I'm not in any financial hardship at the moment, but I am looking to stop doing other work and focus more exclusively on WireGuard, so I put up a donation and patreon page:
Same. I don't use it, but I've heard it's extremely high quality, open source software, which we could always use more of. So I've thrown a few euros their way.
You are not supporting the software but bad practices resulting in fines and fees. But there's hoping a lesson was learned. It would be a shame if something like this damaged the product.
Getting accounting correct in this kind of situation is just very hard, and sometimes people get it wrong even with due diligence and advice from trained professionals in the field.
Saying this is "supporting bad practices" when they are addressing the problems with their set up is IMHO disingenuous.
(This kind of problem also illustrates why Mozilla is set up the way it is, with a Foundation and a Corporation. Tax Law doesn't always deal well with doing both in the same org.)
Boudewijn Rempt replied elsewhere in this thread with a little more details [1]. After reading this, I don't think the fines are based on bad practices by Krita, but rather on the over-complicated Dutch tax system.
Still better than supporting a new project from scratch that would take many years to reach the state of Krita. Despite this setback, they still deserve donations IMHO.
I'd like to drop a note on how much I appreciate Krita. I'm not an artist by any mean, I'm a programmer and while I think I write/draw/sketch a lot on paper. A few months ago I switched from paper to digital hand-writing and bought an old Wacom Intuos drawing tablet. I'm on Linux and Krita works great with a stylus; very comfortable and intuitive, I haven't looked back.
I only tried a drawing tablet once for a few days (also with Krita), but I too was very surprised by how easy it is to setup everything. Basically just install the package with the Wacom driver (xf86-input-wacom on Arch Linux), restart the X server and you're good to go.
> The Foundation was created to be able to have Dmitry work full-time on Krita. Because we sell stuff, the tax inspector has determined that we’re a company, and should have paid VAT in the Netherlands over the work Dmitry has been doing in Russia. Even though there is no VAT in Russia on the kind of work Dmitry is doing.
As someone who has dealt with VAT in the EU a bit this sounds really odd to me. Even if the inspector determines that VAT needs to be charged on these services, shouldn't it be Dmitry who is paying them, not the foundation?
In other words, they should be coming after the person providing the services for the VAT that he neglected to charge, not after the foundation who just paid the invoices they were given.
This is an understandable assumption, but it's actually not the way it works. I'm sure the Dutch tax authorities have equivalent documentation, but the UK description of the 'reverse charge' should explain the basic principle https://www.gov.uk/guidance/vat-imports-acquisitions-and-pur...
I would like to leanr from the article, but it is low on facts (I may have overlooked them while reading).
What is the relationship between Krita Foundation (Krita) and Dmitry?
Is Dmitry an employee to Krita living in Russia? How can there be any VAT involved?
Is Dmitry a freelancer who sends invoices to Krita?
Do those invoices include VAT? If they do, why does Krita need to pay VAT to Dutch authorities? Does he have a VatID on the invoice?
Dmitry is a freelancer who lives in Moscow, not an employee. For the kind of work Dmitry does, there is no VAT appliccable in Russia. If the Krita Foundation had been Russian, no VAT would have been applicable. There is no VAT ID on his invoices, but he does send invoices. He also keeps ownership over his work, and the Foundation doesn't tell him what to work on...
But since the Krita Foundation is in the Netherlands, the tax authorities feel that the VAT is transfered to the Foundation. Like I said below... If 100% of our income had been from donations, no VAT would have been transfered. If 100% had been from sales, it would have been transfered, and then we would have claimed it back. Since it's a mixed bag, 100% is transfered, and we could only claim 15% or so back.
I still don't understand the logic behind that, though...
They think you should pay VAT on imported services? That sounds very fishy to me. I've never heard of such a thing (and I have been exporting into the EU for many years).
Just curious, if Russia has no vat for that service, Dmitry is based in Russia and the sole purpose of the foundation is to support him, why was the foundation set up in the Netherlands and not in russia?
It looks if you're importing services into the EU you need to pay VAT on those services (just like importing goods) - which Krita didn't.
If you do not have other VAT from sales, you will get the money back, which essentially means you do not have to pay that VAT - "would not have to pay VAT" from the article (but declare it).
If you have VAT from buying and selling items, the VAT you've paid for services is deducted from the difference of selling and buying.
Btw, a business model: let artists pay to enter their names in a directory of artists for hire. They can charge clients extra (eg fee) to pay for these ads. True, it would be ideal to include reviews etc but links to their portfolio are often good enough, and it further highlights the power of krita... If interested, contact me via my HN profile - I've done this before successfully, both for startups and at scale, and I don't need your money. :-)
No, they can be slippery as all hell. Ask a question by e-mail, expect a definitive yes/no answer, instead receive a phone call that's instantly claimed to be "off the record", and receive a parable about a nameless other customer who had this one situation this one time.
Chances are the accountancy firm had never set up a charity before and has misunderstood the constraints, and chances are also high that they won't be liable for the problem caused without some long drawn out struggle.
True, but it is worse than that. If you call the tax office and ask them direct questions about doing business abroad then even they still give you an answer with a disclaimer that it might not be correct.
One of the first things I'll do in the future when creating a company is establishing a good relationship with a reputable business lawyer and accounting firm. It's literally one of the first things I'd put money towards. Sounds like their accountant might not have been entirely on the up-and-up.
As soon as I get my paycheck I'm totally donating a little. I've used Krita and enjoyed it as an alternative to when I do not have access to Photoshop. Now if only ZBrush had a top-tier alternative that would be something.
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!!!
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...
>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.
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.
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?
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.
Can I buy something rather than donate ? Its hard for me to donate using my company account - but very easy to buy stuff. It doesnt matter even if its a license to email you 10 times a year.
You're not fooling anyone. You're assisting your user in navigating organizational complexity required to pay a preferred software vendor.
At my previous companies, the only thing I would need to purchase software was an invoice/receipt I could point to to show that I had purchased a software license. The contents of that license don't matter, and in fact, I even told a few projects "Please invoice me for a commercial license of your software. If you don't have a commercial license, I will accept your existing [e.g. MIT] license as a commercial license. If you do not have a price list already, I will accept a quote of $1,000 without any further negotiation required; just send me an invoice for it."
I think that software developers are really weirded out that the same bits can be free-as-in-beer and _also_ cost $1,000. [+] But _software buyers want to purchase outcomes, not bits_. The outcome I want to buy is "$PROJECT continues to exist in the world." I have sufficient internal authority to purchase this outcome, as does the other commentator on this thread -- we've announced that fact loudly, as does anyone else who either requests a quote or actually pays you. I have sufficient legal authority to purchase that outcome as an officer of the company I was employed at, which enjoys an incredible amount of discretion in how it chooses to spend its own money in the pursuit of its legitimate business objectives, and which has chosen to invest that discretion in me. Reasonable third parties might disagree with our expensing policies (or think they shouldn't have hired me), but reasonable third parties don't get a vote.
[ + ] I sold trial-based software, and a fair bit of it, for many years. The difference between a trial version and a registered version was... nothing at all, if you just compared the binary artifact. The sole thing that distinguished the two was that, if you proved to the software's satisfaction that you were a paying customer, it would act like it was registered (displaying that fact and removing the trial limitations). This was, literally, a single if statement.
Could I have sold software on that same model without the trial limitation at all? Clearly yes; registration would then only cause the software to display you were a registered user. Could I have sold software on that same model with the only display that you were a registered user being outside the software? Yes. How about if that were _only displayed on the purchase confirmation email itself_? Absolutely freaking fine.
None of this gets harder or legally murkier with OSS in the picture.
They provide 'priority support' by email in return for an annual license fee. They also do something about the AGPL license that they use with RStudio source code.
Not sure if this helps any and it might be worth finding out what kind of legal entity is involved &c
Readit News
Krita is a great software, and even though I'm not an artist it's worth supporting.
Is there a list of open source software that is going through similar hardships that need donations?
https://www.wireguard.com/donations/
https://www.patreon.com/zx2c4
Deleted Comment
Otherwise, for people in the EU, our bank account is ING, BIC: INGBNL2A, IBAN: NL72INGB0007216397 .
Saying this is "supporting bad practices" when they are addressing the problems with their set up is IMHO disingenuous.
(This kind of problem also illustrates why Mozilla is set up the way it is, with a Foundation and a Corporation. Tax Law doesn't always deal well with doing both in the same org.)
[1] - https://news.ycombinator.com/item?id=14899324
As someone who has dealt with VAT in the EU a bit this sounds really odd to me. Even if the inspector determines that VAT needs to be charged on these services, shouldn't it be Dmitry who is paying them, not the foundation?
In other words, they should be coming after the person providing the services for the VAT that he neglected to charge, not after the foundation who just paid the invoices they were given.
- [1] Reverse-charging VAT (English)
- [2] Calculating VAT for services to and from non-EU-countries (Dutch)
[1] https://www.belastingdienst.nl/wps/wcm/connect/bldcontenten/...
[2] https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/...
From the look of it, Dmitry is outside the EU, making the foundation the importer and thus responsible for the VAT.
Not doing so would allow unfair competition from suppliers outside the EU. Note that for goods, these are import tariffs.
Deleted Comment
What is the relationship between Krita Foundation (Krita) and Dmitry?
Is Dmitry an employee to Krita living in Russia? How can there be any VAT involved?
Is Dmitry a freelancer who sends invoices to Krita? Do those invoices include VAT? If they do, why does Krita need to pay VAT to Dutch authorities? Does he have a VatID on the invoice?
Do they just send money to Dmitry?
But since the Krita Foundation is in the Netherlands, the tax authorities feel that the VAT is transfered to the Foundation. Like I said below... If 100% of our income had been from donations, no VAT would have been transfered. If 100% had been from sales, it would have been transfered, and then we would have claimed it back. Since it's a mixed bag, 100% is transfered, and we could only claim 15% or so back.
I still don't understand the logic behind that, though...
Also, ignore critique, most of them never dealt with bureaucracy in EU and native countries. Such a mess.
If you do not have other VAT from sales, you will get the money back, which essentially means you do not have to pay that VAT - "would not have to pay VAT" from the article (but declare it).
If you have VAT from buying and selling items, the VAT you've paid for services is deducted from the difference of selling and buying.
Btw, a business model: let artists pay to enter their names in a directory of artists for hire. They can charge clients extra (eg fee) to pay for these ads. True, it would be ideal to include reviews etc but links to their portfolio are often good enough, and it further highlights the power of krita... If interested, contact me via my HN profile - I've done this before successfully, both for startups and at scale, and I don't need your money. :-)
But when you're totally unfamiliar with what the requirements are what can you do?
Do large law/accountancy firms give a guarantee for their advice in the case that it was incorrect?
Chances are the accountancy firm had never set up a charity before and has misunderstood the constraints, and chances are also high that they won't be liable for the problem caused without some long drawn out struggle.
As soon as I get my paycheck I'm totally donating a little. I've used Krita and enjoyed it as an alternative to when I do not have access to Photoshop. Now if only ZBrush had a top-tier alternative that would be something.
Even then it's always a grey area where it's advice that may or may not be what you should do and it depends on your decision, blah blah blah.
Do you give a guarantee on your code, including damages?
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!!!
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...
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-ta...
[0]: https://www.law.cornell.edu/wex/non-profit_organizations
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).
Boudewijn Rempt is a good person.
https://en.wikipedia.org/wiki/Museumkaart
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-registration/calculate-turnover
VAT is complex, and it seems the advice they got wasn't robust.
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?
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.
I don't think I'd be open to forking over 12 EUR for shipping. I'd gladly pay 8 EUR for an eBook edition though.
What exactly constitutes a purchase? How can we help you fool your company into thinking that you're buying something?
At my previous companies, the only thing I would need to purchase software was an invoice/receipt I could point to to show that I had purchased a software license. The contents of that license don't matter, and in fact, I even told a few projects "Please invoice me for a commercial license of your software. If you don't have a commercial license, I will accept your existing [e.g. MIT] license as a commercial license. If you do not have a price list already, I will accept a quote of $1,000 without any further negotiation required; just send me an invoice for it."
I think that software developers are really weirded out that the same bits can be free-as-in-beer and _also_ cost $1,000. [+] But _software buyers want to purchase outcomes, not bits_. The outcome I want to buy is "$PROJECT continues to exist in the world." I have sufficient internal authority to purchase this outcome, as does the other commentator on this thread -- we've announced that fact loudly, as does anyone else who either requests a quote or actually pays you. I have sufficient legal authority to purchase that outcome as an officer of the company I was employed at, which enjoys an incredible amount of discretion in how it chooses to spend its own money in the pursuit of its legitimate business objectives, and which has chosen to invest that discretion in me. Reasonable third parties might disagree with our expensing policies (or think they shouldn't have hired me), but reasonable third parties don't get a vote.
[ + ] I sold trial-based software, and a fair bit of it, for many years. The difference between a trial version and a registered version was... nothing at all, if you just compared the binary artifact. The sole thing that distinguished the two was that, if you proved to the software's satisfaction that you were a paying customer, it would act like it was registered (displaying that fact and removing the trial limitations). This was, literally, a single if statement.
Could I have sold software on that same model without the trial limitation at all? Clearly yes; registration would then only cause the software to display you were a registered user. Could I have sold software on that same model with the only display that you were a registered user being outside the software? Yes. How about if that were _only displayed on the purchase confirmation email itself_? Absolutely freaking fine.
None of this gets harder or legally murkier with OSS in the picture.
Octave Pro would simply be a support license to email you 10 times a year. Or the right to create 10 bugs per year on a bug tracker.
So easy to get past accounting. A plushie would be hard.
How RStudio do it.
They provide 'priority support' by email in return for an annual license fee. They also do something about the AGPL license that they use with RStudio source code.
Not sure if this helps any and it might be worth finding out what kind of legal entity is involved &c
http://webcache.googleusercontent.com/search?q=cache:g-C8yv4...