Edited version of your written advice

Authorisation Number: 1051180411777

Date of advice: 12 January 2017

Ruling

Subject: GST and supply of arbitration services to a non-resident

Question

Is the supply of arbitration services you made to the non-resident entity a GST-free supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Advice

Yes, the supply of arbitration services you made to the non-resident entity is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.

Relevant facts

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

You have been engaged by a non-resident company to act with X international arbitrators in a large international arbitration. The dispute which is the subject of the arbitration concerns contractual claims and counterclaims between X parties in respect of the building of infrastructure for a project in Australia.

Your role is to attend hearings in Australia and overseas, perform site visits and with the co-arbitrators write the award (similar to a court judgement) which is provided to the non-resident company. The non-resident company supervises and monitors the progress of the case and scrutinises the award. The non-resident company then provides the award to the parties to the dispute.

You invoice the non-resident company for your supply of arbitration services.

The non-resident company is a non-resident of Australia and is not registered for GST.

Relevant legislative provisions

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

Note: Where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act.

GST is payable on a taxable supply. Under section 9-5 of the GST Act, an entity makes a taxable supply if:

a) the supply is made for consideration; and

b) the supply is made in the course or furtherance of an enterprise that the entity carries on; and

c) the supply is connected with Australia; and

d) the entity is registered for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

All of the above must be satisfied for your supply to be a taxable supply.

Your supply of arbitration services satisfies paragraphs 9-5(a) to 9-5(d) of the GST Act as:

a) you make the supply for consideration; and

b) the supply is made in the course of an enterprise that you carry on in Australia; and

c) the supply is connected with Australia as the supply is made through an enterprise that you carry on in Australia; and

d) you are registered for GST.

However, your supply of arbitration services is not a taxable supply to the extent that it is a GST-free or input taxed supply.

There is no provision under the GST Act that makes your supply of arbitration services an input taxed supply.

GST-free supply

Relevant to your supply of arbitration services is item 2 in the table in subsection 38-190(1) of the GST Act (item 2).

Item 2 provides that a supply of a thing (other than goods or real property) made to a non-resident is GST-free if it is a supply that is made to a non-resident that 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.

The requirement that the non-resident in item 2 is not in Australia when the thing supplied is done is a requirement that the non-resident is not in Australia in relation to the supply when the thing supplied is done.

Based on the information received, your supply of arbitration services satisfies paragraph (a) of item 2 as:

● your supply of arbitration services is made to a non-resident company, a non-resident of Australia that is not in Australia in relation to your supply when the service is done; and

● your supply of arbitration services is not considered to be a supply of work physically performed on goods situated in Australia; and

● your supply of arbitration services is neither directly connected with real property situated in Australia since the purpose of your supply is to arbitrate the contractual disputes between the parties and therefore it is indirectly connected with the land where the project is held.

Having met the requirements of paragraph (a) of item 2, it is necessary to consider subsections 38-190(2), 38-190(2A) and 38-190(3) of the GST Act.

From the information received, subsections 38-190(2) and 38-190(2A) are not applicable to the supply of arbitration services because:

● the supply of arbitration services is not a supply of a right or option to acquire something the supply of which would be connected with Australia and would not be GST-free under subsection 38-190(2) of the GST Act;

● the acquisition of the arbitration services does not relate (whether directly or indirectly or wholly or partly) to the making a supply of real property that would be wholly or partly input taxed under subsection 38-190(2A) of the GST Act; and

● You are not required to provide the arbitration services to another entity in Australia under subsection 38-190(3) of the GST Act since you and the other arbitrators are required to provide the report to the non-resident company and not to the parties involved in the dispute.

Summary

Your supply of arbitration services to the non-resident company is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.

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