Edited version of private advice

Authorisation Number: 1051705660856

Date of advice: 29 June 2020

Ruling

Subject: GST liability and entitlement to GST credit

Question

Is the Australian company entitled to claim the GST paid on the taxable importations of goods which the non-resident company NR Co sold to ABC and delivered to an Australian site under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes. Under subsection 57-10(1) of the GST Actthe Australian companyas the resident agent of NR Co is entitled to claim the GST paid on the taxable importations of goods which NR Co sold to ABC and delivered to an Australian project.

Question 2

Is the Australian company liable for GST for the sales made by the non-resident company NR Co to its customer ABC under the Purchase Order?

Advice

Yes. Under subsection 57-5(1) of the GST Act the Australian company as the resident agent of NR Co is liable for GST for the sales made by NR Co to its customer ABC as the sales made by NR Co to ABC under the Purchase Order are taxable sales under section 9-5 of the GST Act.

Relevant facts

You are an Australian based entity and are registered for the deferred GST.

NR Co is a company located outside Australia. NR Co contracts with customers and supplies goods internationally including Australia.

You have entered into an Agency Agreement with NR CO for the provision of project management for projects in Australia. We have received a copy of the Agency Agreement.

In the Agency Agreement you agreed to perform the services specified in the agreement and it is agreed that you act as the agent of NR Co when making your supplies to NR Co. The services include you paying the GST on the taxable importations of the goods sold by NR Co under the deferred GST scheme and to collect GST from NR Co's client.

Under a Purchase Order NR Co has agreed to supply goods to its customer ABC and to deliver the purchased goods to an Australian project site. The price in the Purchase Order was GST exclusive and was above AU$75,000. It was also agreed that any GST payable will be invoiced separately to ABC in a GST invoice

NR Co contracts a logistic company for the shipment and clearance of the goods when they arrive in Australia. You were listed as the owner of the goods in the import declaration when the goods arrived to Australia and the GST payable on the importation was deferred.

The deferred amount of GST payable on the taxable importations was recorded as a tax liability in your monthly BAS in the tax period the taxable importation was made. You paid the amount of GST due on the taxable importation and never received a refund of this payment from NR Co.

The imported goods were delivered to the customers after being cleared from customs.

NR Co invoiced ABC directly but did not include GST. ABC makes the payment to NR Co. You are aware that the sale made by NR is a taxable sale as the sale is connected with Australia and thus GST applies. Since NR Co was not registered you raised a GST invoice as its agent to collect the GST.

You hold on to the collected GST and paid the amount to the ATO when payment is due to pay the GST payable on the taxable importations.

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 13-5

A New Tax System (Goods and Services Tax) Act 1999 section 15-5

A New Tax System (Goods and Services Tax) Act 1999 section 15-15

A New Tax System (Goods and Services Tax) Act 1999 section 57-5

A New Tax System (Goods and Services Tax) Act 1999 section 57-10

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

Question 1

Under section 15-15 of the GST Act you are entitled to an input tax credit (GST credits) for any creditable importation that you make.

Under section 15-5 of the GST Act you make a creditable importation if:

a)     you import goods solely or partly for a creditable purpose; and

b)     the importation is a taxable importation; and

c)     you are registered or required to be registered for GST.

Under subsection 15-10(1) of the GST Act you import goods for a creditable purpose to the extent that you import goods in carrying on your business.

From the facts given, you are declared as owner of the imported goods in the import declaration for the goods that NR Co has sold to ABC and you have an agency agreement with NR Co in which it was agreed you would act as the Agent of NR Co when you pay the GST payable on the taxable importation through your deferred GST scheme and collect GST from NR Co's client.

In this instance it is relevant to consider Division 57 of the GST Act when you act as the resident agent of NR Co under the Agency Agreement.

Division 57 of the GST Act

Division 57 contains a special rule that makes resident agents acting for non-residents responsible for the GST consequences of supplies and acquisitions the non-residents make through their resident agents. This Division has effect despite sections 13-15 (which is about liability for GST) and 15-15 (which is about who is entitled to input tax credits).

Under subsection 57-5(1) of the GST Act, GST payable on a taxable importation made by a non-resident through a resident agent:

a)     is payable by the agent; and

b)     is not payable by the non-resident.

Under subsection 57-10(1) of the GST Act if a non-resident makes a creditable acquisition or creditable importation through a resident agent:

a)     the agent is entitled to the input tax credit on the acquisition or importation; and

b)     the non-resident is not entitled to the input tax credit on the acquisition or importation.

Goods and Services Tax Ruling GSTR 2003/15 provides guidance on creditable importation including the meaning of the phrase 'you import goods' in paragraph 15-5(a) of the GST Act and who is entitled to claim input tax credits for creditable importation.

Regarding importation of goods through a resident agent, GSTR 2003/15 provides the following:

65. Thirdly, an Australian resident agent of a non-resident principal is entitled, under Division 57, to the input tax credits for creditable importations made by the non-resident through the agent.

66. The non-resident entity must make a creditable importation. That is, the non-resident must import the goods into Australia for a creditable purpose, the importation must be a taxable importation and the non-resident must be registered, or required to be registered.

67. A creditable importation is made through the resident agent where the resident agent has the authority to clear the goods through Customs on behalf of the non-resident, and the resident agent is entered as 'owner' on the import declaration. The resident agent, which might, for example, be an Australian subsidiary of a non-resident company, would normally engage a customs broker.

68. A creditable importation may be made through a customs broker as a resident agent. This occurs where the broker is appointed to enter the goods as an 'owner', in the capacity as agent for the non-resident. However, an importation is not made through a customs broker as resident agent where the customs broker merely prepares and lodges the import declaration for a non-resident who is named as the owner on the declaration.

69. A resident agent is not entitled to an input tax credit under section 57-10 merely because it is liable to pay the GST under section 57-5 on a taxable importation of the goods. A credit entitlement exists only if the non-resident makes a creditable importation through the agent. That is, the non-resident must satisfy the requirements of section 15-5.

70. If a creditable importation is made through a resident agent, the agent needs to be able to demonstrate that there is an agency relationship, and that the requirements for a creditable importation are met.

Taxable importations made through resident agents

209. Under section 57-5, the resident agent of a non-resident is liable to pay GST on any taxable importations that the non-resident makes through the resident agent. The GST is not payable on the taxable importation in this case by the non-resident principal. Section 57-5 overrides the principles of the general law of agency which would otherwise apply.

210. Taxable importations are made by an entity entering imported goods for home consumption. A non-resident entity makes a taxable importation through a resident agent if the agent, on behalf of the non-resident, enters the goods as 'owner' on the import declaration. Entering the goods as 'owner' means that the agent's name is shown on the import declaration as the 'owner'. An agent is within the statutory definition of 'owner' in the Customs Act. In this case, section 57-5 makes the agent liable for GST on the taxable importation.

211. If instead the agent enters goods for home consumption in the name of the non-resident, the non-resident's name appearing as 'owner' on the entry for home consumption, the taxable importation is not made through the resident agent. It is made by the non-resident. The non-resident principal is liable for GST. It is not made through the resident agent, even if the agent assists with, or is responsible for, the administrative activity involved in lodging the entry. An agent can only enter goods in the name of the non-resident principal, if the agent is a customs broker, or the agent engages a customs broker and instructs the broker, in accordance with authority granted by the principal, to prepare the import declaration in the name of the principal.

Creditable importations made through resident agents

213. Ordinarily, if a non-resident makes a creditable importation, the non-resident is entitled to the input tax credit under section 15-15.

214. However, if a non-resident makes a creditable importation through a resident agent, only the agent is entitled to claim the credit. The non-resident is not entitled to the input tax credit on the creditable importation.

215. A non-resident makes a creditable importation where all the requirements for making a creditable importation are satisfied. That is, the non-resident must be the entity that imports the goods (see paragraphs 120 to 155) and must do so for a creditable purpose, and be registered or required to be registered. The importation must also be a taxable importation.

216. A non-resident makes a creditable importation through a resident agent if the non-resident makes a taxable importation through the agent and the importation is for a creditable purpose and otherwise satisfies the requirements for a creditable importation. As discussed at paragraphs 209 to 212 above, this occurs where the resident agent is named as 'owner' on the import declaration for the goods. An arrangement whereby the non-resident does not reimburse the agent for the GST indicates that the agent is authorised to enter the goods as agent for the non-resident and claim the input tax credit. However, it is expected that the resident agent would also have clear evidence of the agency relationship, such as written authorisation from the non-resident.

217. It is important to note that a resident agent is not entitled to an input tax credit under section 57-10 simply because it is liable for GST under section 57-5. A taxable importation made through a resident agent does not necessarily result in a creditable importation being made. The requirements for a creditable importation must be satisfied by the non-resident. That is, the non-resident must import the goods for a creditable purpose and be registered or required to be registered.

After considering the information given we consider that NR Co has made a creditable importation through you as its resident agent under section 15-5 of the GST Act as:

a)     The importation of the goods made by NR Co through you was for a creditable purpose as the purpose of the importation of the goods into Australia was to deliver the goods it sold to ABC to the Australian project site as agreed in the Purchase Order; and

b)     NR Co has made a taxable importation of goods since you acting as the resident agent of NR Co, has on its behalf entered the goods into Australia and paid the GST payable on the taxable importation; and.

c)     NR Co is required to register for GST as its sale to ABC under the Purchase Order is connected with Australia when it is responsible to deliver the sold goods to the Australian site in Australia, and the annual turnover of its sale is above AU$75,000.

In this instance under subsection 57-10(1) of the GST Act you as the resident agent of NR Co would be entitled to claim the GST paid on the taxable importation as NR Co has made a creditable importation of the goods under section 15-5 of the GST Act.

Question 2

GST is payable on taxable supplies. 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 the supply is GST-free or input taxed.

Under subsection 57-5(1) of the GST Act, GST payable on a taxable importation made by a non-resident through a resident agent:

a)     is payable by the agent; and

b)     is not payable by the non-resident.

From the information given:

• NR Co has agreed under a Purchase Order from ABC to supply goods to ABC and deliver the purchased goods to an Australian project site.
• NR Co has engaged you as its resident agent to manage the sale and delivery of the goods purchased by ABC to the Australian project site and to collect GST on its behalf for the sales it has made if applicable.

In this instance we need to determine if the sale of goods made by NR Co to ABC is a taxable sale.

Form the information given the sale of goods made by NR Co to ABC is a taxable sale under section 9-5 of the GST Act as:

• NR Co has made the sale for consideration; and
• NR Co has made the sale through a business that it carries on; and
• The sales of the goods are connected with Australia as NR Co through its resident agent has imported the goods into Australia; and
• NR Co is required to register for GST as its annual turnover is above AU$75,000; and
• The sale of goods to ABC is neither GST-free nor input taxed when delivered to the Australian project site.

Accordingly as you are acting as the resident agent of NR Co you are liable to pay the GST payable on the taxable sales made by NR Co to ABC under subsection 57-5(1) of the GST Act.

For more information on Division 57 refer to GSTR 2000/37 - Goods and Services Tax Ruling agency relationships and the application of the law.

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