7 ms·

Say what you will but this is simply fraud. If they were selling stuff, they should've collected and paid the VAT for Dmitry. You are NOT a non-profit if you se

Say what you will but this is simply fraud. If they were selling stuff, they should've collected and paid the VAT for Dmitry. You are NOT a non-profit if you sell stuff. There is absolutely no complexity about this. Didn't they see anything wrong with selling stuff without collecting the VAT from every transaction? And the best part: they are now separating the sales from the foundation so they can avoid paying taxes. This is the kind of stuff HN abhors... ooops it's not Amazon, it's Krita! Then let's allow it!!!

boudewijnrempt 9y ago
Well, actually there is complexity. We did pay the VAT over everything we sold, of course. That was simple. What we didn't do was pay VAT in the Netherlands over the money we sent Dmitry for his work in Russia. If the Foundation had been a company, we would have had to pay that VAT in the Netherlands, but would have claimed it back -- net result, 0. If the foundation had never sold anything, so not been company-like, there wouldn't have been VAT due. Because it was a mix, the tax people wanted the full VAT paid, which could not have been reclaimed. In short: you're enough like a company that the VAT gets transfered, not enough like a company that you can claim it back. Even the accountants found that complex and disputable...
- molszanski 9y ago
  Also, I would try going to the local tax office. Maybe yours is a friendly one (I've been to both types) and you can get to speak with a your tax area local management. They might have enough knowledge and administrative power and help you out. Human to human protocol. Been there, done that, got a t-shirt.
  - gcp 9y ago
    Maybe you should read the original article first. Just saying. They spent months, got a lawyer involved, and got the fine reduced, a bit.
    - majewsky 9y ago
      > Please don't insinuate that someone hasn't read an article. "Did you even read the article? It mentions that" can be shortened to "The article mentions that." https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
nekopa 9y ago
I thought fraud involves intent to deceive. Seems like they made a mistake, and they aren't trying to avoid the bill.
- mrkrabo 9y ago
  Splitting a company in two so you can avoid paying taxes is not an attempt to deceive? Is it horrible when Apple uses Ireland to avoid taxes, but OK if KDE does it?
  - pmyteh 9y ago
    The tax authorities in the UK (at least) would prefer that charities set up trading subsidiaries for commercial activities. Although there are rules for handling trading through charitable books, everything is much cleaner if the two entities are taxed separately and the profits of the commercial activities paid on from the subsidiary to the charitable parent. So it seems very unlikely that it's an attempt to deceive. If Dmitri isn't involved in the merchandising, it seems that this structure reflects the proper intention of the tax system.
  - boudewijnrempt 9y ago
    Well, that's what the tax inspector suggested we do...
    - H4CK3RM4N 9y ago
      I think there's a clear distinction between what Krita is doing, where the products sold are largely independent of work on developing software, and Apple, where the second company solely dealt with money and didn't perform work independently.
    - xupybd 9y ago
      mrkrabo is not being fair or reasonable. Please don't let their comments add to your stress. You've helped build something fantastic. This situation will be over soon enough. Good luck and thank you for your efforts.
  - 9y ago
DanBC 9y ago
> You are NOT a non-profit if you sell stuff. That's not true in the for example the UK, where there are a couple of corporate structures that allow you to trade as a non-profit. And there are rules about registering for VAT: https://www.gov.uk/vat-charities/registration https://www.gov.uk/vat-charities/registration https://www.gov.uk/vat-registration/calculate-turnover https://www.gov.uk/vat-registration/calculate-turnover VAT is complex, and it seems the advice they got wasn't robust.
princekolt 9y ago
What defines a non-profit is that none of the income it generates should go to members, directors, or officers; and not that it can't sell stuff. [0] Most if not all non-profits I know sell stuff to pay the bills. [0]: https://www.law.cornell.edu/wex/non-profit_organizations https://www.law.cornell.edu/wex/non-profit_organizations
- roel_v 9y ago
  That's for US law, unrelated to this case.
- jimktrains2 9y ago
  Pedantic, but income can and does go to employees through salary. Profit is not split among share holders and must be reinvested or saved.
molszanski 9y ago
> You are NOT a non-profit if you sell stuff. Depends on the legal system. From what I remember (once worked in a foundation myself) the general approach in EU is that donations are "tax-free" but if you "sell" anything, you should calc profit/loss and pay a corporate tax. Paying for Dmitry is a statutory expense, so don't understand why that would raise an eyebrow.
- bonzini 9y ago
  Because of how VAT works (which in turn is different for companies and nonprofits).
coldtea 9y ago
>Say what you will but this is simply fraud. If they were selling stuff, they should've collected and paid the VAT for Dmitry. You are NOT a non-profit if you sell stuff. Non-profits sell stuff all the time, and whether you are exempt from VAT or not for that depends on the jurisdiction and even within a single country can have several subtleties. >There is absolutely no complexity about this. Oh yes, there is. Here's how an expert puts it: "Sadly not. Charity VAT is one of the more complicated areas of VAT, which is a great shame given that many charities are operated by unpaid volunteers who have to administer the complex rules." [1] >Didn't they see anything wrong with selling stuff without collecting the VAT from every transaction? Why would they? It's not like they pocketed anything -- the VAT that was not collected was not imposed into the salary in the first place. Besides, they are volunteers running a non-profit, and had asked a consultancy, not seasoned merchants. >And the best part: they are now separating the sales from the foundation so they can avoid paying taxes. This is the kind of stuff HN abhors... ooops it's not Amazon, it's Krita! Then let's allow it!!! Because a small open source foundation giving its product for free and largely based on volunteer work (with the occasional donation funding only part of what needs to be done) that has stumped upon a tax issue due to inexperience is the same as a global behemoth looking to avoid taxes. [1] https://www.theguardian.com/society/2009/dec/15/charities-tax-vat https://www.theguardian.com/society/2009/dec/15/charities-ta...
- boudewijnrempt 9y ago
  > Oh yes, there is. Here's how an expert puts it: "Sadly not. Charity VAT is one of the more complicated areas of VAT, which is a great shame given that many charities are operated by unpaid volunteers who have to administer the complex rules." [1] And then add the complexity of an international situtation...
  - gcp 9y ago
    Involving a party outside the EU. I bet the latter is what really threw your first accountant off: nonprofit + suppliers outside EU. Most accountants never have to deal with something like this in their entire career.
baldfat 9y ago
"Note: in the interests of full transparency, you can find our end-of-year reports for 2013, 2014, 2015 and 2016 here." https://docs.google.com/spreadsheets/d/1SXm7DQAGfw4Qr1VrXln6LH10lHuv8oT04rKakQGlha0/edit#gid=0 https://docs.google.com/spreadsheets/d/1SXm7DQAGfw4Qr1VrXln6... Lazy post. Also a Non-Profit Foundation and Amazon are two totally different beast. So your saying the Red Cross and Amazon should have the same practices?
EliRivers 9y ago
This is the kind of stuff HN abhors... ooops it's not Amazon, it's Krita! Amazon want to skip taxes with the intent of making more money for themselves. Krita want to skip taxes with the intent of making free software for strangers. Seems like there's a moral difference there (as well as, of course, the actual legal difference).
- bluGill 9y ago
  Krita wants to skip taxes that for either a company or a non-profit would be skipped, but since they are both they fall into a weird zone where they cannot.
icebraining 9y ago
Not true, see e.g. Museumkaart, which is a non-profit foundation created by the Dutch museums that sells cards for accessing them for a flat fee. https://en.wikipedia.org/wiki/Museumkaart https://en.wikipedia.org/wiki/Museumkaart
- gbl08ma 9y ago
  For a perhaps more well-known example, see the Raspberry Pi Foundation. They sell, obviously, Raspberry Pis - a lot of them. They are a charitable organization, which is a type of NPO. https://en.wikipedia.org/wiki/Raspberry_Pi_Foundation https://en.wikipedia.org/wiki/Raspberry_Pi_Foundation
  - icebraining 9y ago
    Yes, but that's in the UK, I was giving an example of a Dutch non-profit.
Confusion 9y ago
You call yourself a 'good person' in your bio, but you show little evidence of that. A good person would be charitable and assume good faith. Boudewijn Rempt is a good person.

boudewijnrempt 9y ago

Well, actually there is complexity. We did pay the VAT over everything we sold, of course. That was simple. What we didn't do was pay VAT in the Netherlands over the money we sent Dmitry for his work in Russia. If the Foundation had been a company, we would have had to pay that VAT in the Netherlands, but would have claimed it back -- net result, 0. If the foundation had never sold anything, so not been company-like, there wouldn't have been VAT due. Because it was a mix, the tax people wanted the full VAT paid, which could not have been reclaimed. In short: you're enough like a company that the VAT gets transfered, not enough like a company that you can claim it back. Even the accountants found that complex and disputable...

molszanski 9y ago
Also, I would try going to the local tax office. Maybe yours is a friendly one (I've been to both types) and you can get to speak with a your tax area local management. They might have enough knowledge and administrative power and help you out. Human to human protocol. Been there, done that, got a t-shirt.
- gcp 9y ago
  Maybe you should read the original article first. Just saying. They spent months, got a lawyer involved, and got the fine reduced, a bit.
  - majewsky 9y ago
    > Please don't insinuate that someone hasn't read an article. "Did you even read the article? It mentions that" can be shortened to "The article mentions that." https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html

nekopa 9y ago

I thought fraud involves intent to deceive. Seems like they made a mistake, and they aren't trying to avoid the bill.

mrkrabo 9y ago
Splitting a company in two so you can avoid paying taxes is not an attempt to deceive? Is it horrible when Apple uses Ireland to avoid taxes, but OK if KDE does it?
- pmyteh 9y ago
  The tax authorities in the UK (at least) would prefer that charities set up trading subsidiaries for commercial activities. Although there are rules for handling trading through charitable books, everything is much cleaner if the two entities are taxed separately and the profits of the commercial activities paid on from the subsidiary to the charitable parent. So it seems very unlikely that it's an attempt to deceive. If Dmitri isn't involved in the merchandising, it seems that this structure reflects the proper intention of the tax system.
- boudewijnrempt 9y ago
  Well, that's what the tax inspector suggested we do...
  - H4CK3RM4N 9y ago
    I think there's a clear distinction between what Krita is doing, where the products sold are largely independent of work on developing software, and Apple, where the second company solely dealt with money and didn't perform work independently.
  - xupybd 9y ago
    mrkrabo is not being fair or reasonable. Please don't let their comments add to your stress. You've helped build something fantastic. This situation will be over soon enough. Good luck and thank you for your efforts.
- 9y ago

DanBC 9y ago

> You are NOT a non-profit if you sell stuff. That's not true in the for example the UK, where there are a couple of corporate structures that allow you to trade as a non-profit. And there are rules about registering for VAT: https://www.gov.uk/vat-charities/registration https://www.gov.uk/vat-charities/registration https://www.gov.uk/vat-registration/calculate-turnover https://www.gov.uk/vat-registration/calculate-turnover VAT is complex, and it seems the advice they got wasn't robust.

princekolt 9y ago

What defines a non-profit is that none of the income it generates should go to members, directors, or officers; and not that it can't sell stuff. [0] Most if not all non-profits I know sell stuff to pay the bills. [0]: https://www.law.cornell.edu/wex/non-profit_organizations https://www.law.cornell.edu/wex/non-profit_organizations

roel_v 9y ago
That's for US law, unrelated to this case.
jimktrains2 9y ago
Pedantic, but income can and does go to employees through salary. Profit is not split among share holders and must be reinvested or saved.

molszanski 9y ago

> You are NOT a non-profit if you sell stuff. Depends on the legal system. From what I remember (once worked in a foundation myself) the general approach in EU is that donations are "tax-free" but if you "sell" anything, you should calc profit/loss and pay a corporate tax. Paying for Dmitry is a statutory expense, so don't understand why that would raise an eyebrow.

bonzini 9y ago
Because of how VAT works (which in turn is different for companies and nonprofits).

coldtea 9y ago

>Say what you will but this is simply fraud. If they were selling stuff, they should've collected and paid the VAT for Dmitry. You are NOT a non-profit if you sell stuff. Non-profits sell stuff all the time, and whether you are exempt from VAT or not for that depends on the jurisdiction and even within a single country can have several subtleties. >There is absolutely no complexity about this. Oh yes, there is. Here's how an expert puts it: "Sadly not. Charity VAT is one of the more complicated areas of VAT, which is a great shame given that many charities are operated by unpaid volunteers who have to administer the complex rules." [1] >Didn't they see anything wrong with selling stuff without collecting the VAT from every transaction? Why would they? It's not like they pocketed anything -- the VAT that was not collected was not imposed into the salary in the first place. Besides, they are volunteers running a non-profit, and had asked a consultancy, not seasoned merchants. >And the best part: they are now separating the sales from the foundation so they can avoid paying taxes. This is the kind of stuff HN abhors... ooops it's not Amazon, it's Krita! Then let's allow it!!! Because a small open source foundation giving its product for free and largely based on volunteer work (with the occasional donation funding only part of what needs to be done) that has stumped upon a tax issue due to inexperience is the same as a global behemoth looking to avoid taxes. [1] https://www.theguardian.com/society/2009/dec/15/charities-tax-vat https://www.theguardian.com/society/2009/dec/15/charities-ta...

boudewijnrempt 9y ago
> Oh yes, there is. Here's how an expert puts it: "Sadly not. Charity VAT is one of the more complicated areas of VAT, which is a great shame given that many charities are operated by unpaid volunteers who have to administer the complex rules." [1] And then add the complexity of an international situtation...
- gcp 9y ago
  Involving a party outside the EU. I bet the latter is what really threw your first accountant off: nonprofit + suppliers outside EU. Most accountants never have to deal with something like this in their entire career.

baldfat 9y ago

"Note: in the interests of full transparency, you can find our end-of-year reports for 2013, 2014, 2015 and 2016 here." https://docs.google.com/spreadsheets/d/1SXm7DQAGfw4Qr1VrXln6LH10lHuv8oT04rKakQGlha0/edit#gid=0 https://docs.google.com/spreadsheets/d/1SXm7DQAGfw4Qr1VrXln6... Lazy post. Also a Non-Profit Foundation and Amazon are two totally different beast. So your saying the Red Cross and Amazon should have the same practices?

EliRivers 9y ago

This is the kind of stuff HN abhors... ooops it's not Amazon, it's Krita! Amazon want to skip taxes with the intent of making more money for themselves. Krita want to skip taxes with the intent of making free software for strangers. Seems like there's a moral difference there (as well as, of course, the actual legal difference).

bluGill 9y ago
Krita wants to skip taxes that for either a company or a non-profit would be skipped, but since they are both they fall into a weird zone where they cannot.

icebraining 9y ago

Not true, see e.g. Museumkaart, which is a non-profit foundation created by the Dutch museums that sells cards for accessing them for a flat fee. https://en.wikipedia.org/wiki/Museumkaart https://en.wikipedia.org/wiki/Museumkaart

gbl08ma 9y ago
For a perhaps more well-known example, see the Raspberry Pi Foundation. They sell, obviously, Raspberry Pis - a lot of them. They are a charitable organization, which is a type of NPO. https://en.wikipedia.org/wiki/Raspberry_Pi_Foundation https://en.wikipedia.org/wiki/Raspberry_Pi_Foundation
- icebraining 9y ago
  Yes, but that's in the UK, I was giving an example of a Dutch non-profit.

Confusion 9y ago

You call yourself a 'good person' in your bio, but you show little evidence of that. A good person would be charitable and assume good faith. Boudewijn Rempt is a good person.