On September 11, advocate general at the Court of Justice of the European Union Juliane Kokott issued an opinion requesting a preliminary ruling from the Tax Disputes Commission under the Government of the Republic of Lithuania on a case concerning that most fundamental financial quandary with which all states, federations, and empires in their might and majesty must—in time—contend: Should you have to pay taxes if you sell RuneScape gold to somebody for real money?
The opinion's introduction, which begins with a quote from Goethe's Faust—"Gold all doth lure, Gold doth secure all things. Alas, we poor!"—explains that "a taxable person" avoided paying VAT [value added tax] on "not insignificant" transactions in which RuneScape gold was purchased from players and sold to others at a profit (via GamesRadar).
"In the present case, the Court has an opportunity to deal with the way in which an entirely new form of gold trading is considered for VAT purposes," Kokott says.
This taxable individual, Kokott explains, was found to have bought and resold through "various forums, groups, and platforms such as Facebook, Discord, and Skype" enough RuneScape gold to earn €415,484—approximately $488,000 USD—between 2021 and 2023.
In Lithuania, small businesses that earn under €45,000 per year are exempt from VAT obligations. Having handily cleared that threshold, our industrious gold sellers were expected to pay the appropriate taxes. They did not—hence the January 2024 legal proceedings in which the applicant was ordered to pay €46,688 in retroactive VAT.
In her opinion, Kokott writes that, as people tend to do when they're suddenly on the hook for the equivalent of $55,000, "the applicant disagreed with the decision of the tax authority and lodged a complaint."
To laymen like you and I, this situation probably seems pretty open and shut. If you make money on something, you pay taxes on it. That's the way the world works, unless you're wealthy enough that you'd topple entire nations' GDP if you were ever held accountable for your sins. I'd hate to be in that world!
However, the taxable person in question, Kokott writes, insists that "the income from the sale of in-game gold is income from trading in virtual currencies and is therefore exempt from VAT," much like how exchanging Bitcoin or other cryptocurrencies is exempt from VAT in some EU countries.
"According to the applicant, if it is not a virtual currency, then in-game gold should be regarded as a multi-purpose voucher, which is not subject to VAT," Kokott says.
It's an interesting gambit—but does it have any merit? After reading Kokott's thoughts, I'm going to go with "yeah, no."
In her request for a preliminary ruling from Lithuania's Tax Disputes Commission that would nip this thing in the bud, Kokott points to two portions of relevant EU law that handle VAT exemptions.
"Article 135(1)(e) of the VAT Directive exempts transactions, including negotiation, concerning currency, bank notes and coins used as legal tender," Kokott writes. "If the applicant’s transactions involving in-game gold are to be covered by the exemption, in-game gold would have to be legal tender."
Considering I can't deposit my RuneScape gold into my bank account, Kokott says in-game currency "can be clearly ruled out" as legal tender.
Which brings us to the voucher question. Kokott writes that, for in-game gold to be considered a voucher—which is exempt from VAT under Article 30b(2) of the EU's VAT Directive—it must meet "two cumulative conditions."
"First, the goods to be supplied or the potential supplier must be apparent from the voucher or its terms and conditions," Kokott says. "Second, in-game gold would have to give rise to the obligation to accept it as consideration for a service," because "the purpose of a voucher is to ‘document’ a taxable person’s obligation to supply (in the present case) a service."
To make this simpler, imagine you receive a voucher you can redeem for a product or service. That voucher would specify the conditions under which it can be redeemed, and what it can be redeemed for—which in-game gold doesn't do, because it can be used for whatever the player wants to spend it on. And that voucher would represent an obligation for the voucher's supplier to provide a later service—which isn't the case with in-game gold, either.
"In-game gold itself is therefore already the consumable benefit and does not merely serve to procure a later consumable benefit in the form of an as yet unspecified service," Kokott says, before penning what is perhaps history's single greatest line written about financial law:
"The mere fact that a service (in-game gold) can be exchanged for another (such as an item like a 'magic sword')—in the present case, within the game—does not make the service that has already been supplied a voucher."
There's more to the opinion before Kokott effectively tells Lithuania's Tax Disputes Commission that it should dumpster this whole situation, but I think the austere quotation marks around "magic sword" makes an appropriate mic drop for this overview.
Interestingly, as my colleague Austin Wood noted over at GamesRadar, Kokott issued her opinion just 5 days before RuneScape developer Jagex declared a strengthened zero-tolerance policy on real-world gold trading, which RuneScape's terms of service "expressly forbid."
"Buying gold off a real world trader is already very clearly against the rules, but historically we've treated the buyers more leniently than the sellers when issuing penalties for real world trading," Jagex said. "As part of our clamp-down on those gold-farming bots and the harm they do to Old School RuneScape, we're now taking a harsher line against players caught buying gold from them. If you're buying your gold that way, please don't expect to get away with just a warning."
It's unclear whether the Jagex's signalling a new War on Gold-selling was in any way a response to Kokott's opinion, but if you're going to be writing your own opinions for the highest court in EU law, you can apparently do worse than pairing Faust quotes with magic swords.
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