Such payment arrangements may entail cash or other means other than cash. An example is barter transactions made between or among operators.
Barter transactions Barter transactions refer to transactions where goods or services are exchanged between trading parties as payment for the supply of goods or services rendered. Such transactions have Value Added Tax implications which should be correctly addressed.

VAT is generally charged  on the consideration made  in relation to the supplies  by any registered operator of goods or services  made  in the course or furtherance of any trade carried out.

The definition of the word “consideration” under the VAT Act , includes any payment made or to be made, any deposit on any returnable container and tax, whether in money or otherwise whether or not voluntary, in respect of, in response to, or for the inducement of, the supply of any goods or services.

From the foregoing, it clearly shows that barter transactions constitute consideration and any goods or services supplied under such arrangements should be subjected to VAT.

How are such goods and services valued for VAT purposes?
In terms of the VAT Act, in cases where goods or services are supplied through means other than cash, (including barter transactions) the value to be placed in computing VAT is the open market value of the goods or services. The open market price is normally the price which unconnected or unrelated parties would charge for such goods or services under the same circumstances.

For Example:
A registered operator X Ltd provides a machine repair service to an unregistered operator Y Ltd, a conveyor belt manufacturer and charges US$230.  As payment for the services rendered, company Y Ltd gives US$230 (open market value of the transaction) worth of conveyer belts to company X Ltd for use in driving their workshop.

Comment and treatment:
This is a typical example of a barter transaction of which company X Ltd should account for output tax on the value of US$230.
If both companies were registered operators, they should account for output tax in respect of the considerations charged for the product or service supplied.

For further  enquiries
Our valued clients are urged to seek clarification with their nearest ZIMRA office for guidance, if they are not sure on the correct treatment of any transactions for VAT purposes. In addition, they are also encouraged to make payments on time to avoid any unnecessary payment of penalties and interest charged for failure to observe the statutory obligations.

Reminder for  VAT Payment Date
Our valued clients are hereby reminded that the VAT for the month of January 2014 is due on or before the February 25 2014.

Disclaimer: This article was compiled by the Zimbabwe Revenue Authority for information purposes this article and only. ZIMRA shall not accept responsibility for loss or damage arising from use of material in no liability will attach to the Zimbabwe Revenue Authority.  
To contact ZIMRA: Visit our website: www. zimra.co.zw; Follow us on Twitter: @Zimra_11; Like us on Facebook: www.facebook.com/ZIMRA.11; Watch us on YouTube: www.youtube.com/zimranetwork; Send us an e-mail: [email protected]; Call us (Head Office): 04 –758891-5; 790813; 790814; 781345; 751624; 752731

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