You can launch a crowdfunding campaign for another person or organization. Before you start, clarify who will legally and for tax purposes receive the funds, how they will be distributed, and how you will document the entire process.
What does crowdfunding mean for third parties?
You launch the campaign, but all or part of the money is intended for another person or organization.
What do I need to clarify before starting the project?
Make sure to clarify the following before you start:
- Who will receive the money? Record the name and full address.
- What is the purpose of the collection?
- How is the funding amount divided when there are multiple recipients?
- Which person or organization is legally and tax-compliant to receive and distribute the payment?
- Who is authorized, and in whose name is the payout account held?
- How are receipts and transfers recorded in the accounting system?
How do I record the funding amount in the accounting records?
Money that you collect solely on behalf of third parties and pass on in full may, under certain conditions, be treated as a transit item. In this case, the collection and the transfer are matched in the accounting records, and—if handled correctly—do not result in separate revenue.
This is not automatically the case. The key factors are the actual legal relationships, the type of accounting, and complete documentation. If not handled correctly, the funding amount may be attributed to you for tax purposes.
Depending on your setup, this may particularly affect sales tax, input tax, income tax, business tax, or corporate income tax. Clarify the tax treatment with your tax advisor before starting the project.
How do I keep track of when I take it and when I give it to others?
The following should be clearly visible on the project page:
- that you are collecting the money, in whole or in part, on behalf of named third parties,
- who these third parties are,
- what purpose the funds serve,
- how the funds are distributed among multiple recipients.
After publication, take a screenshot of the project description and save it as an attachment to the receipt. When making the transfer, use a unique payment description that clearly identifies the name, full address, and purpose of the recipient (individual or organization).
Keep complete records:
- 1Name and full address of the third party or parties,
- 2Amount transferred,
- 3Date of receipt of payment,
- 4Date of cash outflow,
- 5Purpose of the transit account,
- 6Purpose of the onward transfer,
- 7if applicable, the distribution among multiple recipients.
What might proof of disclosure look like?
A separate document can help with bookkeeping on both sides. Tailor it to your specific situation:
Also save the payment confirmation for the onward transfer.
What happens if I keep a portion of the funding amount?
The portion that remains with you is not a transitory item and must be treated in accordance with your tax situation.
What are the rules if I, as a private individual, collect donations on behalf of third parties?
If the collection is not part of an employment relationship, it may be treated as a pass-through item. Complete documentation is particularly important for social benefits to ensure that the origin and distribution of the funds remain traceable.
What are the requirements for companies and organizations?
The accounting treatment differs depending on whether you use the accrual method or the cash basis method. In a cash basis accounting system, pass-through items are excluded only if you collect and disburse the amounts in the name and on behalf of another person or organization. When handled correctly, the pass-through amount should not affect net income.
Crowdfunding for third parties is a special case for tax purposes. These notes are intended as general guidance and do not constitute tax advice. If possible, seek advice before starting your project.