by: Grow VC Group
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Before I even get started, I want to give a huge Welcome! all to visit Kapipal’s brand new site.

With it being the ever fun tax season, we wanted to help you out by providing a brief overview of where crowdfunding falls within the taxation process. As with most things, what is taxed and how much it is taxed depends on the countries, but we will give a quick overview of the European Union and the United States.

European Union

To help clarify tax laws, the European Union segmented the types of crowdfunding campaigns to show which ones fall under the scope of VAT:

  • Donation Crowdfunding – donations given with no obligation or return do not fall under the purview of VAT
  • Reward Crowdfunding – donations where a contributors receive a non-financial reward is considered VAT taxable, unless the rewards are minor and completely unrelated to the amount of contribution. In that case, the contribution can be considered a donation and is thus not taxable
  • Equity Crowdfunding – if an individual receives financial securities, shares or bonds in exchange for contribution to a crowdfunding campaign, then this transaction is exempt from the VAT

Bear in mind that these are guidelines by EU and not legally binding decisions. It’s up to each Member State to adopt the rules.

United States

In the United States, tax rules on crowdfunding are fairly vague. This is largely due to the fact that Congress and the IRS have yet to address crowdfunding related income, which leaves most of the decision up to accountants and tax advisors.

As a general rule of thumb, it is wise to consider general tax principles when deciding how to document funds generated from crowdfunding. Regardless, the lack of attention given to Crowdfunding by Congress and the IRS shows that reporting on Crowdfunding funds is a very minor issue and should be viewed simply as another aspect of the tax processes.

Keep in mind that these are simply general rules. Kapipal doesn’t offer tax advice, so if you are curious, you can explore these sources for more information on tax laws in the European Union and the United States. Also, if you’d like, you can also contact your local tax advisor for your countries tax information.

As always, have a great week and keep on dreaming and making this world a better place!

Read more at Kapipal Blog.

HMRC


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Grow VC Group The Grow VC Group is the world leading, global pioneer of securities crowd funding, peer to peer marketplaces, new investment models and global business development. Established in 2009, the Group has developed new investment models on six continents and continues to innovate the global market.

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This entry was posted on Tuesday, March 8th, 2016 at 10:00 am and is filed under Business Education, Business Updates. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.