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ARTICLE · 26 JUNE 2007

Income Earned In Virtual Worlds: Taxation Issues

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The explosion in virtual worlds has raised some interesting questions about when taxation should apply.

United KingdomTax
Graeme Nuttall
Graeme Nuttall

Originally published in e-Finance & Payments Law & Policy, Volume 1, Issue 7, April 2007

The explosion in virtual worlds has raised some interesting questions about when taxation should apply. Does tax apply to a virtual transaction that takes place in a virtual currency, or does it apply when that income is converted into ‘real world’ currency? Graeme Nuttall, a partner with Field Fisher Waterhouse LLP, examines these issues and the view of taxation authorities from around the world.

Some frequently-asked questions need answering regarding trading in virtual worlds. Perhaps the most common of these involves the misconception that money can be made tax free by trading in virtual worlds. The UK tax system and other tax systems worldwide are designed to tax trading whatever its form. Tax systems coped well with electronic commerce and are probably wide enough in scope to tax trading in virtual worlds.

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