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Edited version of your written advice
Authorisation Number: 1051468302673
Date of advice: 20 December 2018
Ruling
Subject: GST and supply of sales and marketing services to a non-resident entity
Question
Is the supply of sales and marketing services you make to the non-resident company a GST-free supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
Yes, the supply of sales and marketing services you make 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
Relevant facts
You carry on a consulting business in Australia and are registered for the goods and services tax (GST).
You have entered into an Agreement with a non-resident company located outside Australia for the provision of consulting services in the areas of sales and marketing.
For your supply of services you receive a monthly fee and are reimbursed for expenses incurred for rendering the services. You are also eligible to earn a monthly bonus when achieving the objectives pursuant to the Monthly Bonus Structure.
You will endeavour to identify prospective purchasers for the non-resident company’s products, contact these prospects and after extolling and demonstrating the benefits of using these products try to obtain orders for the products. These orders will be forwarded to the non-resident company, who will then process the order and arrange delivery to the customer.
You do not have any agreement with the non-resident company to provide your supply of consultancy services to another entity in Australia.
You will not assist customers with the installation of the product and /or providing ongoing service and maintenance of the product.
You will not provide training to the non-resident company’s customers in the operation or use of the product.
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 section 195-1 of the GST Act.
Detailed reasoning
GST is payable on a taxable supply. A supply is a taxable supply under section 9-5 of the GST Act if:
a. the supplier makes the supply for consideration; and
b. the supply is made in the course or furtherance of an enterprise that the supplier carries on; and
c. the supply is connected with Australia; and
d. the supplier is registered or required to be 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 of sales and marketing services to be a taxable supply.
From the information given, your supply of sales and marketing services satisfies paragraphs (a) to (d) of section 9-5 of the GST Act as:
a) you make your supply for consideration ( monthly fee, reimbursement of expenses and monthly bonus); and
b) the supply is made in the course of a business that you carry on; and
c) your supply is connected with Australia as it is made through a business that you carry on in Australia; and
d) you are registered for GST.
However, your supply of sales and marketing services is not a taxable supply to the extent that it is GST-free or input taxed.
There is no provision under the GST Act that makes your supply of sales and marketing services input taxed.
GST-free supply
Relevant to your supply of sales and marketing services is item 2 in the table in subsection 38-190(1) of 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.
Only one of the paragraphs in item 2 needs to be satisfied.
Paragraph (a) of item 2
From the fact given, your supply of sales and marketing services satisfy paragraph (a) of item 2 as:
● Your supply is made to a non-resident that is not in Australia in relation to your supply when the supply is done; and
● your supply of sales and marketing services 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
Your supply of sales and marketing services is GST-free under paragraph (a) of item 2 to the extent that it is not negated by subsection 38-190(3) of the GST Act.
As paragraph (a) is satisfied there is no need to consider paragraph (b) of item 2.
Subsection 38-190(3) of the GST Act
Subsection 38-190(3) of the GST Act provides that without limiting subsection 38-190(2) or (2A), a supply covered by item 2 in that table is not GST-free if:
a) it is a supply under an agreement entered into, whether directly or indirectly, with a non-resident; and
b) the supply is provided or the agreement requires it to be provided to another entity in Australia; and
c) for a supply other than an input taxed supply – none of the following applies:
i. the other entity would be an Australian-based business recipient of the supply, if the supply had been made to it;
ii. the other entity is an individual who is provided with the supply as an employee or officer of an entity that would be an Australian-based business recipient of the supply, if the supply had been made to it; or
iii. the other entity is an individual who is provided with the supply as an employee or officer of the recipient, and the recipient’s acquisition of the thing is solely for a creditable purpose and is not a non-deductible expense.
From the facts given, subsection 38-190(3) of the GST Act does not apply to your supply of sales and marketing services as you are not required to provide your supply to another entity in Australia.
Your supply of sales and marketing services is therefore GST-free under item 2.
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