A barter deal for VAT purposes involves the exchange of goods or services without using money as a medium. Under Directive 2006/112/EC, particularly Article 2(1)(c), such transactions are considered supplies for consideration if there is a direct link between the exchanged goods or services and the consideration received.
C-410/17 (A Oy) – Barter deal – VAT Implications for Demolition Contracts
- Definition and Scope:
- Article 2(1)(a) and (c) of Directive 2006/112/EC states that both the supply of goods and services for consideration within a Member State by a taxable person are subject to VAT.
- Article 14(1) defines the supply of goods as the transfer of the right to dispose of tangible property as an owner.
- Article 24(1) defines the supply of services as any transaction that does not constitute a supply of goods.
- Barter Transactions:
- Barter transactions involve reciprocal performance where the consideration for a supply of goods or services can be another supply of goods or services.
- For VAT purposes, there must be a direct link between the supplies and the consideration received, which can be in kind rather than monetary.
- Case C-410/17 Context:
- The case involved a demolition company (A Oy) that performed demolition services and could resell scrap metal obtained from the demolition waste.
- The court had to determine whether these transactions constituted one single transaction or two separate transactions for VAT purposes.
- Court’s Interpretation:
- The court ruled that such contracts could consist of both a supply of services (demolition works) and a supply of goods (scrap metal), provided the demolition company attributes value to the scrap metal and factors it into the price quoted for the demolition services.
- The value attributed to the scrap metal should be considered part of the taxable amount for VAT purposes if it reflects economic and commercial reality.
- Implications for VAT:
- In barter deals, each party’s supply (goods or services) is considered for VAT purposes if there is a direct link and reciprocal performance.
- The taxable amount includes everything constituting consideration obtained or to be obtained by the supplier, including non-monetary consideration.
- Practical Considerations:
- When fixing prices in barter deals, it is important to consider how the value of exchanged goods or services is determined and documented.
- Even if the exact value is not agreed upon in the contract, it must be possible to determine it based on economic and commercial reality.
In summary, for VAT purposes under Directive 2006/112/EC, a barter deal involves treating the exchange of goods or services as taxable transactions if there is a direct link and reciprocal performance. The value attributed to the exchanged items must be factored into the taxable amount, ensuring it reflects economic and commercial reality.
C-283/12 (Serebryannay vek) – Barter deal: Services supplied for free in return for not paying rent
- Supply for Consideration:
- Article 2(1)(c) states that the supply of goods or services for consideration within a Member State by a taxable person is subject to VAT. This implies that barter transactions, where services or goods are exchanged, are considered supplies for consideration if there is a direct link between the supply and the consideration received.
- Reciprocal Supplies:
- The judgment in Case C-283/12 (Serebryannay vek EOOD) clarifies that reciprocal supplies of services, such as fitting out and furnishing an apartment in exchange for the right to use it, constitute supplies for consideration. The direct link between the services provided and the right to use the property establishes this.
- Taxable Amount:
- Article 73 of the Directive specifies that the taxable amount includes everything which constitutes consideration obtained by the supplier from the customer or a third party. In barter transactions, this means the value of the goods or services received in exchange.
- Chargeable Event and Chargeability:
- Articles 62 and 63 define the chargeable event as the occurrence that fulfills the legal conditions for VAT to become chargeable, and VAT becomes chargeable when the goods or services are supplied. For barter deals, this would be when the reciprocal supplies are made.
- Open Market Value:
- Article 80 allows Member States to ensure that the taxable amount is the open market value in cases involving close personal ties or other specified relationships to prevent tax evasion or avoidance.
Practical Implications:
- Determination of Value: The value of the goods or services exchanged in a barter deal must be expressed in monetary terms to determine the taxable amount.
- VAT Invoices: Both parties in a barter transaction must issue VAT invoices reflecting the open market value of the goods or services supplied.
- Timing of VAT Payment: VAT becomes chargeable at the time when the reciprocal supplies are made, not necessarily when any formal agreement is signed.
In summary, under Directive 2006/112/EC, barter deals are treated as supplies for consideration for VAT purposes, with the taxable amount being the open market value of the exchanged goods or services. The chargeable event occurs when these supplies are made, ensuring that VAT is appropriately accounted for in such transactions.
Other ECJ Cases related to Barter Deals: Roadtrip through ECJ Cases – Focus on Taxable transactions – Barter deals – VATupdate
