All publications
Shares for goods or services – VAT

Shares for goods or services – VAT

June 8, 2023

Never apply the principle of what is good for the goose is good for the gander in tax. The treatment of the issuing of shares for goods or services for income tax and VAT purposes are entirely divorced with no possibility of reconciliation. This article deals with the VAT treatment of shares issued for goods or services.


In the previous article we dealt with the income tax treatment of transactions involving the issuing of shares for goods or services supplied. We concluded that it is an area that is fraught with danger.

This article deals with the VAT implications of this category of transactions.

So what is the issue?

VAT vendors are often more concerned about claiming input tax on the acquisition of goods or services then having to account for output tax on sales of goods and services.

The crisp issue to consider is whether a VAT vendor that issues shares in exchange for goods or services may claim input tax on the acquisition of the goods or services.

Let’s start at the very beginning

The VAT system is based on supplies made between persons and the consideration for such supplies.

The VAT Act make specific provision for barter transactions, that is, transactions where goods or services are exchanged for other goods or services.

The supply of goods or services in exchange for shares is a typical barter transaction that must be treated according to the VAT principles applicable to this category of transactions.

So now it has a name – barter transactions.

What are the barter-rules?

The only rule of significance applying to barter transactions is that the transactions are deemed to be concluded at the market value of the goods or services – as simple as that!

Now let’s look at those input tax claims …

When may input tax be claimed?

Input tax on the supply of goods or services to a vendor may be claimed if the goods or services have been supplied to the vendor and the vendor is in possession of the relevant documentation. The documentation normally only consists of a tax invoice.

The value of the goods or services bartered, and the VAT thereon must be reflected on the tax invoices. It is important that the parties agree what the value is and that both parties use the same value on their respective tax invoices.

Any special considerations?

When a barter transaction involves the bartering of goods or services for shares, one must consider that an exempt supply for VAT purposes (the issuing of the shares) is bartered for a taxable supply of goods or services (the goods or services).

The supplier of the goods or services will accordingly issue a tax invoice to the issuer of the shares reflecting VAT on the invoice. The issuer of the shares will not issue a tax invoice for the shares as the supply of the shares is not a taxable supply.

The above may result in the seller of the goods or services being held liable for output tax without any cash being paid to the seller.

How do we resolve the above?

If the company issuing the shares acquires the goods or services for the purposes of its VAT enterprise, it will be entitled to a full input tax deduction based on the tax invoice issued by the supplier. It will accordingly sit with cash in its pocket after the input tax has been refunded by SARS.

To ensure that everybody is cash neutral, the goods or services can be supplied partially for shares and partially (an amount equal to the VAT) for cash. Once the issuer of the shares has received the input tax refund from SARS, the refund can be used to settle the cash element of the consideration for the acquisition.


It is clear from the above that the VAT implications of shares-for-goods-or-services-transactions are much simpler than the income tax implications. One should however still ensure that all i’s are dotted, and t’s crossed when these transactions are concluded.

Share this article