Why we had supporters actually CLAIM their bounties!
This time HEROcoin.io’s COO & co-founder Bernhard Blaha will give his opinion on our bounty program:
As many of you have noticed, we had some rather innovative systems during our ICO. Most of them are based on the fact that we have done the first ICO according to Austrian law and regulations (and to our knowledge the first one based on EU law). This was quite a task and we want to save others the hassle of going through the same and also inform our supporters and community, why things were done the way we did them. Since we had two persons accuse us of our bounty claim program being illegal (which is based on their interpretation of some non-existing law, that they could not further explain), I would like to start with this:
What laws did our bounty claim system originate from?
First, let me say that I am neither a tax consultant nor a lawyer. I would say I have a bit of knowledge in this area, but I am no expert as such. All of these topics were handled by very experienced attorneys and tax consultants, I am just representing my understanding of the outcome.
Bounties are rewards for supporters of ICOs. If you have, for example, a Twitter account with many followers and use it to promote an ICO, the company benefits from your followers and wants to encourage you to do so. This saves the company marketing costs and you benefit from their savings via bounty programs.
Most ICOs just send the bounties to their supporters after the ICO has ended. This is the easy way for both, the company and the supporter (bounty recipient).
Why could HERO not just do it like everyone else?
We are an Austrian GmbH (Limited) and therefore are required to have proof of any transaction that happens on our accounts. And this includes crypto wallets. Many companies do not consider this, when doing an ICO, but crypto wallets are considered to be a value storage for FIAT money, so Euro in our case.
Now what happens if you pay out bounty (or any other value) without any receipt at all?
First, there is § 11 UStG 1994 (which roughly translates to „VAT law“), which says, that any financial transaction (which we just learnt that a crypto currency transaction is) has to have a receipt. This could be an invoice, or — since it is the other way around in our case — a credit note. Next to other things, a credit note has to include the name of the service provider (which is our bounty recipient in that case).
Second, there are consequences if a company fails to do so. There are different levels of consequences:
• The best case is that you may just not be able to use the invoice to accordingly lower the companies income, which would mean higher taxation at the end of the year.
• A bit worse (but not important in our case, since we did not include VAT, since HERO is legally a voucher, more on that some other time) is you may not be able to have the amount deducted from your sales tax.
• The worst case is a fine for the lack of receipts combined with above problems. How high this fine may be depends on the severity of the case.
Now consider that we have had more than a thousand bounty participants. This means a thousand receipts that are not linked to any person. I think we do not need to argue about which of the above mentioned cases we would face, do we?
Since our communication experts told me I can write up to a thousand words and I have some left, I would also like to explain, why this law was made the way it is and why not following it is so severe for any company:
Imagine you have a company, a Limited in that case. In our case it is Austrian, but all EU states have similar laws. You have many stakeholders that would like to get some money out of this company. There are, for example, the owners, investors, employees and service providers. All of them do actually get some money out of that company, some more, some less, some sooner, some later.
Now, all states have different kind of taxes on these pay-outs, because since the “usual employee” pays taxes, why shouldn’t those who earn their money in other ways be taxed as well? (I don’t want to start a political discussion on this. Let us just agree that this is our view for now)
And now imagine a company would pay out large sums to anonymous people without a receipt. Of course, we could argue, that there has been a service provided in exchange, but who could prove that? Instead we could just go ahead and pay out all the money to ourselves, the owners of the company and buy some Lambos. Officially we “just” paid out the money without a receipt. Tax free.
So, doing the bounty claim the way we did is not only a benefit for the state we operate in, it is also YOUR benefit, because WE get doublechecked, so nobody gets to scam YOU out of YOUR investment.
I agree that communicating this earlier would have been better for everyone, but finding out such things takes time and we were only informed of this, despite the massive effort we put into researching this beforehand, a mere couple of days before the bounty pay-out started. Take my sincerest apologies for that, but also take this information from me: If you get money from a company without a receipt it is either you or them that tries to evade tax. In the first case it may become a problem, or it may not. In the latter case it will become a problem. And you do not want to be involved. Be careful out there.
One more information, as a bonus: Why did we announce the claim for only a month and had it open for only two weeks? The claiming process is quite a lot of effort. For a start-up focus is key and therefore we tried to focus all the claims on a certain time period. We have thought about adding a grace period for people who missed it, but the feedback from our community was clear: Don’t. Stick to the rules. Same counts, of course, for participation rules in the bounty program itself.