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Edited version of your private ruling
Authorisation Number: 1012600092537
Ruling
Subject: Goods and services tax (GST) and supplies of management consulting services to non-resident company
Question
Is GST payable on your supply of management consulting services to the non-resident company?
Answer
No.
Relevant facts and circumstances
You are registered for GST.
You are supplying management consulting services to a non-resident company that is based overseas.
You charge fees for these services.
The non-resident company has an ARBN.
The consulting services relate to an overseas mine that the non-resident company owns.
The consulting services relate to procurement, tendering etc.
Your day to day work involves sharing/developing content with other Australian consultants working for the non-resident company and employees of the non-resident company's majority shareholder, which is a company publicly listed in Australia.
You perform the work in Australia.
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 38-190
Reasons for decision
Summary
You are making GST-free supplies under item 2 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) because:
• your consulting services are not goods or real property
• you supply the consulting services to a non-resident that is not in Australia
• your supplies of the consulting services are not supplies of work physically performed on goods situated in Australia when the work is done nor supplies that are directly connected with real property situated in Australia; and
• you are not providing the supply of the services to 'another entity' in Australia.
Therefore, GST is not payable on your supplies of these services.
Detailed reasoning
GST is payable by you on your taxable supplies.
You make a taxable supply where you satisfy the requirements of section 9-5 of the GST Act, which states:
You make a taxable supply if:
(a) you make the supply for *consideration; and
(b) the supply is made in the course or furtherance of an *enterprise that
you *carry on; and
(c) the supply is *connected with Australia; and
(d) you are *registered, or *required to be registered.
However, the supply is not a *taxable supply to the extent that it is *GST-free
or *input taxed.
(*Denotes a term defined in section 195-1 of the GST Act)
You meet the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act because:
• you supply the consulting services for consideration;
• you supply the services in the course or furtherance of an enterprise that you carry on;
• these supplies are connected with Australia; and
• you are registered for GST.
There are no provisions in the GST Act under which your supplies of the consulting services are input taxed.
Therefore what remains to be determined is whether your supplies of the consulting services are GST-free.
GST-free supplies to non-residents
In accordance with subsection 38-190(1) of the GST Act, supplies of things other than goods or real property to entities which are outside Australia may be GST-free.
Item 2 in the table in subsection 38-190(1) of the GST Act provides that a supply of something other than goods or real property to a non-resident who is not in Australia when the thing supplied is done is GST-free if:
(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.
However, subsection 38-190(3) of the GST Act provides that a supply covered by item 2 in the able in subsection 38-190(1) of the GST Act is not GST-free if it is a supply under an agreement entered into with a non-resident and the supply is provided to another entity in Australia.
Paragraph 31 of Goods and Services Tax Ruling 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 37 of GSTR 2004/7 explains when a non-resident company is in Australia. It states:
37. A non-resident company is in Australia if that company carries on business (or in the case of a company that does not carry on business, carries on its activities) in Australia:
(a) at or through a fixed and definite place of its own for a sufficiently substantial period of time; or
(b) through an agent at a fixed and definite place for a sufficiently substantial period of time.
Paragraph 41 of GSTR 2004/7 explains when a non-resident company is in Australia in relation to a supply. It 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.
Paragraphs 222 and 223 of Goods and Services Tax Ruling GSTR 2005/6 discuss the concept of providing a supply to an entity. They state:
222. We consider, therefore, that 'provided' in the context of subsection 38-190(3) is used, in relation to a supply covered by item 2, to distinguish between the contractual flow of the supply to the non-resident recipient and the actual flow of the service or other thing supplied to another entity in Australia.
223. This view is supported by the construction of subsection 38-190(3). Paragraph 38-190(3)(a) requires that the supply covered by item 2 is under an agreement entered into with a non-resident. That paragraph establishes the contractual arrangements for the supply - an agreement with a non-resident. Paragraph 38-190(3)(b) looks to the provision of the supply and whether it is provided to another entity in Australia - that is, the actual flow of that supply. These paragraphs contrast the recipient of the supply under the agreement - a non-resident, and the entity that is provided with the supply - another entity.
You are supplying consulting services. Therefore, you are supplying something other than goods or real property. Hence, it is appropriate to consider item 2 in the table in subsection 38-190(1) of the GST Act.
You are supplying the consulting services to a non-resident that is not in Australia.
You are not supplying work physically performed on goods situated in Australia when the work is done nor making supplies directly connected with real property situated in Australia.
You are supply the services under an agreement you have with a non-resident.
You are providing the services to the non-resident company as you are collaborating with various entities for the purpose of assisting the overseas mining business and the non-resident company owns the mine.
Therefore, you are not providing your services to 'another entity' in Australia. Hence the exclusion in subsection 38-190(3) of the GST Act does not apply.
Therefore, you are making GST-free supplies under item 2 in the table in subsection 38-190(1) of the GST Act.
Hence, you supplies of consulting services to the non-resident company are not taxable supplies. Therefore, GST is not payable on your supplies of these services.
Additional information
Your supplies of consulting services would also be GST-free under item 1 in the table in subsection 38-190(1) of the GST Act if they are supplies directly connected with goods or real property situated outside Australia. For example, if you supply advice regarding selling minerals from the overseas mine, your supply of this advice would be directly connected with goods and/or real property situated outside Australia and would therefore be GST-free under that item.
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