0
Crowd funding
and TAX
Kickstarter/Indiegogo

taxsupport.ca Vancouver
Kickstarter and Indiegogo has
become a trusted source of seed
money for Canadian Startups.

taxsupport.ca Vancouver
Is crowd funded money taxable
business income?

taxsupport.ca Vancouver
A question is going to haunt
Canadian startups and
entrepreneurs going forward.

taxsupport.ca Vancouver
According to Canada Revenue
Agency (CRA) crowd funded
capital is ordinary business
income as per Income Tax Act of
Canada
...
It is like a pre sale of your
service or product.

taxsupport.ca Vancouver
You collect funds (money) in
advance promising a service or
product in future to your
customers.

taxsupport.ca Vancouver
Are your customers donating
money to your project?

taxsupport.ca Vancouver
NO! They are not.
They are expecting a service or
product in exchange of funding
your project on Kickstarter and
Indiegogo...
Kickstarter and Indiegogo might
give you the impression that you
are raising capital, but in reality
and as per the Income...
Funding from Kickstarter and
Indiegogo are not Capital.
These are business revenue and
as such part of your taxable
busine...
Expenses related to crowd
funding and providing of service
and product are part of business
expense if they meet the crite...
How much tax you could pay on
your Crowd sourced income?

taxsupport.ca Vancouver
It depends,
on your business entity.
How you are sourcing the fund?

taxsupport.ca Vancouver
Are you sourcing fund as a
sole proprietor,
partnership or
a corporation?

taxsupport.ca Vancouver
If you are a sole proprietor or
partnership, you could pay a
minimum of 22% to maximum of
43% of your net business income
...
For Example, if you sourced
$10,000 from crowd through
Kickstarter and Indiegogo, your
Business Income is $10,000 for
the ...
Your expenses to raise the fund
and provide service or product to
the crowd are $8,000.

taxsupport.ca Vancouver
Your net taxable business income
from the project is $2,000 and
you will pay tax 0n that amount.

taxsupport.ca Vancouver
If you are raising the fund as a
corporation, your taxable income
might be about 15%.

taxsupport.ca Vancouver
It is important to keep in mind
the selling point for Kickstarter
and Indiegogo may be donation,
startup funding, crowd fu...
Canada Revenue Agency (CRA)
has provided a detail technical
interpretation of taxation of
crowd funding in a technical
bul...
It is important to consult your
tax advisor before you decide to
raise funds through Kickstarter,
Indiegogo or any other
c...
You can contact us, if you need
expert business tax advice for
your business or crowd funding
projects.

taxsupport.ca Van...
New Edge Management
Consulting, Inc.
Vancouver, Canada
604-764-7864
www.taxsupport.ca

taxsupport.ca Vancouver
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Kickstarter Canada, Is Crowdfunding Taxable Income

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Is crowdfunding taxable income? Kickstarter, indiegogo will not answer your question but we will. Crowdfunding, you are exchanging funds for a delivery of service or product in future. It is not a donation. Its an exchange of product or service for money. Income Tax act defines these kind of transactions for businesses.

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Transcript of "Kickstarter Canada, Is Crowdfunding Taxable Income"

  1. 1. Crowd funding and TAX Kickstarter/Indiegogo taxsupport.ca Vancouver
  2. 2. Kickstarter and Indiegogo has become a trusted source of seed money for Canadian Startups. taxsupport.ca Vancouver
  3. 3. Is crowd funded money taxable business income? taxsupport.ca Vancouver
  4. 4. A question is going to haunt Canadian startups and entrepreneurs going forward. taxsupport.ca Vancouver
  5. 5. According to Canada Revenue Agency (CRA) crowd funded capital is ordinary business income as per Income Tax Act of Canada taxsupport.ca Vancouver
  6. 6. It is like a pre sale of your service or product. taxsupport.ca Vancouver
  7. 7. You collect funds (money) in advance promising a service or product in future to your customers. taxsupport.ca Vancouver
  8. 8. Are your customers donating money to your project? taxsupport.ca Vancouver
  9. 9. NO! They are not. They are expecting a service or product in exchange of funding your project on Kickstarter and Indiegogo. taxsupport.ca Vancouver
  10. 10. Kickstarter and Indiegogo might give you the impression that you are raising capital, but in reality and as per the Income Tax Act., you are pre selling your product or service. taxsupport.ca Vancouver
  11. 11. Funding from Kickstarter and Indiegogo are not Capital. These are business revenue and as such part of your taxable business income. taxsupport.ca Vancouver
  12. 12. Expenses related to crowd funding and providing of service and product are part of business expense if they meet the criteria of business expense as stated in the Income Tax Act. taxsupport.ca Vancouver
  13. 13. How much tax you could pay on your Crowd sourced income? taxsupport.ca Vancouver
  14. 14. It depends, on your business entity. How you are sourcing the fund? taxsupport.ca Vancouver
  15. 15. Are you sourcing fund as a sole proprietor, partnership or a corporation? taxsupport.ca Vancouver
  16. 16. If you are a sole proprietor or partnership, you could pay a minimum of 22% to maximum of 43% of your net business income from Crowd Funding. taxsupport.ca Vancouver
  17. 17. For Example, if you sourced $10,000 from crowd through Kickstarter and Indiegogo, your Business Income is $10,000 for the project as per Income Tax Act. taxsupport.ca Vancouver
  18. 18. Your expenses to raise the fund and provide service or product to the crowd are $8,000. taxsupport.ca Vancouver
  19. 19. Your net taxable business income from the project is $2,000 and you will pay tax 0n that amount. taxsupport.ca Vancouver
  20. 20. If you are raising the fund as a corporation, your taxable income might be about 15%. taxsupport.ca Vancouver
  21. 21. It is important to keep in mind the selling point for Kickstarter and Indiegogo may be donation, startup funding, crowd funding etc., but from legal definition as per Income Tax Act in Canada, it’s a pre-sale business income, in the ordinary course of business. taxsupport.ca Vancouver
  22. 22. Canada Revenue Agency (CRA) has provided a detail technical interpretation of taxation of crowd funding in a technical bulletin. You can request a copy through our website. taxsupport.ca Vancouver
  23. 23. It is important to consult your tax advisor before you decide to raise funds through Kickstarter, Indiegogo or any other crowd funder. taxsupport.ca Vancouver
  24. 24. You can contact us, if you need expert business tax advice for your business or crowd funding projects. taxsupport.ca Vancouver
  25. 25. New Edge Management Consulting, Inc. Vancouver, Canada 604-764-7864 www.taxsupport.ca taxsupport.ca Vancouver
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