Crowdfunding is a great way for startups to raise funds in order to bring their products to market. This way they get money to start production while customers get to purchase new and innovative products usually for less than what they would fetch at retail. There are no taxes involved which is an added advantage for backers, but this might change soon in Europe as the European Commission is mulling over imposing a tax on crowdfunding projects that you’ll find on websites like Kickstarter.
Over the past few years crowdfunding has become very popular and is now a major potential source of funds for companies who have limited resources.
Many startups have raised hundreds of thousands of dollars, even tens of millions, for their projects through websites like Kickstarter. Some have even been acquired by bigger companies, like Oculus was acquired by Facebook.
The European Commission is mulling over imposing a value added tax on products that people pledge for, the VAT will be paid on the products that they’ll eventually receive since crowdfunding projects don’t immediately ship products, there’s always a gap of a few months if not more.
If the European Commission imposes this tax, crowdfunding projects will have to charge as much as 23% of the total value of the product to customers. Critics are against the idea as they believe that this will impact growth and will ultimately turn startups away from crowdfunding websites.
Filed in . Read more about Crowdfunding and Kickstarter.