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Ruling
Subject: goods and services tax (GST) and technical services provided to non-resident company overseas
Question
Will GST be payable on your supply of the services to the foreign company?
Answer
No.
Relevant facts and circumstances
You are registered for GST.
You have entered into a services contract with a foreign company.
You will provide technical services to the foreign company at a site located overseas - the foreign company's factory. You will send an experienced professional to work in the foreign company's factory located overseas.
The contract price is a certain amount.
You will deal with the foreign company's overseas presence only.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1)
A New Tax System (Goods and Services Tax) Act 1999 section 9-5
A New Tax System (Goods and Services Tax) Act 1999 section 9-40
A New Tax System (Goods and Services Tax) Act 1999 section 38-190
Reasons for decision
Summary
GST will not be payable on your supply of the services to the foreign company because:
· you will be supplying something other than goods or real property to a non-resident that is not in Australia in relation to your supply when the thing supplied is done, and
· the supply will neither be a supply of work physically performed on goods situated in Australian when the work is done nor a supply directly connected with real property situated in Australia.
Detailed reasoning
GST is payable by you on your taxable supplies.
In accordance with section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), a supply is not taxable to the extent that it is GST-free.
A supply of something other than goods or real property is GST-free under item 2 in the table in subsection 38-190(1) of the GST Act 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 for GST.
You will supply services to the foreign company. Services are something other than goods or real property.
Paragraphs 31 and 41 of Goods and Services Tax Ruling GSTR 2004/7 provide the Australian Taxation Office view on the meaning of not in Australia for the purposes of item 2 in the table in subsection 38-190(1) of the GST Act.
Paragraph 31 of GSTR 2004/7 states:
31. The requirement that the non-resident in item 2, or the recipient in item 3, is not in Australia when the thing supplied is done is a requirement, in our view, that the non-resident or recipient is not in Australia in relation to the supply when the thing supplied is done.
Paragraph 41 of GSTR 2004/7 states:
41. A non-resident company is in Australia in relation to the supply if the supply is solely or partly for the purposes of the Australian presence, for example, its Australian branch. If the supply is not for the purposes of the Australian presence but that Australian presence is involved in the supply, the company is in Australia in relation to the supply, except where the only involvement is minor.
You will be supplying services to a non-resident company which is not in Australia in relation to your supplies when the things supplied are done, as you will be supplying the services for the purposes of its overseas presence and you will be dealing with that company's overseas presence only in relation to your supplies of the services.
Your supply will neither be 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.
Therefore, you will make a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.
Hence, GST will not be payable on your supply of the services.
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