Back in April, the European Commission had asked the EU VAT Committee, composed by representatives from EU member states and the Commission itself, to discuss the VAT treatment of crowdfunding activities. This month the Committee has released the outcome of its work, which includes the following main conclusions.
- Donation Crowdfunding: freely given donations for which no benefit is given in return falls outside the scope of VAT.
- Reward Crowdfunding: according to the Committee, the transaction where the backer receives, in exchange of financial contribution, a non financial reward in the form of goods or services by the project owner is VAT taxable, provided that there is a direct link between the supply of goods or services and its corresponding consideration collected by way of crowdfunding, and that the entrepreneur is a taxable person acting as such. However,when the open market value of the good or service supplied by the project owner to the backer is lower than the financial contribution and the benefits deriving from such good or service are negligible or totally unrelated to the amount of the contribution, in this case the transaction can be treated as a donation and therefore not taxable. The VAT will be chargeable upon receipt of the payment.
- Equity Crowdfunding: when the investor receives in exchange of a financial contribution a financial reward, in the form of securities, shares or bonds, this transaction is exempt from VAT. An exceptional case to this guideline is when the financial reward received by the contributor of a crowdfunding campaign from the entrepreneur takes the form of participation in future profits by means of intellectual property rights.
- Lending Crowdfunding: when a contributor to a crowdfunding campaign receives a financial reward in the form of interest payments on a loan, such transaction is exempt to VAT payment.
The VAT Committee has also stated that the fundraising services provided by crowdfunding platforms to entrepreneurs are VAT Chargeable.
ECN welcomes the work of the the EU VAT Committee. However, it should be taken into account that these are not legally binding decisions and it is up to each Member State to adopt rules on this topic, following more or less closely such guidance.