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Authorisation Number: 1011694928629

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Ruling

Subject: GST and supply of services to non-residents

Question

Is the supply of specific services by entity C, as the representative member of a GST Group to a foreign company that is registered with Australian Securities and Investment Commission (ASIC), a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, the supply of the specific services by entity C as the representative member of a GST group to a foreign company that is registered with ASIC is a taxable supply under section 9-5 of the GST Act, unless the foreign company is able to demonstrate that it is a 'non-resident who is not in Australia' for the purposes of item 2 in subsection 38-190(1) of the GST Act.

Relevant facts and circumstances

The entity A, entity B and entity C are registered for the goods and services tax (GST).

The three entities are the members of a GST group and entity C is the representative for the GST group.

A company may choose to deal directly with ASIC or use the services of a casual lodging party or may choose to use the services of a registered agent.

A registered agent acts as an intermediary between ASIC and Australian companies to help those companies meet their lodgement obligations under the Corporation Act 2001 (Corporation Act). A registered agent frequently lodges documents with ASIC and / or arrange payments on behalf of a company.

A foreign company can apply to receive certain supplies from the entity A, if it meets the specific requirements as set out in their rules.

The specific requirements for a foreign company include the following:

§ it must be registered as a foreign company under the Corporation Act, which results in the company being registered with the ASIC. This requires the company to have a registered office in Australia.

§ it must appoint 'an agent for services' in Australia. This will be satisfied if the company complies with the Corporations Act 'foreign company' registration requirements to have a local agent who is an Australian resident and authorised to accept 'service of process and notices' on the company's behalf.

The local agent is answerable for matters that the foreign company is required to comply with, such as lodging the necessary documents with ASIC and notifying ASIC of changes to specific company details.

The specific requirements for a foreign company do not prohibit the company from carrying on business in Australia or outside Australia.

The supply of the services is not a supply directly connected with real property situated in Australia.

The entity C has been treating such services as taxable supplies so far, for the purposes of the GST Act.

Reasons for decision

Section 9-5 of the GST Act provides that an entity is making a taxable supply where:

§ the entity makes the supply for consideration; and

§ the supply is made in the course or furtherance of an enterprise carried on by the entity; and

§ the supply is connected with Australia; and

§ the entity 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. 

The supply of the services by entity C meets all the above positive limbs of section 9-5 of the GST Act. Therefore, the supply of such services is a taxable supply, unless it is GST-free or input taxed under a specific provision of the GST Act.  

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

Under section 48-40 of the GST Act, GST is payable on any taxable supply or taxable importation that a member of a GST group makes and is payable by the representative member of that group. Therefore, as the representative member of the GST Group in this case, the entity C is liable to pay GST on any taxable supply an entity in that group makes.

Non-resident is not in Australia in relation to the supply

Subsection 38-190(1) of the GST Act specifies circumstances where the supply of things other than goods or real property, for consumption outside Australia is GST-free. If the requirements of one of the items in the table in subsection 38-190(1) of the GST Act are met, the supply is GST-free.

In your case, the services are neither goods nor real property. As such, the supply of such services needs to be appropriately considered under subsection 38-190(1) of the GST Act.  

In particular, Item 2 in the table in subsection 38-190(1) of the GST Act (Item 2) is of relevance to this case. Item 2 states that a supply that is made to a non-resident who is not in Australia when the thing supplied is done is GST-free, if the supply satisfies paragraphs (a) or (b) of that Item 2.

Item 2 in the table in subsection 38-190 of the GST Act is reproduced below: 

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

The fundamental requirement that the 'non-resident is not in Australia when the thing is done', means that the foreign company is not in Australia in relation to the supply, when the thing supplied is done. 

Hence, in this case for the supply of services to be GST-free under Item 2, there is a precondition that the non-resident recipient must not be in Australia in relation to the supply when it is provided. Paragraph 68 of Goods and Services Tax Ruling GSTR 2000/31: 'supplies connected with Australia', states: 

68. For the purposes of items 2 and 3 in subsection 38-190(1), the precondition that the recipient is not in Australia at the relevant time requires that neither the recipient, nor a representative acting on behalf of the recipient if the recipient is a company, is in Australia in relation to the supply.

Further, Goods and Services Tax Ruling GSTR 2004/7 (GSTR 2004/7) explains when a supply is made to an entity that is a 'non-resident' or an 'entity that is not an Australian resident' for the purposes of items 2 and 3 and paragraph (b) of item 4 in subsection 38-190(1) of the GST Act.

In your case, supply of relevant services is GST-free under Item 2, if it meets the requirement that the foreign company is not in Australia, and satisfies either paragraph (a) or (b) of Item 2. (Note: it is not necessary to meet both paragraphs (a) and (b), meeting either one is sufficient).

Under paragraph 231 of GSTR 2004/7, the representative of a company may vary.

231. The representative of the company may take on a variety of forms and capacities. For example, a company may be represented by anyone from a single employee to a branch of the company. It is, therefore, necessary to identify the type of presence by a representative of a non-resident company in Australia that makes a company in Australia.

As stated in paragraph 241 of GSTR 2004/7, we consider that a non-resident company is in Australia for the purposes of Item 2, where the company carries on business or carries on its activities in Australia: 

§ at or through a fixed and definite place of its own for a sufficiently substantial period of time; or

§ through an agent at a fixed and definite place for a sufficiently substantial period of time. 

As stated, a company incorporated outside Australia is required to register as a foreign company with the ASIC, if it wishes to acquire the relevant services.

At paragraph 247, GSTR 2004/7 states that it would be reasonable for a suppler to conclude that a non-resident company is in Australia if:

§ the company is registered with ASIC; or

§ the company has a permanent establishment in Australia for income tax purposes.

Accordingly, a non-resident company is considered to be in Australia, if it carries on its activities through an agent in Australia. Based on the facts provided in this case, a foreign company must have an agent under the requirements to acquire the relevant services. This indicates that even where a foreign company does not carry on business in Australia through a fixed place of business in Australia, if it carries on activities through an agent, then it makes a presence in Australia.

The term 'sufficiently substantial period of time' is explained at paragraph 267 of GSTR 2004/7.

Sufficiently substantial period of time simply means that there is a time period sufficient for the business of the non-resident company to be conducted in Australia. In Dunlop Pneumatic Tyre Company, Limited v. Actien-Gesellschaft Fur Motor Und Motorfahrzeugbau Vorm. Cudell & Co [1902] 1 KB 342 ('Dunlop') business was conducted in the foreign country for only nine days. However, that was sufficient time for the non-resident company to be carrying on its business in the UK. Collins MR said:

In the case of an exhibition, such as the show in the present case, which is largely resorted to by manufacturers for the purpose of exhibiting a particular class of goods, and by customers desirous of purchasing such goods, as much business in the kind of goods exhibited might probably be done in nine days as in as many months in an ordinary town.

In applying Item 2 in subsection 38-190(1) of the GST Act to the circumstances described in your case, the supply of listing services provided by you to a foreign company does not involve the supply of services to a 'non-resident' or 'an entity not in Australia'. As such, on application of the test provided in paragraph 241 of GSTR 2004/7 to your circumstances, the relevant foreign companies are to be considered as present in Australia.

For the purposes of subsection 38-190(1) of the GST Act, where the fundamental requirement is not satisfied, it is not necessary to consider if the particular foreign entity satisfies paragraphs (a) and (b) of Item 2. Therefore, Item 2 will not apply to the supply of services by entity C to a foreign company, unless the relevant company qualifies as a non-resident.

However, as provided in paragraph 248 of GSTR 2004/7, a non-resident company to which the supplier makes a supply may be able to demonstrate to the supplier that, even though they are registered with ASIC or have a permanent establishment, on application of the test set out in paragraph 241 of GSTR 2004/7, the non-resident company is not in Australia. In such cases, your supply of services may be GST-free under Item 2, where the requirements of paragraphs (a) and (b) are satisfied.

In this case a foreign company will register with ASIC in order to satisfy the specified conditions to receive the relevant services. Therefore, unless the foreign company is able to demonstrate to you that even though it is registered with ASIC or have a permanent establishment, on the application of the test referred to in paragraph 241 of GSTR 2004/7 to its particular circumstances, that it is not in Australia, then it is taken to be in Australia 'when the thing supplied is done.'

Consequently, the supply of all four services by entity C to such foreign companies will satisfy the requirements of section 9-5 of the GST Act, in the absence of contrary evidence. Thus, the relevant supplies constitute taxable supplies subject to GST.