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Edited version of your written advice

Authorisation Number: 1051276706496

Date of advice: 31 August 2017

Ruling

Subject: GST and supply of services to a non-resident entity

Question

Will your supply of services to the overseas company be a GST-free supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Advice

Yes. Based on the information given, your supply of services to the overseas company will be a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.

Relevant facts

You are an Australian company and registered for the goods and services tax (GST).You supply statistical consulting, market research and analytics services.

You have been contacted by an overseas company for the provision of your services to it. The overseas company has an office in State A. You currently have not entered into a contract with the overseas company for your supply to it.

The work you will do for the overseas company involves collecting market research data, analysing the data and supplying advice to the overseas company to improve its business. The work is not related to property in Australia.

The supplies will be in the form of data and analytics. The analytics and statistical sciences will be carried out in Australia and then the results will be supplied to the overseas company.

The State A office will not have any contact with you during your supply and your supply will be solely for the purposes of the overseas company.

Relevant legislative provisions

A New Tax system (Goods and Services Tax) Act 1999 section 9-5

A New Tax system (Goods and Services Tax) Act 1999 section 38-190

Reasons for decision

Note: Where the term ‘Australia’ is used in this document, it is referring to the ‘indirect tax zone’ as defined in section 195-1 of the GST Act.

Detailed reasoning

GST is payable on a taxable supply. A supply is a taxable supply under section 9-5 of the GST Act if:

    a) the supplier makes the supply for consideration; and

    b) the supply is made in the course of an enterprise that the supplies carries on; and

    c) the supply is connected with Australia; and

    d) the supplier is registered for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

You must satisfy all the above for your supply to be a taxable supply and to be liable for the GST.

From the facts given, you will satisfy paragraphs 9-5(a) to (d) of the GST Act as:

    a) you will make the supply for consideration; and

    b) your supply will be made in the course of the business that you carry on; and

    c) your supply will be connected with Australia as the supply will be made through a business that you carry on in Australia; and

    d) you are registered for GST.

However, your supply of services is not a taxable supply to the extent that it is GST-free.

There is no provision under the GST Act that makes your supply of services input taxed.

GST-free supply

Relevant to your supply of services to the non-resident is item 2 in the table in subsection 38-190(1) of the GST Act.

Item 2 provides that a supply of a thing (other than goods or real property) made to a non-resident is GST-free if it is a supply that is made to a non-resident, who is not in Australia when the thing supplied is done, and:

    (a) the supply is neither a supply of work physically performed on goods situated in Australia when the work is done, nor a supply directly connected with real property situated in Australia; or

    (b) the non-resident acquires the thing in carrying on the non-resident's enterprise, but is not registered or required to be registered for GST.

Only one of the paragraphs needs to be satisfied for the supply to be GST-free.

Precondition of item 2 – non-resident is 'not in Australia'

The requirement that the non-resident in item 2 is not ‘in Australia’ when the thing supplied is done is a requirement that the non-resident is not in Australia in relation to the supply when the thing supplied is done.

Goods and Services Tax Ruling GSTR 2004/7 provides guidance on when a non-resident is 'not in Australia' for the purposes of item 2. The ruling is available at ato.gov.au

We consider that a non-resident company is in Australia for the purposes of item 2 if that company carries on its business (or in the case of a company that does not carry on its business, carries on its activities) in Australia :

        (a) at or through a fixed and definite place of its own for a sufficiently substantial period of time; or

      (b) through an agent at a fixed and definite place for a sufficiently substantial period of time.

A non-resident company is in Australia in relation to a supply if:

    ● the supply is for the purposes of the Australian presence of the company; or

    ● the presence of the company in Australia is involved in the supply unless the only involvement is minor.

From the facts given the non-resident company is located overseas and the results of your services will be provided to it. The overseas company has an office in State A and that office will not be involved with your supply when your supply will be done. In this instance, the requirement for the non-resident not to be ‘in Australia in relation to the supply’ will be satisfied when you supply your services.

The next step is to consider the paragraphs in item 2.

Paragraph (a) of item 2

Paragraph (a) of item 2 requires that the supply of services is neither a supply of work physically performed on goods situated in Australia when the work is done, nor a supply directly connected with real property situated in Australia.

Goods and Services Tax Ruling GSTR 2003/7 provides guidance on when a supply is a supply of work physically performed on goods and when a supply is directly connected with real property.

From the facts given, your supply of services will satisfy paragraph (a) of item 2 as your supply will neither be a supply of work physically performed on goods situated in Australia when done nor a supply directly connected with real property situated in Australia.

In this instance your supply of services will be GST-free to the extent it is not negated by subsection 38-190(3) of the GST Act.

There is no need to consider paragraph (b) as paragraph (a) is satisfied.

Subsection 38-190(3) of the GST Act

Subsection 38-190(3) of the GST Act provides that without limiting subsection 38-190(2) or (2A), a supply covered by item 2 in that table is not GST-free if:

    a) it is a supply under an agreement entered into, whether directly or indirectly, with a non-resident; and

    b) the supply is provided or the agreement requires it to be provided to another entity in Australia; and

    c) for a supply other than an input taxed supply – none of the following applies:

        i. the other entity would be an Australian-based business recipient of the supply, if the supply had been made to it;

        ii. the other entity is an individual who is provided with the supply as an employee or officer of an entity that would be an Australian-based business recipient of the supply, if the supply had been made to it; or

        iii. the other entity is an individual who is provided with the supply as an employee or officer of the recipient, and the recipient’s acquisition of the thing is solely for a creditable purpose and is not a non-deductible expense.

From the facts given, subsection 38-190(3) of the GST Act will not negate the GST-free status of your supply since you will not be required to provide your services to an entity in Australia. Your supply of services to the overseas Company will therefore be GST-free under item 2.