

But this is still half the trouble.

Mail.Ru Games LLC appealed to the Moscow Arbitration Court with a lawsuit against the Inspectorate of the Federal Tax Service No. 14 and demanding that the decision of the Inspectorate of the Federal Tax Service No. 14, which it accrued VAT for the sale of game items, be declared illegal.

11/24/2014 Moscow City Arbitration Court refused Mail.Ru Games LLC, thereby taking the position of IFTS No. 14.

This, in my opinion, is a very alarming bell for the entire game development industry.

I sincerely hope that Mail.Ru Games LLC will appeal this completely savage judgment in an appeal.

In the meantime, based on the justification of the court given in its decision, I recommend that all developers and distributors of online games think about making changes to their licensing agreements with users. There is reason to believe that soon after the IFTS No. 14, the remaining tax inspectorates will start to behave this way.

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