In crowdinvesting potential investors purchase shares of a company and provide capital to support it (typically in a new, young company with an innovative concept). This means that the investor – depending on the model of participation – is proportionally involved in profits and losses and in a possible future increase of the shareholder value. The individual investments are usually relatively small and allow the investor, to keep his risk per project in a financially manageable framework.
Best case scenario: The idea is accepted and converted into marketable products or marketable services. After reaching the break-even point and making up any start-up losses, the company achieves profits, in which the investor is involved. In the case of existing companies, this capital allows further growth. Dividends/interest payments are paid, the company grows, creates many jobs and flourishes. The value of the company increases and investors also profit from that effect. In case of an exit the investor receives a multiple of his initial investment, depending on the amount of participation of the company.
Worst case scenario: The idea fails to achieve the objective and is not accepted. The established or existing company becomes insolvent and the entire invested amount is lost. Margin obligation does not apply.
Participation in a limited liability company
The limited liability company must deduct 27,5% capital gains tax (KESt) from dividends and pay them to the Austrian tax office. Austrian citizens must no longer pay tax on these profits (final taxation). If you have little income, a “standard taxation” can be requested and you will get back a part of the capital gains tax.
If the participation is sold with capital gain, you have to inform your tax office and pay 27,5% capital gains tax to it.
Foreign investors must indicate dividends and interest in their home country and will credit the Austrian capital gains tax. Capital gains are not subject to tax in some countries, therefore more favourable tax rates can arise for foreign investors.
If there is specific interest, we recommend to contact a tax advisor.
Please note: If the participation is held by a corporation, these regulations do not apply.
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