7.8 Barter transactions between related parties (emotional benefit)

The ‘emotional benefit’ can be a reason for a taxable person/business to accept terms in a barter transaction (or any transaction) that it would normally not accept. This often occurs in cases where the business and the other party to the transaction are somehow related. The example I gave earlier was of a father sponsoring the football team of his son by providing them with football shirts in return for his company’s name and logo being visible on those shirts. The fact that a relationship exists may cause the parties to the agreement to not apply an ‘open market value’ to the transaction. If this is the case, Member States have the possibility to adjust the taxable amount for this transaction in certain cases, mainly where one of the parties does not have a full VAT recovery right.1