Taxsupport.ca Vancouver Crowd funding and TAX Kickstarter/Indiegogo.

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Presentation transcript:

taxsupport.ca Vancouver 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

taxsupport.ca Vancouver 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.

taxsupport.ca Vancouver 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 Funding from Kickstarter and Indiegogo are not Capital. These are business revenue and as such part of your taxable business income.

taxsupport.ca Vancouver 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 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 from Crowd Funding.

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

taxsupport.ca Vancouver New Edge Management Consulting, Inc. Vancouver, Canada