"EU considers imposing VAT on crowdfunding" Topic

Public Service Announcement:

The European Commission (EC) has launched an investigation into whether crowdfunding should be liable to EU VAT. If it concludes that the public investment-raising activity is subject to tax, then many UK projects will face a 20% VAT liability on investor returns.

The UK crowdfunding market was reportedly worth £1.70 GBPbn in 2014.

Rewards crowdfunding – a taxable supply?
The EC is particularly concerned with the highly popular practice of ‘rewards crowdfunding', where the public can contribute funds in return for products or services to be developed by the fundraiser. Recent rewards projects have included software development, films and a range of consumer products that are offered free or at a significant discount to crowdfunding investors.

Intermediary services by platforms subject to VAT?
In addition, the EC is questioning if crowdfunding is a financial service as defined by the EU VAT Directive. If it concludes that it is not, then intermediary services provided by the hundreds of crowdfunding platforms available today will become liable to VAT too.

On 21 April 2015, the EC referred the matter to the EU VAT Committee. This group reviews and promotes the uniform application of the provisions of VAT Directives across the 28 member states of the EU.

Crowdfunding's explosive growth has finally brought it to the attention of the EU VAT lawmakers. This follows similar reviews of VAT on bitcoins and other digital currencies. The nascent EU market may be nervous about facing a large tax bill and it could create a major competitive threat to local platforms trying to compete with more established US-based markets.

Original article.

--
Martin Stephenson
Vexillia: Wargames Miniatures & Accessories
Shop | Rules | Twitter

Reminds me of the quote:

If it Moves, Tax it. If it Keeps Moving, Regulate it. And if it Stops Moving, Subsidize it.

On the surface it seems like this affects EU started projects which will have to have higher funding goals to offset the taxes.

Wait and see if they try to apply VAT to pledges before the product is actually produced. That should just about kill crowd funding in any EU state, and if pushed to the extreme (like the 'down load VAT'), could stop or at least hinder residents of EU states from participating in non-EU crowd funding as well.

Goose + Golden Egg = Kill.

Death by bureaucrats.

Would larger companies (like Mantic – that seems to be doing a Kickstarter every 6 months) just move their Kickstarters to originate out of the US or other non-taxable locations? I am pretty sure I got my last Mantic KS shipment from a US source, but that was to control shipping costs, but I would think the same thing could apply to origination location. Interesting

ps. Great Quote Mr Elmo

I have lost interest in Crowdfunding and their like. Lots of companies seem to use it ( in the gaming world) as nothing more than a pre ordering system these days

Yep. Which is precisely why this is on the cards – if it was really an investment vehicle VAT would be a non-starter, but when that's effectively a fiction and it's just a presale system, well, subjecting it to sales taxes isn't a shocking move….

States that go broken and maybe one day broken are most dangerous to freedoms especially enterprise.

I see no problem with this.

If it constitutes a supply of goods that would normally be VATable then no problem; on fact I assumed this was already the case. However taxing a legitimate investment is not wise.

Well, I hate crowdfunding on principle, but this is indeed a hilariously European sort of thing to do.
-Kle.

If you are a company that is VAT registered anyway, don't you have to factor in charging VAT on pledges anyway (i.e. its contained within the pledge) if they are effectively the sale of goods by preordering ?
In any event if the project brought in enough money either itself or in addition to your ordinary sales you could easily be pushed over the threshold wouldn't VAT apply as well?

Or is this to catch 20 percent of the small (but potentially numerous) "here's a fiver ; good luck!" pledges as well?

Hmmm. Interesting. If you pledge to a kickstarter you aren't buying goods, theoretically. You are investing in a development and are rewarded for your investment with loot.

Under normal investment rules you pay income tax on monetary return, but I don't know of any investment where you'd get "stuff" back instead. I would guess it would end up being similar to payment in kind or capital gains, and you'd be taxed on the value of the item.

G.

There are actually people who think this is an "investment"?

More than one born every minute!

Bound to happen, as in practice its just a glorified pre-order-system for many companies.

Goods "invested" via Crowdfunding from outside the EU are already subject to import VAT anyway. It will only effect in-EU campaigns who currently sell "rewards" without factoring in VAT. If in doubt they will have to discuss this with their local tax office anyway, once an audit comes in, and I assume larger companies already price VAT into their perks. The EU will surely stamp upon any attempt to use crowdfunding to escape VAT.

Chances are that there will be a sharply defined seperation between "investment" and "pre-sale" for crowdfunding soon, with the likes of KS going "pre-sale" and being subject to VAT.

Just forward your paychck to the local tax office citizen. Do your part!