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Crowdfunding tax incentives in Europe: a comparative analysis

Author

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  • Antonella Francesca Cicchiello
  • Francesca Battaglia
  • Stefano Monferrà

Abstract

Some European countries offer tax incentive schemes to investors and companies in crowdfunding. On one hand, they could be seen as a tool to reduce the system’s dependence on banks and increase the availability of credit for start-ups and Small and Medium Enterprises (SMEs). On the other hand, there is the counterweight of disadvantages that investors may face by investing in crowdfunding (i.e. complex and incomplete laws, and weak protection). This paper is primarily intended as a primer on the use of tax incentives for crowdfunding in Europe. In this study, we first examine the implementation of tax incentive schemes in the United Kingdom, France, Italy, Spain, and Belgium. Then, we analyse and compare the characteristics of such schemes along three dimensions: the incentives structure; the business characteristics; and the type of investor. We find that tax incentive schemes for crowdfunding vary widely in their form and other features of their design. Moreover, the most used forms of tax incentives are those that provide for an up-front tax credit on the amount invested in early-stage ventures. These incentives have an immediate effect on the annual income tax of the investor. A central implication is that the more tax incentive schemes are properly designed and tailored for crowdfunders, the more investors, start-ups and other firms with low liquidity could use crowdfunding as a source of funding.

Suggested Citation

  • Antonella Francesca Cicchiello & Francesca Battaglia & Stefano Monferrà, 2019. "Crowdfunding tax incentives in Europe: a comparative analysis," The European Journal of Finance, Taylor & Francis Journals, vol. 25(18), pages 1856-1882, December.
    • Handle: RePEc:taf:eurjfi:v:25:y:2019:i:18:p:1856-1882
    DOI: 10.1080/1351847X.2019.1610783
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    Citations

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    Cited by:

    1. Francesca Battaglia & Marika Carboni & Antonella Francesca Cicchiello & Stefano MonferrÃ, 2021. "Assessing the Effects of Anti-corruption Law on Entrepreneurial Finance: Evidence from Latin America," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 20(1), pages 48-78, April.
    2. Sara Picas & Pedro Reis & António Pinto & José Luís Abrantes, 2021. "Does Tax, Financial, and Government Incentives Impact Long-Term Portuguese SMEs’ Sustainable Company Performance?," Sustainability, MDPI, vol. 13(21), pages 1-16, October.
    3. Nor Khadijah Mohd Azhari & Radziah Mahmud & Noor Ashikin Basarudin, 2024. "Developing a Framework of Equity Crowdfunding for Small and Medium Enterprises (SMEs) in Malaysia: A Conceptual Paper," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(10), pages 1635-1642, October.
    4. Harrison, Richard T. & Bock, Adam J. & Gregson, Geoff, 2020. "Stairway to heaven? rethinking angel investment policy and practice," Journal of Business Venturing Insights, Elsevier, vol. 14(C).
    5. Luis F. Cardona & Jaime A. Guzmán-Luna & Jaime A. Restrepo-Carmona, 2024. "Bibliometric Analysis of the Machine Learning Applications in Fraud Detection on Crowdfunding Platforms," JRFM, MDPI, vol. 17(8), pages 1-23, August.
    6. Camilla Civardi & Andrea Moro & Joakim Winborg, 2024. "“All that glitters is not gold!”: The (Unexplored) Determinants of Equity Crowdfunding," Small Business Economics, Springer, vol. 63(1), pages 299-324, June.

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