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Ruling

Subject: Request to issue recipient created tax invoices

Question

Are you entitled to issue recipient created tax invoices (RCTIs) to principals who supply goods and/or services to you as agent for the principals?

Answer

Yes, you are entitled to issue RCTIs to the principals once you have satisfied all the requirements listed in the A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoices Determination (No 13) 2000 (As Amended) (RCTI Determination 2000/13).

Relevant facts and circumstances

· You are registered for GST.

· You have no turnover at present and expect your turnover to be less than $2 million in this financial year.

· You intend to act as marketing, promotion and selling agent for certain businesses (each a principal) pursuant to agency agreements with them.

· You provide an online software platform to the principals to enable them to market, promote and sell particular goods and/or services (Deals) to consumers for a limited sale period.

· The goods and/or services the subject of each Deal, are defined in each agency agreement between you and the principal and are always of the type ordinarily provided by the principal.

· For each Deal, you collect full payment from the consumer as agent for the principal.

· In completing the transaction with the consumer, you are binding the principal to provide the Deal to the consumer in consideration of having paid you (as agent for the principal) for the Deal.

· You do not provide the goods and/or services the subject of the Deal and have no liability in relation to the same.

· Each principal is entirely responsible and liable to the consumer for providing the goods and/or services the subject of the Deal.

· Each principal (and not you) sets the total amount to be paid by the consumer for each Deal.

· In return for providing your agency services to each principal, you are entitled to charge each principal a percentage commission on the total value of each Deal sold by you to the consumers.

· Deals must be redeemed by consumers within a certain timeframe. If Deals are not redeemed within a certain timeframe, the Deal is forfeited.

· Depending on negotiations with each principal, you may also be entitled to retain as part of your commission, any amounts paid by consumers for the Deal where the consumers do not actually redeem the Deal with the principal within a certain timeframe (Non-Redemption Commission).

· Any non-redemption by consumers is tracked and calculated using your online software platform.

· You remit any payments received from consumers for the Deals to the principal less your commission (including any Non-Redemption Commission).

· As you operate the online software platform, you are the only entity in a position to correctly determine the number of Deals and the total value of Deals sold to consumers and any non-redemption by consumers.

· As such, you are the only person in a position to correctly determine your commission which includes the Non-Redemption Commission.

· You propose to enter into written agreements with each principal pursuant to Subdivision 153-B of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) such that for the sole purpose of GST, each of the principal and you will be treated as separate principals when dealing with each other.

· As such, for each Deal, for the sole purpose of GST, the nature of supply changes so that you (acting as a separate principal) is taken to have supplied the goods and/or services the subject of the Deal to consumers.

· The value of the supply by you to the consumer is the total amount paid by consumers for the Deal.

· The principal (acting as a separate principal) is taken to have supplied the goods and/or services the subject of the Deal to you.

· The value of the goods and/or services the subject of the Deal which are supplied to you by the principal, is determined by calculating the total amount paid by each consumer to you for the Deal less the commission (including any Non-Redemption Commission) that you are entitled to retain. Due to this arrangement you are the only person in a position to correctly determine the value of the supply of the goods and/or services the subject of the Deal made by the principal to you.

· Without being authorised by the Commissioner to issue RCTIs in relation to this supply, each principal would be required to issue a tax invoice to you for the supply. In doing so, each principal would rely on calculations and communications made by you as to the value of that supply.

· To require each principal to issue a tax invoice in relation to that supply would detract from the effectiveness of the online software platform provided by you and would result in inefficiencies for both you and the principal as it would require separate (and likely numerous) communications before a tax invoice could be issued by the principal.

· According to paragraph 74 of GSTR 2000/37 Goods and services tax: agency relationships and the application of the law (GSTR 2000/37), an agent and principal may elect to enter into an arrangement under Subdivision 153-B such that an agent is treated as a separate supplier and/or acquirer from the principal.

· You propose to enter into a written agreement with each principal agreeing to such a principal-principal arrangement. It is intended that each written agreement will comply with the requirements as set out at paragraph 76 of GSTR 2000/37.

· Further, it is intended that each written agreement will require that only you will issue tax invoices to consumers for the supply of the Deals.

· You request the Commissioner to authorise you to issue RCTIs in relation to the supply by each principal to you for the following reasons:

o the value of the supply is established by the recipient rather than by the supplier; and

o the supplies are arranged and recorded using electronic purchasing systems operated by the recipients (to require a tax invoice to be issued by the supplier would detract from the effectiveness of these systems); or

o there are mutual efficiencies for the supplier and the recipient in conducting their business on the basis that the recipient notifies the supplier of the value of the supply.

· You propose to embed an agreement with each principal in the RCTIs which you issue to comply with paragraph 13(e) of GSTR 2000/10 Goods and services tax: recipient created tax invoices (GSTR 2000/10). Each RCTI you issue will contain the following statement:

The recipient and the supplier declare that this agreement applies to supplies to which this tax invoice relates. The recipient can issue tax invoices in respect of these supplies. The supplier will not issue tax invoices in respect of these supplies. The supplier acknowledges that it is registered for GST and that it will notify the recipient if it ceases to be registered. The recipient acknowledges that it is registered for GST and that it will notify the supplier if it ceases to be registered for GST. Acceptance of this RCTI constitutes acceptance of the terms of this written agreement. Both parties to this supply agree that they are parties to an RCTI agreement. The supplier agrees to notify the recipient if the supplier does not wish to accept the proposed agreement within 21 days of receiving this document.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 (GST Act) Subdivision 153-B

A New Tax System (Goods and Services Tax) Act 1999 (GST Act) Paragraph 29-70(1)(a)

A New Tax System (Goods and Services Tax) Act 1999 (GST Act) Subsection29-70(3)

Reasons for decision

Paragraph 29-70(1)(a) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that a tax invoice for a taxable supply must be issued by the supplier unless it is a recipient created tax invoice (in which case it must be issued by the recipient).

A recipient created tax invoice is defined in subsection 29-70(3) of the GST Act as:

a *tax invoice belonging to a class of tax invoices that the Commissioner has determined in writing may be issued by the *recipient of a *taxable supply.

Goods and Services Tax Ruling GSTR 2000/10 outlines the circumstances in which a recipient is entitled to issue RCTIs. The Commissioner has determined that three classes of tax invoices can be issued by a recipient of a taxable supply. Tax invoices that come within any of these three classes can be issued by recipients without notifying or applying to the Commissioner. These classes are:

(i) supplies of agricultural products made to registered recipients;

(ii) supplies made to registered Government entities; and

(iii) supplies made to registered recipients that have an annual turnover of at least $20 million.

Based on the information provided, you do not fall within any of these three classes.

However, the Commissioner has also made a number of specific determinations under subsection 29-70(3) of the GST Act for certain classes of tax invoices that may be issued by the recipient of a taxable supply that are not listed in GSTR 2000/10.

Of relevance to you is RCTI Determination 2000/13, clause 4 states:

A tax invoice that belongs to a class of tax invoices for a taxable supply of selling agent services may be issued by an entity that is the recipient of that supply where the recipient:

(i) establishes the value of those services after the supply is made using a calculation process; and

(ii) satisfies the requirements set out in Clause 5.

Clause 5 of RCTI Determination 2000/13 contains the following requirements that must be satisfied by a recipient of a taxable supply before the recipient can issue RCTIs:

(a) the recipient must be registered for GST when the invoice is issued;

(b) the recipient must set out in the tax invoice the ABN of the supplier;

(c) the recipient must issue the original or a copy of the tax invoice to the supplier within 28 days of making, or determining, the value of a taxable supply and must retain the original or the copy;

(d) the recipient must issue the original or a copy of an adjustment note to the supplier within 28 days of the adjustment and must retain the original or the copy;

(e) the recipient must reasonably comply with its obligations under the taxation laws;

the recipient must have either:

· a written agreement with the supplier specifying the supplies to which it relates, that is current and effective when the RCTI is issued, agreeing that:

(i) the recipient can issue tax invoices in respect of the supplies;

(ii) the supplier will not issue tax invoices in respect of the supplies;

(iii) the supplier acknowledges that it is registered for GST when it enters into the agreement and that it will notify the recipient if it ceases to be registered; and

(iv) the recipient acknowledges that it is registered when it enters into the agreement and that it will notify the supplier if it ceases to be registered for GST; or

· an agreement with the supplier embedded in an RCTI it issues that contains the following statement:

The recipient and the supplier declare that this agreement applies to supplies to which this tax invoice relates. The recipient can issue tax invoices in respect of these supplies. The supplier will not issue tax invoices in respect of these supplies. The supplier acknowledges that it is registered for GST and that it will notify the recipient if it ceases to be registered. The recipient acknowledges that it is registered for GST and that it will notify the supplier if it ceases to be registered for GST. Acceptance of this RCTI constitutes acceptance of the terms of this written agreement.

Both parties to this supply agree that they are parties to an RCTI agreement. The supplier agrees to notify the recipient if the supplier does not wish to accept the proposed agreement within 21 days of receiving this document.

(f) the recipient must not issue a document that would otherwise be a recipient created tax invoice, on or after the date when the recipient or the supplier has failed to comply with any of the requirements of this determination;

(g) if the recipient has a current GST turnover of less than $1,000,000, it must notify the Commissioner in writing of the recipient's intention to use recipient created tax invoices. This notification must be made before 14 days have elapsed after the first occasion that a recipient created tax invoice is issued by that recipient.

The following expressions are defined in clause 6 of RCTI Determination 2000/13:

calculation process means any process used by the seller to calculate the commission or payment to the selling agent;

purchase orders means any order or request for goods or services;

seller means the entity that will satisfy the purchase order through the supply of goods or services;

selling agent means any entity that is authorised by the seller to accept purchase orders on behalf of the seller;

selling agent services means the collection and delivery of purchase orders by a selling agent to a seller;

As you operate the online software platform, you are the best entity to determine the number and value of Deals made taking into account any non-redemption by consumers. The principals cannot determine easily the net value of their goods and/or services and the amount they are to be paid until advised by you. Hence you meet the requirements of clause 4(i) of RCTI Determination 2000/13.

As your situation fits within the scope of RCTI Determination 2000/13, you are entitled to issue RCTIs for the taxable supplies of goods and/or services by your principals, once you satisfy all the requirements of clause 5 of RCTI Determination 2000/13.

Please note that you and the principals are required to retain an original or a copy of the RCTI and any adjustment note for five years.

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