This article explains when, as a startup founder, you should issue invoices to backers and how sales tax, corporate income tax, and business tax can affect your crowdfunding campaign.
Do I need to issue invoices to my supporters?
First and foremost, what matters is who is legally behind your project. It is not the designation—whether as a private individual, association, foundation, or school—that is the sole determining factor, but rather whether the project organizer is engaging in business activities through the crowdfunding campaign and whether supporters receive economically significant consideration in return.
What are the requirements depending on the project sponsor?
- Individual: For a purely personal, non-business project, you do not issue a sales tax invoice. However, if you regularly sell products, tickets, workshops, or other tokens of appreciation, you may be considered a business owner for sales tax purposes—even without a registered business.
- Sole proprietors, freelancers, LLCs, or other businesses: Gifts given in exchange for services are generally part of business operations. Check whether sales tax applies or if you qualify for the small business exemption.
- Association or Foundation: Being a nonprofit does not automatically mean exemption from sales tax. An association or foundation may have both non-commercial and commercial activities. The sale of merchandise, tickets, or other tokens of appreciation may constitute a commercial activity. For genuine donations made without expecting anything in return, a tax-exempt organization can instead issue a donation receipt.
- gGmbH: Even a nonprofit limited liability company (GmbH) can engage in business activities. When offering gifts in return for a service, it must determine whether the service is taxable, eligible for tax benefits, or tax-exempt.
- School: First, determine who the legal project sponsor is. This could be a parent-teacher association, a foundation, a private school operator, or—in the case of a public school—the municipality or another public school authority. For a parent-teacher association, the rules for nonprofit organizations apply; for a private school, the rules of its governing body apply. Tax-exempt educational services do not automatically make the sale of merchandise or other thank-you gifts tax-exempt.
When is an invoice required?
The following applies to typical crowdfunding rewards:
- If you are not engaged in business activities, you do not issue invoices for VAT purposes.
- If you are self-employed and provide a service to another business or legal entity, you are generally required to issue an invoice. This also applies to small business owners—in which case the invoice should not include a sales tax amount and must include a reference to Section 19 of the German Sales Tax Act (UStG).
- For private backers, there is generally no requirement to issue a sales tax invoice for typical crowdfunding rewards. Issue an invoice if you have promised to do so or if backers need one.
- As a general rule, you should not issue an invoice for free assistance provided without any compensation or for a purely symbolic token of appreciation with no economic value.
Rule of thumb: First, check the legal entity behind the project; then, verify its business status; and finally, review the specific thank-you gift. For associations, foundations, and schools, you should clarify their classification with your tax advisor or the relevant sponsoring organization before the project begins.
What am I billing for, and who am I billing?
An invoice may be required if supporters receive a specific benefit in return. Examples include:
- Products or merchandise,
- Tickets or events,
- Workshops or services,
- digital content.
Issue the invoice to the person or organization that purchased the thank-you gift. Use the billing address provided.
If a thank-you gift includes multiple items—such as a book, a T-shirt, and a workshop—a different sales tax rate may apply to each item. Even components provided without consideration can be treated separately. Using the “Split” feature under “Thank-You Gifts” in Postfunder, you can split up such components before generating the invoice. Then review each component individually.
When should I issue an invoice?
Send the invoice along with the shipment or after the service has been provided—for example, along with the shipping confirmation via email or as an insert in the package.
If you are required to issue an invoice, it must generally be issued within six months after the service is rendered.
When do I have to pay sales tax?
As a general rule, treat the gross amounts received through Startnext for taxable thank-you gifts as advance payments for services you have yet to provide. You must report the sales tax included in these amounts in the month or quarter in which the payment is received in your account. Do not deduct platform and payment fees from this amount; instead, record them separately as expenses.
When you later send the thank-you note or issue the invoice, no additional sales tax is due on the amount that has already been fully taxed. Report the advance payment you received on the invoice in such a way that the sales tax is not recorded twice.
What sales tax do I need to charge?
The standard sales tax rate in Germany is 19%. The 7% rate applies only to goods and services eligible for preferential treatment under the law, such as many books and e-books.
In Postfunder, under "Thank-You Gifts," you can use an AI feature to calculate the potential sales tax. Review each classification individually. For packages with different services, you can use the "Split" feature in Postfunder.
If you are covered by the small business exemption under Section 19 of the German Value-Added Tax Act (UStG), you do not have to report value-added tax.
For VAT purposes, shipping costs are generally treated in the same way as the related principal service.
Important: This does not apply to payments without consideration subject to sales tax. In the event of cancellations, refunds, additional payments, or changes to the thank-you gift, the sales tax may need to be adjusted. These notes are intended as general guidance and are not a substitute for individual tax advice.
You can find more background information on the Startnext blog about crowdfunding and taxes.
What taxes might apply to crowdfunding?
Sales tax, corporate income tax, and business tax treat your crowdfunding differently. Sales tax is based on individual services and payments. Corporate income tax and business tax are generally based on taxable income.
Sales Tax: Tax on "Thank-You" Gifts in Exchange for Consideration
Sales tax may apply if you provide a specific service in exchange for a donation—for example, a product, a ticket, a workshop, or digital content.
- The amount of the payment for the respective thank-you gift is what counts. Platform and payment fees do not reduce this amount but are recorded separately as expenses.
- Depending on the service, the tax rate in Germany is 19%, 7%, or the service is exempt from tax by law.
- If you take advantage of the small business exemption under Section 19 of the German Value-Added Tax Act (UStG), your sales are tax-exempt under the statutory conditions, and you do not report value-added tax.
- Unconditional contributions and genuine donations made without any direct consideration are generally not subject to sales tax.
- If you are eligible for an input tax credit, you may deduct the sales tax on related business expenses as input tax in accordance with the general rules.
Corporate Income Tax: Tax on a Corporation's Profits
Corporate income tax applies in particular to GmbHs, UGs, associations, and foundations. It is not levied on the total amount of funding, but generally on taxable income or taxable profit.
- In simple terms: Crowdfunding revenue minus deductible project and operating expenses, such as production, shipping, and platform and payment fees.
- The corporate income tax rate in Germany is 15% through 2027. In addition, there is a solidarity surcharge on corporate income tax.
- Sole proprietorships and individuals do not pay corporate income tax. Instead, they may be subject to income tax on their profits.
- Nonprofit associations, foundations, and gGmbHs generally enjoy tax benefits in their non-profit activities and in recognized special-purpose operations. Profits from taxable commercial operations, on the other hand, may be subject to corporate income tax.
- If the total annual revenue, including value-added tax, from all economic business operations that are not special-purpose operations does not exceed 50,000 euros, the corresponding tax bases are not subject to corporate income tax or trade tax pursuant to § 64 of the German Fiscal Code (AO). This threshold does not constitute a value-added tax exemption.
Trade Tax: Tax on Business Profits
Trade tax may apply if the crowdfunding initiative is part of a business operation. It is levied on business income and determined by the respective municipality.
- In Germany, sole proprietorships and partnerships are entitled to a tax-exempt allowance of 24,500 euros on business income.
- Corporations such as GmbHs and UGs do not have this tax exemption.
- For certain taxable associations, foundations, and businesses that are legal entities under public law, a tax-exempt allowance of 5,000 euros may apply.
- The remaining business income is multiplied by the tax assessment rate of 3.5% and then by the assessment rate of the applicable municipality.
- Genuine freelance work is generally not subject to business tax. However, the sale of products or merchandise may be considered a business activity.
Example of Classification
You will receive 100,000 euros in taxable thank-you gifts. Production, shipping, and platform and payment fees total 70,000 euros in deductible expenses.
- Sales tax is based on the fees and tax rates for each thank-you gift—not on the remaining profit.
- For corporate income tax, personal income tax, and business tax, the starting point is, in simple terms, a profit of 30,000 euros. Tax adjustments, deductions, allowances, or exemptions may affect the final amount.
Important: Even pro bono support can increase a taxable company’s profits by being classified as operating revenue, even though no sales tax is due. The specific classification depends on your project sponsor, your accounting practices, and the type of support. These notes are intended as general guidance and are not a substitute for individual tax advice.
You can find more background information on the Startnext blog about crowdfunding and taxes.
What do I need to keep in mind when running a crowdfunding campaign at the turn of the year?
If your crowdfunding campaign ends around the turn of the year, here’s what’s most important: For tax purposes, what often counts is the date when the money is actually paid out to you or received—not just when backers pay or when your project ends.
Payment may take up to about 21 days after the end of the funding phase, provided that your verification is complete and there are no outstanding charges with Stripe. Please factor this timeframe into your project timeline and—if applicable—into your invoicing and donation receipts.
What specifically should I check?
- When does your funding period end?
- When is the payment expected?
- Have you completed the verification process, or are there any outstanding Stripe requirements?
- Do you issue invoices, or do you need donation receipts?
- What type of taxation and what timing of payment apply in your case?
Scenario 1: Move-in before the end of the year, payment after the end of the year
The contributions will be collected in the old year, but the total funding amount will not be paid out to you until the new year.
What does that typically mean?
- Income tax, corporate income tax, and business tax: Often, the date on which you actually receive the money is relevant. The income is then typically reported in the new year.
- Value-Added Tax: The allocation may vary depending on the method of taxation and the timing of the service. Under the accrual method, the timing of the service may be the determining factor. Under the cash method, the actual receipt of payment is often the relevant factor.
Scenario 2: Deposit and Withdrawal Before the End of the Year
The contributions are collected in the previous year, and the funding amount is also disbursed in the previous year.
What does that typically mean?
The tax classification often falls in the previous year as well, because you receive the money in the previous year.
Scenario 3: Deposits and Payouts After the New Year
The contributions will be collected in the new year, and the total funding amount will be disbursed in the new year.
What does that typically mean?
As a rule, both the collection and the inflow occur in the new year.
These scenarios are intended as a general guide. The tax treatment that applies to you depends on your legal structure, your accounting practices, the type of taxation, and the timing of the transaction. Consult your tax advisor to clarify your specific situation.