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Edited version of private ruling
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Ruling
Subject: GST and supply of services to non-resident
Question
Is your supply of the services to the non-resident entity GST-free?
Answer: Yes, your supply of the services to the non-resident entity is GST-free
Relevant facts and circumstances
You are a resident Australian entity.
You are registered for goods and services tax (GST).
You entered into an agreement with a non-resident entity to provide service to promote its product
You do not sell the product.
In accordance with the agreement, you are not entitled to act in the name or on behalf of the non-resident entity or incur any liabilities or pledge the credit or give any warranty or otherwise bind the non-resident entity to any agreement with a customer or other third party or negotiate or contract for or on behalf of the non-resident entity unless you are authorised to do so.
You do not provide any services to clients of the non-resident entity.
You receive a commission as payment for your services.
The non-resident entity does not have a permanent establishment in Australia.
The non-resident entity is not registered for GST.
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
GST is payable on taxable supplies. According to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), you make a taxable supply if:
a) you make the supply for consideration;
b) the supply is made in the course or furtherance of an enterprise that you carry on;
c) the supply is connected with Australia; and
d) you are registered or required to be registered.
However, a supply is not a taxable supply if it is GST-free or input taxed.
Section 38-190 of the GST Act provides that supplies to non-residents (other than supplies of goods or real property) are GST-free if the supplies are covered by items in the table in subsection 38-190(1).
Under Item 2 in the table in subsection 38-190(1) of the GST Act (Item 2), a supply is GST-free if the supply 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.
Goods and Services Tax Ruling GSTR 2004/7 examines when a non-resident is not in Australia for the purpose of Item 2.
According to paragraph 241 of GSTR 2004/7, a non-resident company is in Australia for the purpose of Item 2 if:
· the company carries on business in Australia at or through a fixed and definite place of its own for a sufficiently substantial period of time; or
· the company carries on business in Australia through an agent at a fixed and definite place for a sufficiently substantial period of time.
You advised that the non-resident entity does not have a permanent establishment in Australia through which it carries on its business. You do not sell the product of the non-resident entity; as such you do not carry on the business of the non-resident entity. Therefore, the non-resident entity is not in Australia when you supply your services.
The supply of your services is not a supply of work physically performed on goods situated in Australia or a supply directly connected with real property situated in Australia. As such, paragraph (a) of Item 2 is satisfied. It is no longer necessary to consider paragraph (b) of Item 2.
Where a supply satisfies one of the paragraphs in Item 2, we must determine whether subsection 38-190(3) of the GST Act applies.
Subsection 38-190(3) of the GST Act states:
(3) Without limiting subsection (2), a supply covered by item 2 in that table is not GST-free if:
(a) it is a supply under an arrangement 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.
In your case, you make the supply of your services under an agreement with the non-resident; however, you advised that you do not provide your service to the clients of the non-resident, thus you do not provide the supply to another entity in Australia.
Subsection 38-190(3) of the GST Act does not apply. Therefore, the supply of your services to the non-resident entity is GST-free.
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