Yes, you can launch a crowdfunding campaign on behalf of a third party. However, to ensure that the funds raised can be transferred to the right recipient (ideally) without any tax deductions, you’ll need to prepare and document the project thoroughly.
The most important point: If you collect money on behalf of third parties, you should treat it as a “transitory item” in your accounting (and provide documentation of the transfer).
What does “crowdfunding for third parties” mean?
You launch the campaign, but the funds are intended (in whole or in part) for another person or organization.
1) What you need to clarify before you start
To avoid any problems later on, make sure to clarify the following in advance:
- Who should receive the money in the end (name and full address)?
- What is the purpose of the fundraiser?
- How is the amount distributed if there are multiple recipients (distribution logic)?
- Who is legally and tax-wise authorized to receive and distribute the payment?
2) Why is this a special case for tax purposes?
If you don't handle it properly, you may end up having to pay taxes on the entire amount of the funding.
According to our blog post, funds you collect on behalf of third parties should be recorded in your accounting as “transitory items.” When posted correctly, the income and the transfer offset each other—the funds can thus be recorded without affecting income or tax liability (i.e., typically no sales tax/input tax, business tax, or corporate income tax on these transitory amounts).
3) Documentation
To ensure that the process can be traced later, the following should be clearly visible on the project page:
- that you are raising the funds not (only) for yourself, but for a specific third party
- if applicable, the allocation logic (if there are multiple recipients)
Blog recommendation:
- Just to be safe, take a screenshot of the project description.
When making the transfer, the payment description should be clear (e.g., a note stating that the amount was collected on behalf of the third party, including their name and address).
You should keep complete records of:
- 1Name and full address of the third party
- 2Amount disclosed
- 3Date of cash receipt and cash disbursement
- 4Purpose of the transit account
4) Sample text (document for distribution)
A receipt (tailored to your specific situation) can be helpful for your accounting and the accounting of the third party:
- [Name and address of the starter]
- [Name and address of the third party]
As part of the crowdfunding campaign at [Link], we have raised EUR [Amount] for you.
The purpose of these funds, as stated in the project description, is:
- [Purpose 1]
- [Purpose 2]
The amount was transferred to us on [date] and forwarded to you on [date] with the reference [VWZ] to the account with the IBAN [last 4 digits].
5) Special cases
You collect on behalf of others and for yourself
In that case, the portion that remains with you is subject to normal taxation.
You are collecting on behalf of third parties as a private individual
According to the blog, if you do not receive these funds as part of an employment relationship (wages), they are generally not subject to income tax, payroll tax, church tax, or social security contributions. Complete documentation is particularly important when it comes to social benefits.
You collect as a business or organization
Depending on the accounting method used (balance sheet vs. simplified accounting), accruals are recorded differently—but if handled correctly, they do not affect net income.
Important
- This is for informational purposes only and does not constitute tax advice.
- Especially when it comes to crowdfunding for third parties, it’s worth seeking brief tax advice beforehand.
More background
Blog: Crowdfunding for Third Parties – Passing on the Funding Amount