Bartering for Property or Services
Like sales of property or services, barter (This link will open a new window) transactions are generally taxable supplies under the GST and QST systems. However, they may also be exempt supplies or zero-rated supplies, depending on the property or services supplied.
To determine whether a person is a small supplier or is required to register for the GST and the QST, add the value of the property or service supplied in the barter transaction to the total sales of property and services.
Value of the property or service supplied in a barter transaction
Generally speaking, the value of the property or service supplied in a barter transaction corresponds to the fair market value (This link will open a new window) (FMV) of the property or service exchanged.
However, where two registrants exchange property of the same class or type, the value of the consideration for the property is considered nil if
- the property is acquired by the recipient as inventory to be used or consumed in the course of the recipient's commercial activities; and
- the consideration is acquired by the supplier as inventory to be used or consumed in the course of the supplier's commercial activities.
Designation of a barter exchange network
Under the GST and QST systems, special rules apply to transactions carried out between members of a designated barter exchange network (This link will open a new window) using barter units (This link will open a new window).
The members of a designated barter exchange network are not required to pay GST and QST in respect of the barter units accepted in exchange for property or services. The members, if they are registrants (This link will open a new window), must charge GST and QST in respect of the taxable supplies of property or services they make in exchange for the barter units. The taxes in respect of such property or services are calculated on the exchange value of the barter units accepted as consideration.
Mr. A and Ms. B are GST and QST registrants and members of a designated barter exchange network. Mr. A provides legal services to Ms. B in exchange for barter units having a value of $100. Mr. A will have to charge GST and QST in respect of the services he provided. Those taxes will be calculated on $100. Ms. B will not have to charge GST and QST in respect of the barter units given in exchange for the legal services.
Note that if the barter exchange network is not designated, GST and QST generally have to be paid in respect of the barter units accepted by a registrant in exchange for property or services.
Application for designation of a barter exchange network
The administrator of a barter exchange network may apply to have the network designated for GST and QST purposes by sending Revenu Québec a letter that is signed by the administrator or an authorized individual and contains the following information:
- the name of the barter exchange network;
- the name, address, telephone number and trade name of the administrator of the barter exchange network as well as the numbers used by Revenu Québec to identify the administrator;
- the effective date requested;
- a copy of the membership agreement of the barter exchange network describing the responsibilities of the members and of the administrator;
- a statement from the applicant indicating that the applicant meets the definition of "administrator" of a barter exchange network given in the Excise Tax Act and the Act respecting the Québec sales tax; and
- a statement from the applicant, signed by the administrator of the network or by an individual authorized to sign on behalf of the administrator, certifying that the information provided in the application and in any document enclosed therewith is true, accurate and complete.
The letter must be sent to:
Direction principale des lois sur les taxes et l'administration fiscale et des affaires autochtones
3800, rue de Marly, secteur 5-2-2
Québec (Québec) G1X 4A5
Revenu Québec will notify the administrator of the network in writing of the designation and its effective date.