(TL;dr: VAT is due on crowdfunding within the EU. Probably. Don’t shoot the messenger.)
You may remember that one of the issues which the VATMOSS debacle failed to address was the question of VAT and crowdfunding, an issue which came to a head with Patreon’s initial denial of compliance obligations. The confusion was made possible by a lack of clear guidance: what are the rules on applying VAT for crowdfunding projects, who is responsible for processing and paying in the funds, and what happens if a project does not reach its funding goal after that VAT is paid in?
Getting a straight answer on this issue was an uphill battle to say the least:
— Juliet E McKenna (@JulietEMcKenna) May 15, 2015
The result of all of that – the bottom line – was contained in pages 194-195 of an absolutely impenetrable cross-indexed committee document issued in November 2015. It’s important to note that this document is not a law or a binding resolution: it is the committee’s gathered and informed opinion, which as we all know in practice means it is likely to be rubber-stamped into approval.
I have extracted those two pages containing what you need to know (.pdf, 108kb). To sum up, the committee suggests that:
- VAT is due on crowdfunding campaigns where the contributor receives a good or service (or is promised one) in exchange for their contribution
- VAT is due when the cash is paid in
- No VAT is due when the “reward” is not a good or service
- Platforms which provide crowdfunding services are responsible for dealing with VAT
The VAT applicable on a contribution would of course be determined by the place of supply, not the location of the product or service being pledged. Platforms would therefore need to configure their systems to apply VAT to contributions based on the country of the person contributing to the campaign, not the person receiving it.
Again, these findings are not the rules or the law: they are the committee’s informed recommendation. You do not have to comply with them. However, the committee’s view is, as they say, the way that the wind is blowing.
Now, what happens if – as is common – you make a contribution upfront towards a campaign which does not reach its funding target, and your contribution is refunded? Why should VAT be levied, and therefore refunded, at the time of the contribution (creating extra administration for both crowdfunding platforms and tax authorities), rather than being withheld until the campaign is confirmed to succeed? That question remains unanswered.
If you read this far go get yourself a beer. I need one after writing it.
About the author
Heather Burns is a digital law specialist in Glasgow, Scotland. She researches, writes, publishes, consults, and speaks extensively on internet laws and policies which affect the crafts of web design and development. She has been designing and developing web sites since 1997 and has been a professional web site designer since 2007. She holds a postgraduate certification in internet law and policy from the University of Strathclyde. Learn about hiring Heather to write, speak, or consult.