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Ruling

Subject: Recipient Created Tax Invoices

Issue:

Will the Commissioner make a determination to allow you to issue recipient created tax invoices?

Decision:

No, the Commissioner will not make a determination to allow you to issue recipient created tax invoices.

This ruling applies for the following periods:

N/A

The scheme commences on:

N/A

Relevant facts and circumstances

You are a company carrying on an enterprise in a field related to information technology (IT).

You are registered for the goods and services tax (GST).

Your annual turnover is less than $20 million.

You have an arrangement with another entity, which is also registered for the GST, to supply that entity's intellectual property to third parties via your web facilities.

The intellectual property belonging to the other entity is survey questionnaires.

Under an agreement you have with this entity, the survey questionnaires are loaded into your website in electronic form to facilitate their supply to your customers (third parties), also in electronic format.

Your customers can request access to these questionnaires in your website and to complete them in their electronic form.

You provide your customers with, a user identification and a password for this purpose.

Your website keeps a count of the number of questionnaires purchased by your customers.

You invoice your customers according to their usage of the questionnaires.

Based on the actual usage by your customers, you pay a royalty to the entity who owns the intellectual property and with whom you have the agreement.

You pay the entity on a periodic basis on an invoice raised by the entity after you inform the entity of your customers' usage.

Consequently, it is you who determine the price for the supplies the entity makes to you.

You claim that it is administratively convenient to both the entity owning the intellectual property and you to issue recipient created tax invoices (RCTI) for the acquisitions mentioned above rather than inform the supplier of the price and then get the supplier to raise an invoice.

You also state that, under the agreement, the entity has the facility to electronically track the supplies you make to your customers via your website.

The agreement you have with the entity is an exclusive one and no other party has similar arrangements with the entity.

It is possible that there may be other entities carrying on enterprises similar to the one you are carrying on and who may benefit from the issuance of a RCTI determination.

To your knowledge there are no current RCTI determinations made by the Commissioner to cover this class of taxpayers.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 29-70.

Reasons for decision

RCTI Determinations are made under subsection 29-70(3) of A New Tax System (Goods and Services Tax) Act 1999 ('the GST Act'). This subsection states as follows:

'A recipient created tax invoice is 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.'

(Items marked with an asterisk are defined in section 195-1 of the GST Act)

Paragraph 10 of Goods and Services Tax Ruling GSTR 2000/10 (GSTR 2000/10), which deals with RCTIs, lists three broad classes of tax invoices in relation to which RCTI agreements may be entered into. These classes are established by the first Determination made pursuant to subsection 29-70(3) of the GST Act. The first such class is tax invoices for taxable supplies involving the determination of the value of agricultural products (and any by-products) subsequent to and dependent upon quantitative or qualitative analysis of the supply.

The second such class is tax invoices for taxable supplies made to registered government related entities.

The third such class is tax invoices for taxable supplies made to a registered recipient that (a) has an annual turnover, including input taxed supplies, of at least $20 million or (b) is a member of a GST group, or a member of a GST joint venture in which another member of the group, or another participant in the joint venture has such a turnover.

The design of the GST system in Australia is that the registered supplier issues the tax invoice. It is, normally, the supplier that is liable to remit the GST. It is not the practice to give on an entity-by-entity basis what in effect would be an exemption from this requirement so as to allow responsibility for issuing a tax invoice to be transferred from the particular supplier entity to the particular recipient entity.

Subsection 29-70(3) of the GST Act refers to classes of tax invoices, rather than the granting of permission to specific entities. Consistent with this, RCTI Determinations that have already been issued are in respect of broad classes rather than particular entities.

Paragraph 53 of GSTR 2000/10 mentions industry associations making requests to the Commissioner for RCTI determinations. This reflects the concept of there being an identified need in a particular taxpayer community for a determination. Although the paragraph was added to in the Addendum of 27 September 2000 to include the sentence "Other registered recipients may also make requests," Determinations will only be made for broad classes rather than particular entities.

However, the Commissioner may initiate a process to issue a legislative instrument with a view to preparing a legislative determination to capture a broad class of taxpayers who fall within the circumstances you have outlined in your submission to us, provided there is such a broad class of taxpayers and they make an application as a class.

If, at a future date, the Commissioner decides that the circumstances you have outlined merit a legislative determination because there is a broad class of taxpayers who would benefit from it, the issuance of a legislative instrument in that regard will be in compliance with Legislative Instruments Act 2003 and the relevant ATO practice statements current at that time.

If a new legislative determination for this purpose is eventually issued, it would be placed in the ATO website at a time when it is prepared. Taxpayers will need to check the website to see whether any of the existing or new legislative determinations would allow them to issue RCTIs.

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