CROWDFUNDING : WHAT ARE THE TAX ISSUES?
Abstract
This paper seeks to analyse the different tax issues that arise for each party to a crowdfunding arrangement. There are currently four main types of crowdfunding arrangements. These are commonly referred to as donation-based crowdfunding, reward-based crowdfunding, equity-based crowdfunding and debt-based crowdfunding. Each uses a different strategy to attract funding and each may have different tax consequences for the parties involved.
In addition to income tax issues, the authors discuss GST in the context of reward-based crowdfunding and highlight the different results that arise under GST due to the different criteria for determining whether an enterprise is being carried on for GST purposes as opposed to a business for income tax purposes. With regard to equity and debt-based crowdfunding the authors also point out some of the limitations that arise due to regulatory control.