Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Any income tax considerations of community network engaging in barter transactions.
Position TAKEN:
Transactions are subject to Income Tax Act. Provided copy of and general guidance based on IT-490, Barter Transactions, and copy GST/HST News No. 34 Fall 1999.
Reasons: N/A
XXXXXXXXXX 2001-008158
T. Young, CA
May 17, 2001
Dear XXXXXXXXXX:
Re: XXXXXXXXXX
This is in reply to your letter of April 25, 2001, requesting our views on a XXXXXXXXXX.
In your letter, you describe XXXXXXXXXX as a system that allows approximately XXXXXXXXXX community members to exchange goods and services amongst themselves. You stated that it is not a business venture, but rather a community network whereby individuals are able to access goods or services that they might not otherwise have known about. You have asked us to comment on the system from a Canada Customs and Revenue Agency perspective and provide any suggestions for ensuring that the project is acceptable to us.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R4, Advance Income Tax Rulings, dated January 29, 2001. Since this enquiry relates to an existing situation, it should be addressed to the relevant Tax Services Office. Also, it would be necessary to review all relevant documentation (including any agreements relating to participation in the XXXXXXXXXX) before an actual determination of the tax implications could be made. However, we can provide you with the following general comments.
Based on the information you provided, the XXXXXXXXXX appears to be a type of barter club. Our position with respect to barter transactions is described in interpretation bulletin IT-490, Barter Transactions (copy enclosed).
As explained in the bulletin, it is our view that barter transactions are within the purview of the Income Tax Act (the "Act"). Such transactions can therefore result in income or expenses as contemplated by sections 3 and 9 of the Act or can result in the acquisition or disposition of capital property, eligible capital property, personal-use property or inventory, depending upon the circumstances of the persons who are bartering and the nature of what is bartered, on the same basis as if cash were the consideration.
When goods or services are bartered by a taxpayer for either goods or services, the value of the goods or services must be brought into the taxpayer's income where they are of the kind generally provided by the taxpayer in the course of earning income from, or are related to, a business or a profession carried on by the taxpayer. Examples include a dentist that provides dental services, or the owner of a plumbing business who agrees to fix someone's drains in return for services or property provided by the other party. Where the taxpayer is an employee (e.g., a mechanic), occasional help given to a friend or neighbour in exchange for something would not be taxable unless the taxpayer made a regular habit of providing such services for cash or barter.
Barter transactions can also result in the application of GST or HST. The XXXXXXXXXX may be a "Barter Exchange Network" for GST/HST purposes. To assist you, we are enclosing a copy of GST/HST News No. 34 Fall 1999, which contains a discussion of Barter Exchange Networks. For further assistance on the GST/HST implications of barter transactions, please contact your local Tax Services Office.
We trust our comments will be of assistance to you.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Encl.
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