Trade exchange
Trade exchange - it is one of the methods of payment between businesses. It was known in ancient times. It is based on a system of exchange of one good for another good of equivalent value. An example of this is the exchange of butter for four crates of apples. As can be seen, this is a system in which cash is not used for trade. It is worth mentioning, however, that the exchange of benefits does not necessarily have to be reduced to the exchange of material goods for material goods. It is also common for one trader to provide a service to another trader in return for obtaining a particular good. A similar analogy can be applied to the provision of intangible goods (e. g. services) between businesses as an acceptable form of payment.
Trade Exchange in virtue of law
Basically, trade exchange is no different from normal payment. However, in this case there is a special situation in which the parties compensate each other on the basis of separate benefits. This means that for trade exchange to be effective, it is important for the subjective perception of the parties that the benefits are equivalent. Otherwise, it will be important to adjust the benefits by way of incidental benefits (e. g. cash). Furthermore, there is nothing to prevent a contractual agreement from determining the value of the benefits, e. g. based on the calculation of costs and a surcharge on costs [1]. Nevertheless, it should be borne in mind that the price set by the persons concerned is a market rate. It's because of the fact that:
- If a given rate is underestimated, the tax authority will be able to increase revenues and reduce costs of a given transaction accordingly;
- The value will be the net value when the VAT taxable amount is determined.
Therefore, as can be seen, barter trade will also be a taxable event. This is due to the fact that in the legal space such an event generates cost and revenue for each of the entrepreneurs. It should therefore, in principle, be tax-neutral in respect of income taxes. The situation is different in the case of VAT. In accordance with the principle that the economic burden of taxation should be borne by the final recipient, entrepreneurs should not suffer its consequences. Nevertheless, they should document every consumption, even intra-corporate consumption, and therefore they will be on barter agreements to identify the applicable tax rates for the provision of services or the supply of goods [2].
Trade exchange as a value for a economy
Trade exchange is the cornerstone of the global economy. This is due to the fact that many companies, which do not have sufficient monetary values, finance their activities by making their goods available. This can be the provision of work or, for example, the renting of existing machinery by filling an unused production line. The above allows, among other things, to start a business with relatively small capital. It is possible to compare here e. g. start-up activity, which is also generally characterized by the exchange of capital (shares) in exchange for the provision of a specific type of work.
Therefore, as can be seen, for the global economy the functioning of trade exchange is still very important and allows for the development of many sectors with high entry rates [3].
Footnotes
| Trade exchange — recommended articles |
| Value added tax — Amortization of intangible assets — Rate base — Depreciation vs. amortization — Arms length price — Barter agreement — Income Shifting — Functions of money — Franchise |
References
- Eckhaus, E., (2011) Barter Trade Exchange to the Rescue of the Tourism and Travel Industry "Journal of Shipping and Ocean Engineering", No. 2 Vol. 1
- George, A., George, A., George, K., (2014) Market escape through exchange: home swap as a form of non-commercial hospitality "Current Issues in Tourism", No. 7 Vol. 17
- Sudzina, F., (2019) Sudzina F., A Literature Review Motives for Barter, post conference
Author: Weronika Czarna
