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Submission: On May 18 via api from US — Scanned from DE
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* World Tax * World TP * Login * Subscribe * Free Trial * Direct Tax * Indirect Tax * Transfer Pricing * Jurisdictions * Africa * Asia-Pacific * Europe * Latin America and Caribbean * Middle East * North America * Africa * Asia-Pacific * Europe * Latin America and Caribbean * Middle East * North America * Expert Analysis * Features * Local Insights * Special Focus * Webinars * Podcasts * PDF Archive * Features * Local Insights * Special Focus * Webinars * Podcasts * PDF Archive * Events * Conferences * Awards * Webinars * Conferences * Awards * Webinars Show Search Submit Search Search Query Menu Submit Search Search Query * Direct Tax * Indirect Tax * Transfer Pricing * Jurisdictions * Africa * Asia-Pacific * Europe * Latin America and Caribbean * Middle East * North America * Africa * Asia-Pacific * Europe * Latin America and Caribbean * Middle East * North America * Expert Analysis * Features * Local Insights * Special Focus * Webinars * Podcasts * PDF Archive * Features * Local Insights * Special Focus * Webinars * Podcasts * PDF Archive * Events * Conferences * Awards * Webinars * Conferences * Awards * Webinars * Login * Subscribe * Free Trial International Tax Review is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730 Copyright © Delinian Limited and its affiliated companies 2023 Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement Cookies Settings LUXEMBOURG: CROWDFUNDING IN THE EU: VAT CONSEQUENCES July 12, 2016 * Twitter * LinkedIn * Email * Show more sharing options Share Close extra sharing options * Twitter * LinkedIn * Email * Copy Link URLCopied! * Print CERTAIN BUSINESSES ARE INCREASINGLY RELYING ON "REWARD-BASED CROWDFUNDING" AS ANOTHER METHOD TO SEEK ADDITIONAL SOURCES OF CAPITAL INJECTIONS, WHERE THE BUSINESS MAY OFFER TANGIBLE OR INTANGIBLE ASSETS, SERVICES, SHARES OR PARTICIPATION IN FUTURE PROFITS TO PERSONS WHO ENGAGE IN THE FUNDING CAMPAIGN. Raphaël Glohr Michel Lambion The VAT consequences of these activities has become an issue: is reward-based crowdfunding an exempt financial service or a taxable supply where persons providing funds are offered goods or services in return for their investment, and thus giving rise to VAT registration/compliance obligations? The 2015 guidelines issued by the European Union (EU) VAT Committee provide a useful reminder that the "participative" nature of crowdfunding does not make it exempt from the normal VAT rules. The VAT Committee, a consultative body consisting of representatives from the VAT authorities of the 28 EU member states, issued guidelines on crowdfunding in November 2015. Although not binding, the guidelines have been discussed and agreed upon by representatives of the national administrations and, therefore, are useful as a high-level guide for businesses. Most of the guidelines discussed below have been adopted unanimously (areas where unanimous agreement was not reached are specified). VAT GUIDELINES The VAT guidelines state that a good or service received by a contributor as a reward (i.e. in exchange for the contribution to the crowdfunding campaign) is subject to VAT when: (i) there is a direct link between the reward and the contribution; and (ii) the person that provides the reward is a VAT taxable person, i.e. a person performing economic activities on a regular basis. The taxable basis on which VAT should be calculated, in principle, would be the purchase or cost price of the reward. This taxable basis may be lower than the market value of the reward, and could be lower than the value of the contribution itself. It was 'almost unanimously' (i.e. by more than 24 member states) agreed by the VAT committee that a reward of a negligible value, or a value wholly unconnected to the value of the contribution, could be viewed as a donation, which falls outside the scope of VAT. The same treatment is applied to goods given as samples or gifts of low value. Rewards in the form of intellectual property rights fall within the scope of VAT, but those consisting of securities are VAT exempt. Finally, where the contribution is an interest-bearing loan, the interest payments are exempt from VAT. VAT STATUS OF CROWDFUNDING PLATFORMS Crowdfunding platforms are deemed to perform an economic activity when services are rendered to taxable persons. The VAT committee 'almost unanimously' agreed that such supplies should be subject to VAT unless the supplies consist of exempt financial services. The fact that the guidelines specifically refer to services rendered to a "taxable person" seems to imply that a platform supplying services to only non-taxable persons would not be considered to perform an economic activity. From a general EU VAT perspective, however, the status of the recipient of a service should be irrelevant to the characterisation of the nature of that service. It also is surprising to note that, while all member states consider that a platform that renders services is performing an economic activity, a few member states consider that these services should not be subject to VAT. BUSINESS CONSIDERATIONS Persons involved in crowdfunding activities should consider their VAT positions and associated administrative obligations (e.g. VAT registration, filing VAT returns, issuing valid VAT invoices, etc.). In particular, where rewards are granted by fund owners, it will be important to determine the taxable basis and VAT rate to be applied. This exercise will be more complex in cross-border situations, but it is necessary to avoid unintended and costly consequences. Raphaël Glohr (rglohr@deloitte.lu) and Michel Lambion (milambion@deloitte.lu) Deloitte Luxembourg Tel: +352 45145 2665 and +352 45145 3993 Website: www.deloitte.lu TAGS International UpdatesLuxembourgSponsoredEuropeITR MagazineJuly/August 2016EuropeLuxembourgJurisdictionsJurisdictions more across site & bottom lb ros MORE FROM ACROSS OUR SITE Technology trends in a TP world Technology solutions to TP challenges are advancing quickly in a complex world where compliance is king. Euan Healy, May 18, 2023 Opinion: PwC tax leaks scandal raises difficult industry questions PwC Australia is facing investigations over leaked information on tax policy, but this scandal could reach far beyond one country. 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Courtney Wilson, May 11, 2023 * About us * Meet the Team * Contact Us & FAQs * Media Pack * Editorial Calendar * Advertise in ITR International Tax Review is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730 Copyright © Delinian Limited and its affiliated companies 2023 Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement Cookies Settings * twitter * facebook * linkedin We use cookies to serve you with the most relevant content and ads, and to keep our websites reliable and secure. I AGREE PRIVACY PREFERENCE CENTER * YOUR PRIVACY * STRICTLY NECESSARY COOKIES * PERFORMANCE COOKIES * FUNCTIONAL COOKIES * TARGETING COOKIES YOUR PRIVACY When you visit any website, it may store or retrieve information on your browser, mostly in the form of cookies. This information might be about you, your preferences or your device and is mostly used to make the site work as you expect it to. 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