9 December 2025
Barter transactions: the VAT taxable base shifts from fair value to costs
The Italian VAT law provides that when two parties exchange goods or services for no money consideration (barter transaction) two separate supplies are deemed to occur, each being independently subject to VAT.
The VAT taxable base for barter transactions is currently determined by market value of the goods or services supplied.
However, this approach is not fully aligned with the EU VAT Directive. In fact, through EU Pilot (2022) 10314, the European Commission asked Italy to clarify potential inconsistencies with EU law, an issue later addressed also by the VAT Committee in Working Paper no. 1107/2025.
The Court of Justice of the European Union has consistently ruled that, for barter transactions between unrelated parties, the taxable basis must reflect the costs incurred to make the supply, rather than market value, which is only allowed in some specific cases.
To align domestic law with EU principles, the draft Italian Budget Law proposes amending the current VAT law so that the VAT taxable base for barter transactions is determined by the total costs incurred by the supplier.
Key takeaway
Pending final approval of the 2026 Italian Budget Law, the current draft provides that the new rules will enter into force on 1 January 2026, without affecting past practices. Once effective, it will be essential to identify and substantiate all costs associated with barter transactions, as these will determine the revised VAT taxable basis.