7.2 A brief introduction to the VAT issues surrounding bartering

From a VAT perspective, bartering raises questions regarding the determination of the taxable amount and the amount of deductible VAT. It is also not always clear whether both parties to a barter transaction qualify as a taxable person from a VAT perspective (and not just one of them), especially if one of the parties involved is a natural person (as opposed to a legal person).

If the consideration for a supply does not consist (entirely) of money, the value of this consideration must be determined differently. I will discuss the current rules for this in this chapter. Also, it may prove impossible to express the consideration for the provision of a good or service in (an exact amount of) money, which, under the current EU VAT rules, is a requirement for the ‘payment in kind’ to be considered a VAT relevant ‘consideration’.1 In some cases the terms of a barter transaction may be affected by a connectedness between the parties involved, which may lead to further complications in ascertaining the correct taxable amount and deductible amount.

Also, in a case where two taxable businesses are involved in a barter transaction, the amount of VAT that can be deducted as included in the consideration (in kind) paid for the supply has to be established. I will address all these issues in this chapter.

I will first discuss some background with regard to bartering, before further examining the VAT consequences of these types of transaction.