On this model, the fundraiser solicits donations for altruistic purposes. Still, this does not relieve users of the obligation to register for, collect, and remit GST/HST if the Excise Tax Act requires them to do so. So far, we have yet to hear from the GST/HST Rulings Directorate on this issue. In its 2013 document, the Income Tax Rulings Directorate mentioned that it had forwarded to the GST/HST Rulings Directorate an inquiry concerning the GST/HST implications of the rewards-based model. Both documents mentioned above were released by the CRA’s Income Tax Rulings Directorate. The CRA has yet to issue any guidance on the GST/HST implications of rewards-based crowdfunding. The amounts received by the business would be included in its income pursuant to subsection 9(1). Assume a business uses crowdfunding as a method of raising funds for the development of a new product and the contributors do not receive any form of equity.In 2015, the Canada Revenue Agency released a subsequent document confirming that funds raised for product development are business income barring evidence that the funds were a loan or equity investment (2015-0579031I7): Expenses related to crowdfunding efforts incurred by a taxpayer for the purpose of gaining or producing income from a business… may be deductible. Whether certain expenses are deductible is a question of fact.In our view, amounts received by a taxpayer from crowdfunding activities would generally be included in income… as income from carrying on a business.As usual, the Canada Revenue Agency would permit the fundraiser to claim deductions for expenses incurred to earn business income: The CRA considers funds received from rewards-based crowdfunding to generally be business income. In 2013, the Canada Revenue Agency released a document addressing its stance on the income-tax implications of the rewards-based model (2013-0484941E5). But contributors do not receive an equity stake in the project or business. For instance, the contributor might receive an early version of the product or a promotional item, like a T-shirt.
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In exchange, the contributors receive rewards as incentives. Probably the most popular crowdfunding model, the reward-based model, involves raising small amounts of capital from numerous contributors to fund a specific business or product.
![go fund me accounts go fund me accounts](https://s.hdnux.com/photos/60/04/16/12600230/5/ratio3x2_1800.jpg)
(Of course, it could also be some combination thereof.) So, the income-tax implications of raised funds depend on the crowdfunding model. Crowdfunding Models and Their Canadian Income-Tax Implicationsĭepending on the crowdfunding model, the money that you raise from a crowdfunding campaign could be income, a gift, a loan, or a capital contribution. The cash bankrolled the base for the Statue of Liberty. In 1885, a New York newspaper raised $100,000 in donations from over 160,000 of its readers. The nineteenth-century French philosopher, Auguste Comte, famously raised funds for his future works by soliciting pre-orders from fellow Parisians. During the Second World War, Canada crowdfunded its military by issuing Victory Bonds. Recently, websites such as Kickstarter, Kiva, IndieGoGo, and Microventures have drawn attention to the practice.īut crowdfunding has a long history. Canadian Taxation of Crowdfunding-A Canadian Tax Lawyer Analysis What is Crowdfunding?Īs the name suggests, crowdfunding is a manner of raising funds from a large number of people.