The European Commission’s VAT Committee has added a section on the VAT treatment of crowdfunding to its list of guidelines on various provisions of the VAT directive, including confirmation that VAT is due on reward-based crowdfunding projects. The key conclusions of the VAT Committee were:
Goods or services promised to investors in exchange for their funds in crowdfunding campaigns are liable to VAT as a taxable transaction.
VAT due on funding will be payable to the tax authorities when the cash is received.
Where investors receive shares, bonds or debt in the campaign, there is no VAT due – although a participation in future profits from intellectual property rights will be subject to VAT.
The services of crowdfunding platforms that provide fundraising services to entrepreneurs are within the scope of VAT.
Richard Asquith, vice-president of global tax at Avalara, said: ‘The VAT Committee’s conclusion may spring a tax liability on unprepared crowdfunding projects and make the economics far less attractive. Many projects will now have to register for VAT to process and report the liabilities.’ See www.bit.ly/1AcuiCO.
The European Commission’s VAT Committee has added a section on the VAT treatment of crowdfunding to its list of guidelines on various provisions of the VAT directive, including confirmation that VAT is due on reward-based crowdfunding projects. The key conclusions of the VAT Committee were:
Goods or services promised to investors in exchange for their funds in crowdfunding campaigns are liable to VAT as a taxable transaction.
VAT due on funding will be payable to the tax authorities when the cash is received.
Where investors receive shares, bonds or debt in the campaign, there is no VAT due – although a participation in future profits from intellectual property rights will be subject to VAT.
The services of crowdfunding platforms that provide fundraising services to entrepreneurs are within the scope of VAT.
Richard Asquith, vice-president of global tax at Avalara, said: ‘The VAT Committee’s conclusion may spring a tax liability on unprepared crowdfunding projects and make the economics far less attractive. Many projects will now have to register for VAT to process and report the liabilities.’ See www.bit.ly/1AcuiCO.
