Don’t Get Caught Out by the Tax Authority in Crowdfunding!

The following post should not be construed as legal or tax advice.Tax_man

As you may be aware, crowdfunding platforms are becoming increasingly popular in the business world today. They provide an alternative means of fundraising for small businesses. Over the recent months, it has become apparent that the European Commission and other such organisations have been laying focus on the tax rules applicable to crowdfunding projects and although no changes have been made as yet; it is expected that greater scrutiny is to be exercised over the crowdfunding sector as a whole.

This is considered to be a grey area by most creators as the tax rules in crowdfunding vary enormously depending on the home country, industry and of course, the style of crowdfunding being actioned. Any applicable VAT is determined by the country in which the consumer is based so you can just imagine how complex things can get for the business owner! VAT rates and policies are different in all countries so to avoid complication, it’s recommended that business owners take advantage of the latest offering from MOSS (Mini-One-Stop-Shop), an online electronic portal which has been designed to allow for simplified implementation of this new Council Regulation.

 Stick to crowdfunding platforms such as Tailwind Crowd that proactively look for solutions to assist entrepreneurs and project owners deal with VAT implications.

As an entrepreneur, you should register with a platform that:

  • Will provide an overall and detailed table of the applicable VAT in each country and support the company to correctly apply the VAT to its supporters
  • Remains up-to-date with the trends of the industry
  • Generally supports the project owners with all aspects of crowdfunding

Do taxes need to be paid on Reward-Based Campaigns in order to comply with the law?

Reward-based campaigns are structured on a model of crowdfunding where businesses offer rewards (instead of the more traditional model of shares) to those who elect to provide funds to their company. The trouble is that rewards come in all different shapes and sizes, some tangible, some intangible; it’s no wonder this provokes confusion amongst entrepreneurs!

According to the European Commission, “The requirement for taxpayers to apply VAT to supplies of rewards goods and services – whether given freely or by way of barter – has existed under EU law for decades. Otherwise, crowdfunded businesses and their investors would gain an unfair tax advantage over the general public by effectively obtaining their reward goods and services VAT-free”


In a nutshell, if you are looking to register with a crowdfunding platform, it is highly recommended that you do so with platforms such as Tailwind Crowd who have strategies in place to assist you with all aspects including VAT rules in general. Cash flow implications must be proactively managed in order to avoid being caught unawares.

Get in touch with our team here at Tailwind Crowd and we will gladly provide you with additional information relating to applicable VAT terms and conditions.

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