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Comment by nekopa | Hacker News Reader

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

In some case (see "abus de bien sociaux" in belgian law), tt's the other way around : if you make a mistake in your management of taxes, then the state considers that it was with the intention to deceive (because you are meant to 1/ know the law 2/ apply it). It's not the state who needs to prove your intention to deceive, but it's you who has to prove that there were no intention.

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?

Well, that's what the tax inspector suggested we do...

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.

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.

This is using the tax system as it's meant to be used. This isn't doing anything weird to aggressively avoid tax.

That's not the same thing at all. The one is a non-profit that had some additional commercial activity to finance it. The other is a multi-billion dollar company that avoids paying any taxes at all, as much as possible, to avoid doing their part for the economies and societies they profit from.

The one is using the law, the other is misusing loopholes.

Well combining the for profit sales and accepting donations was a mistake. but to correct that mistake they are now setting up two entities, one for doing business and one for non-profit things. they are not deceiving anyone, if they do business they will do it with the entity which is intended to do business. They are not routing the profit to the non-profit organisation nor they are backing off in paying the taxes.

It seems you didn't actually read (or understand) the post: The problem is that - until now - they DIDN'T split it in two, so currently the tax authorities say "you are some kind of mix between company and non-profit, we do whatever we want with you" (obviously simplified, read the post!). But at least they gave them a suggestion for the FUTURE: Split up, you will have no more problems.

So, there is no intention to deceive, just a simple misunderstanding which leads to very grave problems (as usual when taxes are involved and you are small).

That's exactly what I'm saying. They have busted them cold so they're going to be more careful about their fraud in the future by splitting the company in half.

Do you even understand what VAT is and how it works?

They are and were collecting VAT on their sales. This part is unavoidable regardless.

For the stuff they buy, they're not avoiding VAT. There's no point in avoiding VAT because it doesn't cost a business anything. YOU GET IT BACK FROM THE STATE. The whole point of VAT is that it is a zero-sum game for businesses. But due to their old structure, they're in a situation where they have to pay but can't get back. That's not how VAT is supposed to work.

Of course I know what VAT is. I am a freelancer based in Europe. And I know if I'm paying SOMEONE for his services I also have to pay VAT, regardless of whether I'll get it back later or not. Why? Because I have to prove that VAT was spent in something related to my business (I can't have the VAT from my food returned, for example). It does not only apply to goods, it also applies to services.

What you say is (or used to be) false for deferred VAT transactions, but anyway.

If you understand the nuance, why are you saying they're dodging taxes? The VAT on the freelancer is related to their business, so it is intended to be recoverable.

Do you think it is acceptable to not pay VAT just because you know you'll get the money back? It is not legal, at least. Who are you to judge that? The government must know, because they are the ones to judge.

That's what VAT deferred transactions are...I'm giving up on your dear sir.

You are a freelancer, not a nonprofit, right?

That 'fraud' has been advised by the tax authorities themselves. That would probably be a world-first that the tax authorities that just 'busted' you recommend how to not be busted in the future.

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.

It's not an attempt to deceive. It's an attempt to navigate a complex tax system. I personally have no problem with any company avoiding tax where they can. I do have a problem with governments opening up huge tax loop holes for companies to use. Of course companies will do all they can to avoid tax. It's up to governments to build fair and robust tax frameworks.

This is a group of passionate people developing a great product and giving it away. I'm not sure any law maker would want to target these guys for tax revenue. I'm not sure the auditors actions represent the spirit of the law.

> Splitting a company in two [..]

Splitting an organization in two so the non-profit part can enjoy the benefits the law intends to bestow upon a non-profit is exactly what the government wants you to do.

Separate rules for separate kinds of organizations are a lot easier to make than rules for combined organizations. The latter invites loopholes, but to prevent them the government tends to err on the side of 'anti-loopholes' such as the one the Krita Foundation fell into.

This is not even what the government intends, just an unfortunate side effect.

Splitting a company in two so that they can precisely pay VAT taxes on things that VAT is supposed to apply to, no more tax, no less tax.

That is definitely not an attempt to deceive.

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