Edited version of private ruling

Authorisation Number: 1011612678826

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Ruling

Subject: GST and invoices/tax invoices

Question

Will the proposed combined invoice/tax invoice issued by an overseas entity on your behalf meet the requirements of section 29-70 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No.

Relevant facts

You carry on an enterprise of providing legal services.

At times you and various overseas entities will provide legal services to a given client from your respective jurisdictions.

While you are registered for GST in Australia, the overseas entities are not.

It is proposed that an overseas entity will issue a combined invoice/tax invoice for an Australian client in respect to the services provided by them as well as for the services performed in Australia by you for the same client.

The overseas entity will issue the tax invoice in respect to the Australian services performed by you in their capacity as a "billing agent".

While the invoice/tax invoice will typically be in United States (US) dollars, the exchange rate to determine the equivalent in Australian currency will be listed on the invoice. This will facilitate the recipient to determine the GST payable on the taxable supply.

If the client is engaged from Australia, the arrangement would be such that you would act as the billing agent for the overseas entity for the services they provide to that client. In this scenario you will account only for GST on the Australian services component as the remaining fees would be for services conducted overseas and would not be suppled through you as a resident agent.

You are not in a common law relationship with any of the other overseas entities..

Reasons for decision

Subsection 29-70(1) of the GST Act outlines that a tax invoice is a document that complies with the following requirements:

(a) it is issued by the supplier of the supply for supplies to which the document relates, unless it is a recipient created tax invoice (in which case it is issued by the recipient);

(b) it is in the approved form;

(c) it contains enough information to enable the following to be clearly ascertained:

(i) the supplier's identity and the suppliers ABN;
(ii) if the total price of the supply or supplies is at least $1,000 or such higher
amount as the regulations specify, or if the document was issued by the
recipient - the recipient's identity or the recipient's ABN.
(iii) what is supplied, including the quantity (if applicable) and the price of what
is supplied;
(iv) the extent to which each supply to which the document relates is a
taxable supply;
(v) the date the document is issued;
(vi) the amount of GST (if any) payable in relation to each supply to which the
document relates;
(vii) if the document was issued by the recipient and GST is payable in relation
to any supply - that the GST is payable by the supplier;
(viii) such other matters as the regulations specify;

(d) it can be clearly ascertained from the document that the document was intended to be a tax invoice or, if it was issued by the recipient, a recipient created tax invoice.

In this case, you are the supplier of the Australian services. As such the tax invoice must be issued by you in order for it to meet the requirement of paragraph 29-70(1)(a) of the GST Act. However, Division 153 of the GST Act provides an exception to this rule. Under Subdivision 153-A, an agent can issue a tax invoice for supplies made on behalf of the principal.

You have advised that the relationship between you and the other entities are not principal/agent under common law and therefore the exception provided in Division 153-A of the GST Act does not apply. You are responsible for the issue of a tax invoice for your supplies.

Tax Laws Amendment (2010 GST Administration Measures) Act 2010 has amended the requirements for a document to be a tax invoice, replacing a previous prescriptive list with equivalent more flexible principles. The amendments allow those acting for a principal who are not agents under common law to access the simplified accounting procedures in Subdivision 153-B of the GST Act. Please note that the amendments do not apply to Subdivision 153-A of the GST Act (i.e. only an entity, as an agent under common law, can issue a tax invoice on behalf of a principal).

Chapter 3 of the Explanatory Memorandum for the Tax laws Amendment (2009 GST Administration Measures) Bill 2009 provides (in part) the following explanation of the new law:

3.13 The amendments allow entities that facilitate the supplies or acquisitions of an enterprise carried on by another entity through acting as an intermediary to use Subdivision 153-B, irrespective of whether the intermediary can legally bind the principal with their acts. Billing and paying agents, among others, would be able to access these accounting procedures. In short, the amendments permit those that would be considered "transaction facilitators" but fall short of the requirements to be regarded as common law agents to use the same accounting procedures in Subdivision 153-B.
3.14 To use Subdivision 153-B, the principal and the intermediary have to enter into an agreement in writing that the intermediary will facilitate supplies to third parties, acquisitions from third parties or both on behalf of the principal. The agreement also needs to specify the other matters required in section 153-50, such as the kinds of supplies and acquisitions to which the agreement will apply and the requirement for the intermediary to issue tax invoices to third parties instead of the principal. The intermediary and principal will have to be registered for GST purposes.

The overseas entities are not making supplies on your behalf but wish to issue the relevant invoices under the proposed Agreement. As they are not common law agents they are entitled to issue invoices on your behalf if the conditions of subdivision 153-B of the GST Act are met.

Subsections 153 - 50(1) and (2) of the GST Act state:

(1)  An entity (the principal) may, in writing, enter into an arrangement with another entity
(the intermediary) under which:

(a) the intermediary will, on the principal's behalf, do any or all of the following:

(i) make supplies to third parties;

(ii) facilitate supplies to third parties (including by issuing *invoices relating to, or receiving
*consideration for, such supplies);

(iii) make acquisitions from third parties;

(iv) facilitate acquisitions from third parties (including by providing consideration for such
for such acquisitions); and

(b) the kinds of supplies or acquisitions, or the kinds of supplies and acquisitions,
to which the arrangement applies are specified; and


(c) for the purposes of the GST law:

(i) the intermediary will be treated as making the supplies to the third parties, or acquisitions
from the third parties, or both; and

(ii) the principal will be treated as making corresponding supplies to the intermediary or
corresponding acquisitions from the intermediary, or both; and

(d) in the case of supplies to third parties:

(i) the intermediary will issue to the third parties, in the intermediary's own name, all the *tax
invoices and *adjustment notes relating to those supplies; and

(ii) the principal will not issue to the third parties any tax invoices and adjustment notes relating
to those supplies; and

(e) the arrangement ceases to have effect if the principal or the intermediary, or both of them,
cease to be *registered

(2)  For the purposes of subsection (1), an entity can be an intermediary whether or not the entity is the agent of the principal.

The effect of these arrangements on supplies is outlined by section 153-55 of the GST Act which states:

(1) A *taxable supply that the principal makes to a third party through the intermediary is taken to be a
supply that is a taxable supply made by the intermediary to the third party, and not by the principal,

if:

(a) the supply is of a kind to which the arrangement applies; and
(b) the supply is made in accordance with the arrangement; and
(c) both the principal and the intermediary are *registered.

(2) In addition, the principal is taken to make a supply that is a *taxable supply to the intermediary. This
supply is taken:

(a) to be a supply of the same thing as is supplied in the taxable supply (the intermediary's supply) that the intermediary is taken to make; and
(b) to have a *value equal to 10/11 of the amount that is payable to the principal by the intermediary in respect of the intermediary's supply.

The intermediary is taken to make a corresponding *creditable acquisition from the principal.

(3) If the principal pays, or is liable to pay, an amount, as a commission or similar payment, to the
intermediary for the intermediary's supply to the third party:

(a) for the purpose of paragraph (2)(b), the amount payable by the intermediary to the principal is
taken to be reduced by the amount the principal pays, or is liable to pay, to the intermediary; and
(b) the supply by the intermediary to the principal, to which the principal's payment or liability relates, is not a *taxable supply.

(4) However, this section no longer applies, and is taken never to have applied, if the principal issues to the
third party, in the principal's own name, any *tax invoice or *adjustment note relating to the supply.

(5) This section has effect despite section 9-5 (which is about what are taxable supplies), section 9-75 (which is about the value of taxable supplies) and section 11-5 (which is about what are creditable acquisitions).

*Asterisked terms are defined in the Dictionary at section 195-1 of the GST Act.

Conclusion

Thus a billing agent may issue tax invoices for the supplies a principle makes if the conditions of Division 153-B of the GST Act are met. This means that the overseas entity will need to register for (Australian) GST and report GST on the relevant activity statements.

Where the client engagement is led from Australia and you act as the billing agent for the overseas entity, then the combined invoice/tax invoice that is issued by you suffices for the purposes of GST Act with the following clarifying remarks:

o both parties are in a Division 153 B arrangement

o the Commissioner makes no comment if the combined invoice suffices for the needs of
the overseas entity's own taxation obligations

Other comments

Although the overseas entities are not entitled to issue tax invoices for the supplies you make (unless A Div 153B arrangement is in place), we consider that the invoice provided in Appendix A of your ruling submission meets the other tax invoice requirements of subsection 29-70 of the GST Act. It is in an approved form and contains enough information to allow certain factors to be determined. This includes the GST payable, price or value expressed in a foreign currency and the conversion rate used by the supplier to work out the GST payable in Australian currency as per paragraphs 41 and 42 of Goods and Services Taxation Ruling GSTR 2001/2.

Thus, the combined invoice will be a valid tax invoice if it is issued by you and you are in a Div 153B arrangement with the relevant overseas entity.

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