On bartering sites like Barter Network, you can trade goods or services of equivalent but relative value without any money changing hands.
In the past, this process was considered pretty straightforward. Both parties would simply engage in negotiations until they reached an agreement. Today, other forms of this exchange exist, such as Barter Network Ltd., where credits are used to represent value instead of money. Members can then earn credits by providing services and goods and use these to acquire services and goods from other members.
However, the modern era presents additional factors to consider, as bartering is not simply viewed as a simple exchange by the average person anymore. Instead, the Canadian Revenue Agency (CRA) sees bartering as taxable transactions.
Taxation
Unless under specific circumstances, bartering is considered taxable by the CRA. The agency believes that goods or services being exchanged should be considered as paid and that the value received is equal to the market value of what is being provided to other parties, even if the value received in exchange is not equal.
Thankfully, not every trade requires determining its value for tax purposes. Some trades are exempt from taxes. The tax implications of bartering are concerned with trades where payment is typically sought for services or goods exchanged. As long as the transaction does not involve giving away goods or services that are usually paid for, it should be exempt from taxes.
It’s worth noting that the cost of the services or goods being traded can be deducted when calculating the tax owed on the transaction.
Legal Framework
The Income Tax Act and Excise Tax Act do not specifically define barter transactions. Nevertheless, bartering can give rise to both Canadian income tax as well as goods and services tax and/or harmonized sales tax obligations according to the CRA.
What’s good to know is that goods and services exchanged in a barter do not have to have the same fair market value for tax purposes.
Ultimately, bartering is incredibly useful as a way to preserve cash flow. However, if you are not careful and do not keep a record of all bartering transactions, it can lead to potential tax problems if not handled and documented properly.
Get excellent value without having to spend any cash at bartering sites like Barter Network Ltd.
Book a free assessment now and begin your bartering journey today!
