The VAT tax base for a barter transaction
Entrepreneurs can use many different forms of transaction settlement - from traditional cash payment, through bank transfer, collection fees, to barter. It might seem that the last one will not cause problems for contractors - after all, it consists in a cashless exchange on the "something for something" basis. It turns out, however, that in a barter transaction it may be problematic to determine the VAT tax base.
Barter transaction - what is it?
Barter is a specific type of commercial transaction that has not been explicitly identified in the regulations. According to the dictionary definition, when making a barter transaction, the following is exchanged:
goods for goods,
services for service,
goods for service.
There are no cash settlements in barter - it is a transaction that is carried out without using traditional payment methods. Legal regulations regarding this type of settlements can be found in the Civil Code.
VAT tax base - rules for determining
A barter transaction, although it does not include traditional cash settlements, will be subject to tax on goods and services (if it is made by active VAT payers).
According to Art. 29a paragraph. 1 of the Act on tax on goods and services, the VAT tax base consists of everything that is the payment that the seller of goods or the service provider is to receive from the buyer, recipient or a third party.
Act on VAT
Art. 29a. 1. The tax base, subject to the provisions of paragraph 2. 2-5, art. 30a-30c, art. 32, art. 119 and art. 120 paragraph 4 and 5, is everything that is the payment that the supplier of the goods or the service provider has received or is to receive for the sale from the buyer, recipient or third party, including received subsidies, subsidies and other payments of a similar nature having a direct impact on the price of the goods provided or services provided by the taxpayer.
Barter transaction and the VAT tax base
With regard to the barter agreement, the question arises - how should the VAT tax base be determined, since in this case entrepreneurs do not have to deal with specific values of goods and services?
In order to determine the method of determining the tax base in such transactions, reference should be made to the case law of the Court of Justice of the EU (judgment C-33/90 Empire Stores of June 2, 1994, judgment C-380/99 Bertelsmann of July 3, 2001). If the tax base is generally understood remuneration received, then in the case of barter, the value of the good or service that it has for the recipient (i.e. if the transaction was settled in cash) should be considered as such basis. When determining the VAT tax base, it should be remembered that the amount should be adequate to the costs that are incurred in order to purchase or manufacture a good or service.
To sum up, it can be stated that the value of the mutually exchangeable goods or services that it has for the buyer who has offered something in return is considered the basis for VAT in a barter transaction. In the valuation of barter, one cannot deviate from the market value of the commodity or service, or the products and other inputs that would normally be required to produce or provide the object of exchange.