Since last year, when several Romanian studios were raided by the tax authorities, legal taxation after income from broadcasting on live cam sites has become a hot topic. Although things have become calmer, still there is a lot of confusion around how these businesses can work completely legally, and since many studios want to work clean, various questions came up, including how cam sites can help their partners in operating lawfully.
The Romanian situation is probably not a unique one, as no one really likes to pay taxes. Of course it is a must and it also has its reason why, but let’s not get lost in these details. However, since money from cam sites in many cases is not arriving on bank accounts, eluding from this duty is easier and tempted a lot of studio owners.
But last year’s raids shook the industry, it was a strong warning sign to everyone, especially for those businesses whose accounting practices were questionable. The good news is that many of these studios immediately started to organize their standing with tax authorities, paying taxes retrospectively, creating legal companies, contracts with their models, and so on.
“I believe that the legal system in Romania is not ready for dynamic online business. Thus we, Charm Group, are facing an unfriendly and outdated legal environment which is not providing clear solutions.” – Dragos Costea, Charm Group
But even those, who try to come clean or stay clean meet a maze of legal practices, namely, no one can tell exactly from the authorities, what is the best practice. This summer on the AW Summit we had an expert panel on this issue, and the consensus between the participants was that different legal or authority representatives give different advices. What is definitely sure is, that all money in any cases should be accounted, but there are still questions. For example, if models should be employees of a studio, or they should be working as “contractors” in cooperation with the studio.
“One of the mistakes that we see in the Romanian system is that legal studios are sometimes abused by the authorities and the studios that are not paying taxes are not disturbed in their activity.” – Razvan Vasilescu, SmartChat Studio
Another issue, which is not necessarily the system’s fault, is that many models still lean towards studios which are not accounting legally. The behaviour as we said is not unique to Romania, but brings legal studios in a tough position, as their strictly lawful accounting and contracts – which should be an advantage normally – can be a great disadvantage when it comes to attracting fresh workforce. And since clean studios report everything they have to, they are more in spotlight for the tax authorities, than ones that often are not even registered as companies.
“(…) all cam sites should ask for invoices from the studios for all their incomes, the studio account should be registered on a company name (same as on the invoice of course), and payments should be made via international wire transfer, directly in the bank account of that Company. (…) a signed contract between our Company and the Cam Site would be very well received.” – Sorin Anghel, LTV Studio
A returning question in the whole situation is, how changing the form of collaboration between studios and cam sites could help broadcasters in coming on the same page with the tax authorities.
With exception of a few cam sites, studio owners can only register as physical person, uploading their own identification data, bank information, and so on. When it comes to accounting, this generates a problem, as the money should arrive to a company, on the company’s bank account, via international transfer.
Also a various studio owners expressed their need of signed, stamped written contracts between studio and cam site, as between two legal entities, companies.
The industry is definitely making efforts into the direction of getting rid of the stigma and becoming legal, but it is still a long road ahead probably. One of the things that would surely help content providers, if there would be a conversation between the industry and the authorities, to figure out a unified way in which these businesses could operate legally and in piece. But also cam sites should make efforts in easing the pressure, studios are under, by providing them the opportunity of an intercompany collaboration so authorities can recognize the legal bond between them.