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For example, if I trade someone 10 apples for 10 strawberries, do I or my trading partner need to pay taxes? Do I need to pay taxes if I do business without using officially issued currencies?

If this varies between countries, what are some countries that don't tax this kind of business?

  • FYI, Bartering was a potentially really big up and coming industry in the late 70s and early 80s. It was touted as exactly what your question asks. A way to get around taxes. Of course, being successful, the Feds put a quick stop to that with the "Tax & Equity Fiscal Responsibility Act" of 1982. (I only remember this because a group of very wealthy individuals heavily involved in starting up a bartering network would meet at the restaurant I worked in. From time to time they'd even have congresspeople in on their meetings)..... – Dunk Jul 29 '13 at 15:44
  • ....Needless to say, politicians couldn't figure out how their personal pockets would be lined, thus they shut the industry down by passage of TEFRA in 1982. – Dunk Jul 29 '13 at 15:45
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Keep in mind that all of the information below assumes:

  1. The barter occurs outside a black market and by agents who wish to comply with the law. Black markets are a different issue.
  2. You are fully aware that I am not a tax professional, so although I've tried to provide sources where possible, speak to someone who knows the laws of your respective country if this question is anything more than a curiosity.

That being said, here are some examples of national tax laws relating to barter transactions. Obviously this isn't an exhaustive list, but based on my grossly non-representative sample, I think it's fairly safe to assume that barter transactions are more likely taxable than not.

United States

You're referring to a barter system; in the United States, the IRS is very specific about this (see the section titled Bartering).

Bartering is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included on Form 1040 in the income of both parties.

The IRS also provides more details:

Bartering occurs when you exchange goods or services without exchanging money. An example of bartering is a plumber doing repair work for a dentist in exchange for dental services. You must include in gross income in the year of receipt the fair market value of goods and services received in exchange for goods or services you provide or may provide under the bartering arrangement.

Generally, you report this income on Form 1040, Schedule C (PDF), Profit or Loss from Business or Form 1040, Schedule C-EZ (PDF), Net Profit from Business. If you failed to report this income, correct your return by filing a Form 1040X (PDF). Refer to Topic 308 for amended return information.

So yes, the net value of bartered goods or services is most likely taxable.

Australia

According to the Australian Tax Office:

Barter transactions are assessable and deductible for income tax purposes to the same extent as other cash or credit transactions.

United Kingdom

Her Majesty's Revenue and Customs states that:

If you supply services or goods (new or second-hand) and receive other goods or services in payment, there are two separate supplies:

  • the supply from you to your customer
  • the supply from your customer to you

You must account for VAT, and so must your customer if they're VAT-registered. The VAT treatment is the same as for part-exchanges. You must both account for VAT on the amounts you would each have paid for the goods or services if there had been no barter and they had been paid for with money.

Russia

Searching the website of the Federal Tax Service for the Russian/Cryllic word for barter (бартер) doesn't yield any results, but that might be because even between Google Translate and the rest of the internet, I don't speak Russian. That being said, I did manage to find this (translated from the first full paragraph of the Russian, beginning with "Налог на доходы...":

The tax on personal income is paid by citizens of the Russian Federation with all types of income received by them in the calendar year, either in cash or in kind.

Since bartering would probably qualify as an in kind transaction, it would likely be taxable.

South Africa

The South African Revenue Service includes barter transactions in the supply of goods taxed under the VAT.

The term “supply” is defined very broadly and includes all forms of supply and any derivative of the term, irrespective of where the supply is effected. The term includes performance in terms of a sale, rental agreement, instalment credit agreement or barter transaction.

Look for section 3.6, Supply and Taxable Supply, found on p17 of the current version of the linked document.

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Generally it is a taxable transaction. Basic principle of taxation everywhere is that the mean of payment doesn't matter. If the income is taxable - it is taxable regardless of the unit of currency you used. It can be a strawberry, a bitcoin, a gold nugget, or a dollar, it doesn't change a thing about how it is taxed.

If you look at the United States tax code definition of taxable income, for example, you will find no mention whatsoever of any currency. Similarly with other tax laws I'm familiar with. I'm sure there's no such limitation in Australia.

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