European Legal Review, 2013 – VAT Treatment of Barter Supplies, Cases С-549/11 Orfey Bulgaria EOOD and C-19/12 Efir OOD
VAT TREATMENT OF BARTER SUPPLIES
Case С-549/11 Orfey Bulgaria EOOD and Case C-19/12 Efir OOD
Cases C-549/11 and C-19/12 were heard by the Court of Justice following references for preliminary rulings by the Bulgarian Supreme Administrative Court made in the course of the proceedings between respectively Orfey Bulgaria EOOD (“Orfey”) and Efir OOD (“Efir”) and the Bulgarian tax authorities.
The two disputes which reveal great similarities both concern the interpretation of the VAT provisions regarding barter supplies in the construction sector. Barter supplies imply the existence of two reciprocal supplies of goods or services, each of which is considered as the remuneration for the other supply. Respectively, the supplier in the first barter supply is deemed the recipient in the second supply. In the cases at hand Orfey and Efir were construction companies which received the building rights over plots of land in exchange for the obligation to build and deliver on a turn-key basis certain real estate to the principals of the building right. The two companies were subject to tax audits in the course of which the Bulgarian tax authorities found that Orfey and Efir failed to issue tax invoices and charge the due VAT on the barter supplies upon the earlier of the two barter supplies – the transfer of the building rights. As a result, the construction companies were assessed VAT on the date of the building right transfer on a taxable base which was determined by an expert on the basis of the openmarket value of the construction works as per the publicly available information and specialized literature.