So you have been musing over how you’re going to make your fortune in the Wild, Wild West known as Second Life. You have your business set up, your prims are all in order and your tract of real estate is picked out and perfectly positioned. Everything is set, unless of course you are in South Korea. In that case, if you happen to to make more than about $13,000 a year you’ll have the tax man to contend with.

The Decision

NTS, Korea’s national tax service is planning to institute a tax on all real money transactions taking place in the virtual land of Second Life that are in excess of $6,500 each half year. This “value added” tax will be automatically applied by transaction middle-men unless, of course you happen to make more than $13,000 in any half year period. For revenue greater than this amount you will have to apply for a business license and handle taxes yourself.

The Analysis

This is an interesting legal precedent to set in an industry that, up until this point, has been quite shaky on who actually “owns” virtual property. Many online worlds contend that the items created in world are actually “owned” by the developers and licensed to be used by the citizens of that world. Who then should be taxed when real money comes into play?

There are also questions of jurisdiction, if an avatar in South Korea is interacting with an American owned business would the tax work identically as it would if it was a transaction between avatars from the same nation?

Web 2.0 Roundup

Virtual worlds open up brand new questions not only for the way we socialize but for the ways we do business. How governments decide to handle these new systems will go a long way to determining how valid the idea of all-virtual business becomes in the future. For the sake of this new cultural era, lets hope that the decisions that are made are wise.