Crowdfunding

What is crowdfunding?

Crowdfunding, or crowdfunding, is a way to raise money for new projects. For example, you can raise money to finance the start-up of a new business or to develop a prototype of a new product. 
Crowdfunding makes it easier for people to give support directly to projects they are interested in, while at the same time making it easier for small players to get support for their projects. The collection takes place mostly online. 

Different types of crowdfunding

There are four types of crowdfunding that are common. Here is an overview of the different ways to raise money and what they can be suitable for. 
1.    Donation-based crowdfunding
Here, the contributors give an amount without expecting anything in return. This is well suited for non-profit projects or early-phase financing, where you as an entrepreneur can attract support from those who want to help without quid pro quo.
2.    Reward-based crowdfunding
Contributors receive a reward as a thank you for their support. The reward can be the product itself you're developing, or something else exclusive. This is a popular method of funding startups and building awareness around new products.
3.    Equity-based or equity-based crowdfunding
Here, the contributors give money in exchange for becoming owners of your business. This method attracts investors who want returns and is relevant for entrepreneurs who want to share ownership in exchange for capital.
4.    Loan-based crowdfunding (crowdlending)
The contributors act as lenders, and you repay the loan with interest over time. This is a structured form of financing that suits projects with a clear repayment plan. Separate rules have been drawn up for actors who mediate such loans.

The purpose determines tax liability

The purpose of the funding determines whether the income from crowdfunding is taxable for the recipient.
1.    Donation-based crowdfunding. If the money is given without consideration, it is normally considered tax-free for the recipient. 
2.    Reward-based crowdfunding. If the money you receive is linked to a reward, such as a good or services, it is a form of income and will be taxable.
3.    Equity-based or equity-based crowdfunding. Fundraising where the person who invests in the company receives shares and becomes an owner in the business.
4.    Loan-based crowdfunding. The contribution is a loan that must be repaid with interest. Borrow as their money against a return over time in the project. Separate rules have been drawn up for those who mediate loans.

What type of crowdfunding might be right for your project?

Both donation and reward-based crowdfunding are ideal in the early stages to test out ideas and build a following without giving up ownership:
You can use the platforms to promote your project and secure the support of committed donors. 

Here it is possible to get support from many who want to give without demanding anything in return. 

Equity-based and loan-based crowdfunding is suitable for projects that have a clear growth plan and can attract investors who want returns. This is more relevant when the business has progressed further in the development phase.

Finanstilsynet has drawn up clear rules for who can offer loan-financed crowdfunding.

Finanstilsynet - guidance on loan-based crowdfunding