According to the Canadian Revenue Agency (CRA), barter trade exchange in Canada is recognized as a legitimate economic transaction. Therefore, it’s taxable just as any other regular business transaction would be.
Let’s take a look at what exactly the rules are and how they should be applied.
As the “Seller”
The general rule is that if you provide anything through a barter exchange that you would usually have sold for regular currency during the normal course of business, then the monetary value of what you gave in the trade needs to be included in your income statement.
An example of this might be if you’re a print shop owner who makes a barter deal to provide a print job for a store owner in exchange for a case of a product they sell. Even though you didn’t receive money for the print job you provided, the normal value of that print job (say, $100) needs to be recorded in your income regardless. The store owner would need to do the same for the product he gave you.
If you are registered for goods and services tax (GST), then you need to pay the required tax on that income amount. Even though you haven’t received money for the barter transaction, the value of what you “sold” through the barter exchange needs to be included in your total income and thus plays a key role in determining whether you meet the GST registration income threshold.
As the “Purchaser”
If you are the recipient of goods in a barter exchange, then a similar rule exists in terms of recording the barter as a cost.
If the goods you received in the barter exchange were the kinds of goods you would normally purchase as part of the normal course of business, then the monetary value of those goods can be claimed as costs.
What’s more, if the business is registered for GST, then you can claim an income tax credit, but only if the provider of the goods is also registered.
In the case of the above example, the print shop owner provides his customers with a complimentary product with every print job as a normal part of this business. Therefore, he can claim the cost of the case of the product and get an income tax credit for it.
On the other hand, a print job is not a normal business expense for the store owner. Therefore, he cannot claim the cost from the CRA.
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