7.4.3 Can the supply of a good or service be a payment at the same time?

In the above section I come to the conclusion that a payment in kind is not a transaction that is subject to VAT. I now answer the question whether a taxable supply can also, i.e. as part of the same transaction, be a payment (in kind) from an EU VAT perspective. In my view, this is not the case.

In my view, the EU VAT rules do not allow a single transaction to be considered twice (or: to be two separate things) from a VAT perspective. The transfer of ownership of a good, for example, can only be a taxable supply of that good from a VAT perspective if performed by a taxable person acting as such. In that case, in my view, it cannot also be a payment. Conceptually, a single transaction cannot be two whole separate things (within the same country) at the same time from a VAT perspective.1

Goods (or services) can be used for different purposes consecutively, or parts of the same good can be used differently at the same time, but one whole single good (or service) cannot, in my view, be the object of a taxable supply and at the exact same time be a payment for another taxable supply, even if this payment is not a taxable transaction.2 I will elaborate on the consequences of this view in the rest of this Chapter.

Based on the above, a single transaction (in my earlier example: the transfer of ownership of a good) cannot, as a whole, be considered to be two separate transactions (e.g. a supply of a good as well as a payment). This means that, in my view, a taxable business that supplies goods and/or services as part of a ‘barter transaction’ can only perform one transaction, which is the taxable supply of the goods and/or services (for consideration). This is not (also) a ‘payment in kind’, even though that is what parties to the agreement may call it and that is what it may appear to be.

In my view, from a VAT perspective, where two taxable businesses are parties to a ‘barter transaction’, they in fact make two taxable supplies for consideration and the businesses settle the amounts or considerations that they have to pay by offsetting them against each other using, as I will discuss in Section 7.5, an agreed value that is the same for both supplies.

The definition of ‘barter’ in the dictionary is the exchange of goods or services for other goods or services without using money.3 The fact that no money is used does in my view not have to mean that the goods are also used for payment. All it means is that the parties to the barter transaction consider the value of their respective supplies to be of equal value, whereby they (implicitly) agree to offset their monetary/cash debts so that no cash payments are required.

From the CJEU’s older case law on barter transactions, it seems that the CJEU sometimes finds it difficult to grasp the exact operation or nature of barter transactions. In a ruling about a business that offers ‘free goods’ in return for people that either register as customers or that introduce other people as new customers to the business, the CJEU describes/considers this taxable person – that supplies the goods – as the recipient of a supply making payments (in kind) for the services received rather than a supplier, in at least five instances.4

Also, in the same ruling, the CJEU applies a reasoning for determining the taxable amount for the supply made by the taxable person that is based on the premise that the supply is a payment. Under the relevant EU VAT provisions for determining the taxable amount or consideration for a supply, the value is determined by ‘everything received or to be received in return for the supply’, i.e. the value of the consideration received by the supplier. Instead, the CJEU uses the value of the supply made by the supplier as taxable amount for that supply. I find that confusing, as I will now explain.