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.

1. Crowd funding
and TAX
Kickstarter/Indiegogo
taxsupport.ca Vancouver

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

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

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

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. It is like a pre sale of your
service or product.
taxsupport.ca Vancouver

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

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

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. 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. 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. 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. How much tax you could pay on
your Crowd sourced income?
taxsupport.ca Vancouver

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

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

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. 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. Your expenses to raise the fund
and provide service or product to
the crowd are $8,000.
taxsupport.ca Vancouver

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

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

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. 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. 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. You can contact us, if you need
expert business tax advice for
your business or crowd funding
projects.
taxsupport.ca Vancouver

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