Crowdfunding has grown into a popular way to invest and raise funds in recent years. Whether you are an individual or a business owner, understanding how taxes work with crowdfunding is essential.
Many people ask themselves: do I have to pay taxes on crowdfunding income? Is it possible to do crowdfunding tax-free? In this article, we delve deeper into crowdfunding and taxes and offer practical tips to help you maximize your investments without tax surprises.
How Does Crowdfunding Work?
Crowdfunding is a way to raise money for projects or businesses through small contributions from many people. Platforms like Lendahand allow individuals and businesses to invest directly in initiatives they believe in. These can range from social enterprises to sustainable energy projects. In exchange for their investment, investors often receive interest. But how do taxes apply to this income?
How Do You Pay Taxes on Crowdfunding?
Whether you invest as an individual or a business, crowdfunding income is taxable. The tax rules surrounding crowdfunding depend on the type of investment you make. Crowdfunding and taxes for individuals, for example, means that income such as interest must be reported in your tax return.
- Loan-based crowdfunding: Here, you lend money to a project or business and receive interest on the loaned amount. This interest is considered income and falls under ‘other income.’
- Equity crowdfunding: If you invest in shares via crowdfunding, you pay taxes on the value of your shares. The taxes you pay depend on the total value of your assets.
- Donation crowdfunding: In some cases, you can contribute to crowdfunding projects without receiving anything in return. This counts as a donation and may be tax-deductible under certain conditions.
It’s important to keep track of what you earn through crowdfunding to report it correctly in your tax return. At Lendahand, we help by generating an automated annual overview for you each year.
What Are the Tax Benefits of Crowdfunding?
Crowdfunding can also offer tax advantages. A key benefit is that certain investments can be tax-free. It’s essential to consider the following:
- Tax-free crowdfunding: Certain investments in startups or social projects may fall under the “entrepreneur’s deduction” scheme. This means that part of the investment can be tax-free if the project meets the set conditions.
- Green investing: When investing in sustainable projects, you may qualify for tax benefits such as lower wealth tax or even a tax deduction. This makes crowdfunding tax-free in certain cases, depending on the applicable conditions.
By taking advantage of these schemes, your returns on crowdfunding can increase even further.
Why Should I Crowdfund with Lendahand?
Lendahand offers transparency, sustainability, and social returns. With us, you’re not only investing for financial gain but also for a better world. Our projects are carefully selected and have a positive impact on communities worldwide. Additionally, we ensure that all necessary information is available so you’re well-informed about the tax implications of your investments.
How Do I Report My Lendahand Investments to the Tax Authorities?
When you log in to Lendahand, you can find your annual overview at the bottom of the page in the Financial Dashboard under 'Downloads.'
- For individual investors in the Netherlands, loans outstanding via the Lendahand platform fall under Box 3. Your wallet balance is listed separately on the annual overview and should be reported under 'Bank accounts and other assets' in the 'Bank and savings accounts' category.
- For business investors, the earned returns are subject to corporate tax.
- Are you a taxpayer in a country other than the Netherlands? Seek advice on how to report outstanding funds from crowdfunding platforms in your tax return.
Please note: Lendahand does not report your outstanding amounts or data to the tax authorities or local authorities. (Note applicable in 2024)
Start Crowdfunding Tax-Efficiently with Lendahand
Crowdfunding offers not only financial returns but can also provide tax benefits. Whether you’re looking for tax-free crowdfunding or want to know how to pay taxes on crowdfunding income, it’s crucial to stay well-informed.
At Lendahand, we help you invest responsibly, keeping both returns and tax benefits in mind. Start crowdfunding with Lendahand today and discover how you can contribute to a better world in a tax-efficient way.