7.9 Are all ‘barter transactions’ involving a taxable person acting as such VAT taxable transactions?

In my view, not all barter transactions involving taxable persons acting as such need to be subject to VAT. As the CJEU has repeatedly stated, for a transaction to be subject to VAT, it follows from the relevant provision in the EU VAT Directive that the consideration for the provision of a supply must be capable of being expressed in money. Also, this consideration is a subjective value since the basis of assessment for the provision of services is the consideration actually received and not a value assessed according to objective criteria.1 There has to be a ‘direct link’ between the supply and the consideration.2

In my view, there can be cases where this direct link is missing. For example, a business offering a ‘conditional discount’, e.g. a shoe shop offering a discount if customers hand in a pair of old shoes, is not a ‘barter transaction’ in economic and commercial reality. Another example of such a ‘conditional discount’ is a business offering a 10% discount to the first ten customers to come in at a certain day. The recipients of the discount will have to do something to be granted the discount, but this ‘something’ is not considered to be ‘in return for the supply’ but, as mentioned, a condition for the discount. There is no direct relation between the condition and the value of the supply. This becomes more clear if, instead of showing up at a designated time, people get that discount if they come to a shop wearing a specific outfit/costumer or accessory, of when people have to make a puzzle, come up with a slogan or hand in a colouring picture. In my view, these are all examples of barter transactions in the broadest sense of that concept. Whether the transaction (i.e. the supply made by the taxable person) is subject to VAT depends on the factual circumstances. There has to be a direct link between the supply (‘granting a 10% discount’) and the consideration (‘dressing up’). This is not the case for certain ‘conditional discounts’.

In my view, as soon as the business can establish the actual value of the discount, which it should at least be able to do as soon as the discount is actually granted, the cost price of the supply is known. But in my view, in a barter transaction, the business should either mention the price for its supply (i.e. put a price on granting a 10% discount) or apply the ‘open market value’ of granting this discount as a taxable amount for this transaction. This should be possible in the case of a 10% discount actually granted on the same day that the ‘payment’ is received. But this could be more difficult, or impossible, if for example a ‘5% discount on all purchases in the next calendar year’ is granted. And the link between the supply and the payment gets even more blurred in a very common promotional activity in, for example, the Netherlands: the barter transaction where customers allow a business (e.g. a supermarket) to keep track of their purchasing so that it can use that information for targeted commercial activities, in return for certain discount offers (e.g. ‘exclusive deals’).3

It seems possible that the supply and the consideration in these types of barter transactions lack a sufficiently direct link to be considered subject to VAT. As mentioned, in my view this is definitely the case if the ‘payment’ as such is of no (real) value to the supplier but should be considered a condition to be eligible for the free supply or discount. This is different where the payment has an actual economic value to the supplier, as in the example of the personal purchasing data of supermarket clients. In that case, in my view, the business should put a value on the supply (in this example: the eligibility to specific discounts and ‘exclusive deals’) and remit VAT for this supply to the tax authorities.

However, in order for that type of barter transaction to be subject to VAT, it should be based on an agreement between parties under which a supply is agreed but also a specific consideration is agreed to be paid in return for that supply.