The CRA stated that amounts received by a taxpayer under a
crowdfunding arrangement could represent a loan, capital
contribution, gift, income or a combination thereof. The CRA will
evaluate each situation on a case-by-case basis.
The CRA stated that, in its view, where funds are received by a
taxpayer for the development of a new product and the taxpayer
carries on a business or profession, the funds will be taxable
income unless the taxpayer can establish that such funds are a
loan, capital contribution or other form of equity. The CRA noted
that any reasonable costs related to the crowdfunding arrangements
would likely be deductible in computing that income.
The CRA noted that, in Canada, crowdfunding activities typically
do not involve the issuance of securities, but that some securities
regulators may be considering changes to existing regulatory rules.
The CRA will evaluate the income tax consequences if such
regulatory changes take place.
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.
The amounts received by the business would be included in its
income pursuant to subsection 9(1).
Taxpayers who seek and obtain crowdfunding (for business and
non-business purposes) should be aware of the potential tax
implications, particularly in light of fact-specific results and
the CRA's evolving views on the subject.
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