An increasingly popular form of financing is the so-called 'crowdfunding'. Crowdfunding is an alternative way to finance a project/business without the intervention of a financial intermediary. Crowdfunding enables the entrepreneur to acquire funds with the aid of direct contributions from (private) investors.
In some situations, VAT may become due by the recipient of the fund. Recently the European VAT Committee published its opinion on the VAT-consequences regarding crowdfunding. This published opinion is not obligatory for the Member States, but is considered to be leading.
According to the European VAT Committee, the mere grant of a (interest-bearing) fund remains to be a VAT-exempt service. However, if the recipient of the fund - besides paying the interest - does something in return for the (private) investors (e.g. supplying goods or services against a substantial reduced price), VAT may become due by the recipient of the fund. In this respect, the European VAT Committee outlined the following:
- the provision of certain goods or services promised in return for the received funds, is in principle subject to VAT;
- VAT on the supply of certain goods or services is due by the recipient of the fund at the time the fund is received;
- VAT will not be due for merely receiving a loan or providing shares; and
- the fundraising services of crowdfunding platforms are subject to VAT.
Considering the aforementioned, the recipients of funds in crowdfunding projects should be aware of the possible VAT-exposure. Therefore, before receiving any funds, the recipient should assess whether VAT may become due. Should you require any assistance with that, please do not hesitate to contact us.
Source: Guidelines of the European VAT Committee resulting from the 102nd meeting of 30 march 2015 (Document H - taxud.c.1(2015)5528628 – 870)