We have a law called "Money Collection act", which states that to gather donations (i.e. payments with nothing in return), you have to get a permit. This permit costs money, is not given to individuals, and is given only for non-profit activities.
So this means that if you see a donation/sponsorship button on a software project where the money goes to a Finnish person, it is illegal (unless they have obtained a permit, which is highly unlikely). If you see a patreon/sponsorship with rewards, it's a grey area. The only clearly legal way is by selling actual things, and of course then you quickly need to set up a business.
I host a free project myself and I've had to set up a business (sole proprietorship) and sell things in order to get money for server costs. Even though people have been interested in donating, I can't do that legally.
What you can do is to "sell" something in lieu of donations:
E.g. - To support me please buy this wallpaper image file of my project logo. Or one-day email support etc.
You can always add a note that Finland laws prevent you from accepting donation, and this is the only way you can accept money from patrons, and even provide a link to the law in question.
(Note that depending on the laws in your country you may have to register as a freelancer / small business and pay taxes. In most countries this will be free or near free, and you probably won't get enough money to reach the threshold aftwer which you have to pay taxes).
[*] Digital artwork = project logo in png format, free to use however they please. You can license the publicly-available logo with any minimally-restrictive license (e.g. CC-BY); this should still count that "you gave them additional rights, in exchange for payment".
Whether all people do it or not is another question, but that is what is required by the law.
What you might need a company for is to pay sales taxes you charge for physical goods, or get insurance appropriate for your line of work. That's likely to be state-by-state. You just get the convenience of an EIN by registering and some additional legal protections by being a distinct entity (i.e. I could sell the company or assign IP to it or hire employees).
I have certainly gotten contractor income to me personally that I just had to account for. In the USA for small businesses you'd have to send the same documentation, so it doesn't even save paperwork. As a sole proprietorship I get the same tax documents from my clients as I would if I were operating directly under my name.
Edit: Also, if this were true in the USA, it implies that all those Uber drivers each have a sole-proprietorship set up. I'm pretty sure that companies can hire contractors as individuals without them becoming businesses.
What specifically the parent was referring to I'm not sure, but that would be why it is consistent to describe a company as both "in compliance with tax law" and also as "using loopholes". If they weren't in compliance with tax law they'd just be breaking the law. No one is accusing the companies of breaking the law, they're accusing the tax system of being biased and corrupt.
Which games don't have edge cases, loopholes, exploits?
Of the games which can be "gamed", are they more or less complex than any given tax code?
Won't protect one guy or a small team in case of legal disputes, it's called piercing the corporate veil. I wonder if the EU has something similar.
No it isn't... In Canada, you can happily accept money from people and just stick it in the "other income" box on your tax return, where it'll get income-taxed appropriately.
If you're trying to do business deductions or want to pay business taxes instead, yes you need a business. If you're trying to set up a physical location, yes you need a business license from your city. But if you don't care about the pennies and your work is digital there's absolutely no requirement.
This is not the case in the USA. There is no general federal legal requirement to register a business or obtain a business license in order to sell things. However, there are specific industries for which business licenses are required (at any of the federal, state and local levels) and forming an LLC might help personal assets if you are sued.
The obvious workaround here is to paywall some tiny feature with choose-your-own-price, or perhaps offer something akin to Reddit Gold. I presume the law already thought of that?
The authors tactic of paywalling things behind a "donation" seems legally much more dubious.
It's so much easier in the US. If you're an individual it's going to be taxable income, but there's no up-front paperwork to do (for that matter, you don't have to "set up" a sole proprietorship here either -- that's just what the tax code calls "some rando doing business by themself"). I've done contract work for years, have a bit of my income coming in through GitHub sponsors now.
Now, if we could only get health care covered for folks who don't have an employer...
> I host a free project myself and I've had to set up a business (sole proprietorship) and sell things in order to get money for server costs.
What's your side project? Speaking of Sandstorm, I'm wondering if it might be relevant; dealing with the problem of developers needing to monetize things in order to cover hosting costs was one of the motivations for the project:
A single member LLC provides some benefits but those benefits often require a lawyer to invoke (i.e. you're getting sued, gotta file things and work the legal system). If you have insurance you just tell the insurance company and they hire the lawyers.
Then there's a technical issue at launch and orders are being rejected left and right.
They could be out basically the whole value of the marketing campaign which is 10x your salary. You might owe them compensation for that, unless of course you got paid through an LLC and only have the $100 in your account.
(ps. With some careful lawyer drafting to exempt things which can't be limited in that way (negligence etc.), while carefully wording the exemption so any part voided doesn't take the whole limitation with it.)
On the other hand various types of corporate insurance cover you for particular risks. Depending where and how you operate you may have to have them by statute or by practicality. So you may have to carry liability insurance by law if you have an office where people visit, or a contract may require that you hold E&O insurance up to a certain amount. In a way the latter is actually your customer protecting themselves from your use of a LLC. Without it, in the case of a settlement against you, you could easily just turn around and say "fine, the corporate account has $5 in it, here you go" and then fold up the company leaving them with no recourse. With E&O coverage for certain types of errors, they know they can get covered in a settlement up to a certain amount.
E&O covers you for particular failures in providing the service you are contract for. Say you were an electrician and did some work on a new building. They sue you claiming your work wasn't to code and caused them $100k in trouble with the city - you disagree. E&O insurance covers your court costs and potentially your settlement if it goes that way. It isn't going to cover you if you get sued for libel because of things you said about them, etc.
This is also why, for example, it may be hard/impossible to get underwriters for some software consulting. Because there are not professional standards groups that are well recognized and because potential damages from software can be difficult to asses (your script change cost us $10mm in AWS fees) insurance companies may not want anything to do with it.
So that leads to a third prong of protections which you didn't mention, which is you need to pay attention to your contract terms (and set them as much as you can). Depending on your situation this can range from easy to impossible, but can have a huge impact. For example, I've successfully added clauses to limit all liability to actual spend on previous 6 mo.
 this is hugely dependent on jurisdiction, particularly with single member variants.
But it's a one-time fee, so you're probably still right in general, but for the moment I'm mostly coasting on savings & sponsorships, focusing on the stuff I care about while I have the breathing room. I might consider being a bit more organized if/when I ramp up business again and am considering looking for new clients.
It's mainly for fun and I want to keep it free, but of course I wouldn't mind if there was some money coming in to pay for the costs and motivate to work on it more. Currently I'm selling stickers and in the future I will implement some kind of paid accounts which will have some minor features that free accounts don't have – the dilemma is to keep it balanced so that free users don't feel second class.
In the UK it's even simpler if you are recieving less than £1,000 a year in donations or similar. HMRC have basically decided taxing people's side hustles would costs more than it returned. https://www.gov.uk/guidance/tax-free-allowances-on-property-...
$7 = 700 random bytes
$15 = 1500 random bytes + 500 bytes free!
$99 = lifetime* subscription for 25k random bytes per year
* your lifetime or my lifetime, whichever terminates earlier
Truth in advertising and all that.
If you're not allowed to sell copyright licenses in Finland, then your whole software business is screwed.
My non-Scandinavian girlfriend never understood why people pay for the bus there if they never get checked. Or why people bother to leave money in a little box at an unmanned coffee/waffle/etc stand in the middle of nowhere. But most do as it is the right thing to do, guilt free.
And if there is a slight chance the tax authorities might contact him the guilt/embarrassment is worse than any token fine.
They aren't the same from an ethical perspective.
You understand that you enjoy living in a system that you can trust. You understand that being able to trust the system means that the system has to trust you. You value a working system more than a petty dollar or some other short-sighted piece of self-interest, because you get more benefit from having the system work in your favor than taking a little for yourself but eroding/ruining the system in the same go. If most people do the right thing, the system works and everyone benefits.
Simple as that! It's the opposite of the tragedy of the commons.
In non-utopian countries, you have to make an advance deposit into the system and may never do enough to make it universally trusted. People may never stop jaywalking, or taking a free coffee/waffle/etc. from the unmanned stand, or cheating your taxes with family income and business expenses. But I'm doing well for myself, so what am I really losing by doing the right thing? Life already put me ahead. I'd rather contribute a small part to a working system I can trust, than to grab another small pie just for myself.
This only works if you never piss anyone off, have no enemies and the government only stands to look bad from going after you.
Obviously accepting donations in an illegal manner is a stupidly low hanging fruit for someone who wants to screw you over. Sure you'd probably only have to pay back taxes (or whatever) in the end but it's a massive hassle and better to just keep it on the down low.
...which they probably wouldn't.
Also, if you receive more than a few hundred dollars, perhaps the Finnish IRS will start noticing.
I have seen some gamers in India asking for donations and giving direct account details(UPI details), but I am very cautious against this. I am just waiting(selfishly) for Income Tax dept to serve notice to someone and get this clarified via court case.
In other words, they are not given in exchange for something; the something is freely given without the donation.
Of course there is the question of whether something is truly a donation. But charities have to deal with that question, so there are formulaic approaches to it, and advisors. Sometimes the wording that accompanies a donation must be written carefully, to clarify what is and is not expected for it, because donations can be directed to a purpose, which isn't (apparently) the same as paying for something.
I assume it's similar elsewhere?
Like my work?
* all donations automatically receive (whatever)
The software (Or service in your case?) is the product.
Currently our air carrier Finnair is under investigation because they offered a climate compensation payment for flights. They say the payment went towards biofuel and other compensation methods but it's being investigated if it was considered a donation.
Also OPs explanation is not so straightforward, the money collection act is being contested all the time and many succeed in collecting money here.
Finnish peoples problem isnt the laws, but the fact that they are total pussies when it comes intrepreting the law.
Seems like there would be a clear value exchange here.
Surely gettings lots of monetary gifts from foreign friends would probably not hold during a tax audit (they'd accuse you of trying to evade taxes unless you could provide a plausible reason why all these people would be sending you gifts) but it's an interesting counter-example nevertheless.
Not something to be impressed by; gifts are tax free in the US under $15,000 per one year.
Another would be to regard such a construct as income. Report your income. Pay your taxes and be happy.
It only becomes "gray" areas when people think it is possible to have non-taxed revenue streams.
This may be true in some countries, but it's definitively not an universal truth. Some business models are not allowed even if you pay taxes on the income. This is what the user is describing, and reading the (English translation) of the text of the Act, I'd be worried too.
That you would need to open a business is probably something most countries require though.
Finland is probably too far the opposite direction, but the whole sector could use a lot more scrutiny over here.
The IRS doesn’t seem to give these orgs much scrutiny unless they’re egregiously bad or become a big news story.
It's extremely frowned upon to begin with, but at least the laws make it illegal.
(Not that it necessarily hinders those that really want to scam someone. Some of these BS "organizations" just contract their work to foreign call-centers. Every year a lot of young European people are lured to some low-cost country in southern Europe, where they'll have to work for some call-center at below minimum wage - and these centers will sometimes work for anyone...)
Donation regulation is not a 'socialist' policy, and at a stretch, you could only say it's simply a policy which happens to be implemented in a capitalist social democratic country, in this case Finland.
If you did, you got rightly called out. If you didn’t, then I don’t understand what you meant.