Disclaimer
This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your private ruling

Authorisation Number: 1012367907937

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: Withholding tax

Question

Are you required to withhold an amount referred to as 'No ABN withholding' under Division 12 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953) from a payment to an entity that invoices its Australian customers via a non-resident company?

Answer

No

This ruling applies for the following period

Year ended 30 June 2013

The scheme commenced on

1 July 2012

Relevant facts

You sell goods through an online trading platform which provides services to Australian traders for the purpose of selling such goods and services online.

Fees are charged by a non-resident entity to users ('Traders') for these services.

The non-resident entity has advised you that they are neither subject to GST nor required to be registered for an ABN as the fee payments it receives from you are not subject to taxation.

You are billed by and remit payments to the non-resident company periodically on the basis of services provided.

Relevant legislative provisions

Taxation Administration Act 1953 section 10-5 of Schedule 1
Taxation Administration Act 1953 subsection 12-190(4) of Schedule 1
Taxation Administration Act 1953 subsection 12-190(5) of Schedule 1
Taxation Administration Act 1953 subsection 12-190(6) of Schedule 1

Reasons for decision

The PAYG withholding system, contained in Part 2-5 in Schedule 1 to the TAA 1953, was introduced for paying instalments during the income year towards an expected income tax liability for any business and investment income.

The table in section 10-5 in Schedule 1 to the TAA 1953 provides a summary of payments and other transactions covered by PAYG.

Where a supplier does not provide their ABN or a statement that they are not carrying on an enterprise, the payer should withhold 46.5% of the payment unless one of the exceptions in subsections 12-190(4) to (6) of Schedule 1 to the TAA 1953 applies.

Taxation Ruling TR 2002/9 discusses the rules governing PAYG withholding where no ABN is quoted, including whether the supply and payment are made "in the course or furtherance of an enterprise" and whether the enterprise is "carried on in Australia".

If a supplier is not carrying on an enterprise in Australia, they will not need an ABN and you will not need to withhold from payments you make to them: subparagraph 12-190(4)(a) of Schedule 1 to the TAA 1953 .

In general, Australia does not tax the profits of an enterprise resident in a country with which it has a double tax agreement unless the enterprise carries on business in Australia via a permanent establishment (PE). Australia has a Double Tax Agreement with Country A.

For a non-resident enterprise to be deemed to have a PE in Australia, the 'Permanent Establishment' Article of a double tax agreement generally requires four conditions to be satisfied.

In the present case, the non-resident company has no PE in Australia because although it has an Australian affiliate, the responsibilities of its Australian affiliate do not include the requisite 'authority to conclude contracts' on the non-resident company's behalf in Australia. The contract is between you as the trader and the non-resident company.

Therefore, the payments fall within an exception to the withholding payments rules and there is no obligation for you to deduct withholding amounts from the payments.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).