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Krita Foundation in Trouble

krita.org

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Re: Krita Foundation in Trouble

#31

Post by sgift »

mrkrabo wrote: post #10
nekopa wrote: post #9

Earlier quoted context omitted.

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

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?

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).

Re: Krita Foundation in Trouble

#32

Post by pmyteh »

mrkrabo wrote: post #10
nekopa wrote: post #9

Earlier quoted context omitted.

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

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?

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.

Re: Krita Foundation in Trouble

#33

Post by DanBC »

rplnt wrote: post #27
dbrgn wrote: post #11

Just a quick reminder, if everyone here donates just 3-5$, the expenses will be paid in no time :) Krita is a great software, and even though I'm not an artist it's worth supporting.

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.

You say bad practices, but they got advice from a registered qualified professional in a complex area of tax law.

Re: Krita Foundation in Trouble

#34

Post by coldtea »

mrkrabo wrote: post #5
Jonnax wrote: post #2

That's really sad to hear. With how complex laws are, it's scary that going to a professional may not be sufficient. 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?

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…

>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-ta...

Re: Krita Foundation in Trouble

#35

Post by _Codemonkeyism »

boudewijnrempt wrote: post #29
_Codemonkeyism wrote: post #23

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 hav…

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…

Thanks!

Re: Krita Foundation in Trouble

#36

Post by roel_v »

princekolt wrote: post #19
mrkrabo wrote: post #5

Earlier quoted context omitted.

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…

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

That's for US law, unrelated to this case.

Re: Krita Foundation in Trouble

#37

Post by KayEss »

boudewijnrempt wrote: post #29
_Codemonkeyism wrote: post #23

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 hav…

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…

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).

Re: Krita Foundation in Trouble

#38

Post by gcp »

rplnt wrote: post #27
dbrgn wrote: post #11

Just a quick reminder, if everyone here donates just 3-5$, the expenses will be paid in no time :) Krita is a great software, and even though I'm not an artist it's worth supporting.

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.)

Re: Krita Foundation in Trouble

#39

Post by dom0 »

laumars wrote: post #20
boudewijnrempt wrote: post #18

Earlier quoted context omitted.

It's very slow... The hackernews effect, I'm afraid. Internationally, paypal is easiest: just use foundation@krita.org. Otherwise, for people in the EU, our bank account is ING, BIC: INGBNL2A, IBAN: NL72INGB0007216397 .

I hope this (the "Hacker News effect") doesn't bump up your hosting costs as that's the last thing you'd need. For what it's worth, I've donated. :)

EU bank transfers are free of charge.

Re: Krita Foundation in Trouble

#40

Post by boudewijnrempt »

coldtea wrote: post #34
mrkrabo wrote: post #5

Earlier quoted context omitted.

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…

> 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. Her…

> 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...

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