Edited version of private advice

Authorisation Number: 1051681323552

Date of advice: 19 May 2020

Ruling

Subject: Goods and services tax (GST) and supply of public relations services

Question

Is GST payable on your supply of public relations services to company X?

Answer

Yes

Relevant facts and circumstances

You are registered for GST.

You are a resident.

You provide public relations services, which you perform in Australia.

One of your customers is a company called X. You charge X for the services you supply to it.

Company X is based in an overseas country but also has a branch in Australia through which company X sells its Y brand products to the Australian market.

Company X is one of the owners of the Y brand. Company X's Australian branch runs the Y brand in Australia.

The services you provide in relation to the Y brand are public relations and social media services for the brand directly targeting the Australian media. You promote the Y products in Australia. You are advertising Y products through Australian magazines and digital platforms. A lot of the work that you do involves promoting Y products within Australia.

Your contact in relation to company X is based in Australia and instructs you on behalf of the Y brand.

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

Summary

GST is payable on your supply of public relations services to company X as all the requirements of section 9-5 of the GST Act are met.

The supply of these services is not GST-free under item 2 or 3 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) as the recipient of the supply is in Australia in relation to the supply.

Detailed reasoning

GST is payable on a taxable supply.

An entity makes a taxable supply if it meets 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)  you make the supply in the course or furtherance of an *enterprise that you *carry on; and

(c)   the sale is *connected with the indirect tax zone; and

(d)  you are *registered or *required to be registered for GST.

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

(*Denotes a term defined in section 195-1 of the GST Act)

The indirect tax zone includes most of Australia.

In your case, you meet the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. That is:

(a) you supply the public relations services for consideration; and

(b) you supply the services in the course or furtherance of your business; and

(c) your supply of the services is connected with Australia, as the services are performed in Australia and they are supplied through the business you carry on in Australia; and

(d) you are registered for GST

Your supply of the public relations services is not input taxed.

Therefore, what remains to be determined is whether your supply of these services is GST-free.

The relevant provisions to consider are item 2 and item 3 in the table in subsection 38-190(1) of the GST Act (item 2 and item 3).

Item 2 provides that a supply of something other than goods or real property is GST-free where the recipient of the supply is a non-resident who is not in Australia when the thing supplied is done.

There are a number of exclusions from GST-free treatment under item 2.

Item 3 provides that a supply of something other than goods or real property is GST-free where the recipient of the supply is not in Australia and effective use and enjoyment takes place outside Australia. The recipient of the supply may be a resident or non-resident. There are a number of exclusions from GST-free treatment under item 3.

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 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.

How to determine if the presence of a company in Australia is in relation to the supply for the purposes of items 2 and 3

Paragraphs 349 and 350 of GSTR 2004/7 state:

349. Clearly if the supply to a company is solely or partly for the purposes of the Australian presence, for example its Australian branch, representative office or agent if it is a non-resident company, or the Australian head office if it is an Australian incorporated company, the company is in Australia in relation to the supply. There is a connection between the supply and the presence in Australia that is not a minor connection.

350. 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', unless the only involvement is minor.

You are making a supply of public relations services to an overseas based company, company X.

These services are not goods or real property.

However, these services are solely or partly for the purpose of company X's Australian branch as the public relations services promote Y brand products and company X sells those products through its Australian branch.

Therefore, company X is in Australia in relation to your supply of public relations services when these services are performed.

Hence, you do not make a GST-free supply under item 2 or item 3.

There are no other provisions of the GST Act under which your supply of these services is GST-free. Hence, as all the requirements of section 9-5 of the GST Act are met, GST is payable on your supply of these services.

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