Edited version of private ruling

Authorisation Number: 1011714901622

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Ruling

Subject: goods and services tax (GST) and supply of services to a non-resident

Question

Will GST be payable on your supplies of the IT support services to your overseas client?

Answer

Yes.

Relevant facts and circumstances

You are registered for GST.

You will supply IT support services to an overseas based and registered company, which does not have a presence in Australia. Your overseas client will sell your IT support services to its overseas clients, which are based overseas. as well as having Australian arms.

None of your overseas client's overseas clients under the arrangements in question will be individuals.

The IT support services will relate to the IT systems of the Australian arms of your overseas client's overseas clients.

The work carried out by your IT support engineers will be conducted both on site at the premises of the Australian arms of your overseas client's overseas clients and over the phone in Australia. Where the work is conducted over the phone, your IT support engineers will be talking to the Australian arms of your overseas client's overseas clients.

Your supplies of the IT support services will not be supplies of work physically performed on goods situated in Australia when the work is done.

Reasons for decision

Summary

Your supplies of the IT support services to your overseas client will not be GST-free under item 2 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

GST will be payable on your supplies of the IT support services to your overseas client, as all of the requirements of section 9-5 of the GST Act will be satisfied.

Detailed reasoning

GST is payable by you where you make a taxable supply.

You make a taxable supply where you satisfy 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) the supply is made in the course or furtherance of an *enterprise that

you *carry on; and

(c) the supply is *connected with Australia; and

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

However, the supply is not a *taxable supply to the extent that it is *GST-free

or *input taxed.

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

In your case, you will satisfy the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. That is, you will supply the IT support services for consideration and you will make these supplies in the course or furtherance of the enterprise that you carry on. Additionally, your supplies of the IT support services will be connected with Australia and you are registered for GST.

There are no provisions in the GST Act under which your supplies of the IT support services will be input taxed.

Therefore, what remains to be determined is whether your supplies of the IT support services will be GST-free.

Item 2 in the table in subsection 38-190(1) of the GST Act provides that a supply of something other than goods or real property is GST-free where the supply is made to a non-resident who 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.

Your supplies of the IT support services will be supplies of things other than goods or real property. Therefore, the first requirement of item 2 in the table in subsection 38-190(1) of the GST Act will be satisfied.

Paragraph 31 of Goods and Services Tax Ruling GSTR 2004/7 provides that the requirement that the non-resident in item 2 in the table in subsection 38-190(1) of the GST Act is not in Australia when the thing supplied is done is a requirement, in our view, that the non-resident is not in Australia in relation to the supply when the thing supplied is done.

Paragraph 41 of GSTR 2004/7 provides the rules for working out whether a non-resident company is in Australia in relation to a supply. It states:

41. A non-resident company is in Australia in relation to the supply if the supply is solely or partly for the purposes of the Australian presence, for example, its Australian branch. 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, except where the only involvement is minor.

Your overseas client is a non-resident. This client does not have a presence in Australia. Therefore, your overseas client will not be in Australia in relation to your supplies of the IT support services when these services are performed. Therefore, the second requirement of item 2 in the table in subsection 38-190(1) of the GST Act will be satisfied.

Your supplies of the IT support services will neither be supplies of work physically performed on goods situated in Australia when the work is done nor supplies directly connected with real property situated in Australia. Therefore, the requirements of paragraph (a) of item 2 in the table in subsection 38-190(1) of the GST Act will be satisfied.

If your overseas client acquires your IT support services in carrying on its enterprise and it is not registered or required to be registered for GST, the requirements of paragraph (b) of item 2 in the table in subsection 38-190(1) of the GST Act will be satisfied.

However, subsection 38-190(3) of the GST Act provides that a supply covered by item 2 in the table in subsection 38-190(1) of the GST Act will not be GST-free if:

(a) it is a supply under an agreement entered into with a non-resident; and

(b) the supply is provided, or the agreement requires it to be provided, to another entity in Australia.

Your supplies of the IT support services will be supplies under agreements entered into with a non-resident - your overseas client. Therefore, the requirement of paragraph 38-190(3)(a) of the GST Act will be satisfied.

Your overseas client's overseas clients will be different entities to your overseas client with which you will enter into agreements under which you will make your supplies of the IT support services.

Paragraph 125 of Goods and Services Tax Ruling GSTR 2007/2 provides that if an entity other than an individual has a presence in Australia and outside Australia, a supply is provided to that entity in Australia if the supply is for the purposes of that entity's presence in Australia.

None of your overseas client's overseas clients under the arrangements in question will be individuals. Your overseas client's overseas clients will be entities that have presences in Australia and outside Australia. Your IT support services will relate to the IT systems of the Australian arms of your overseas client's overseas clients. Hence, your supplies of the IT support services will be provided to your overseas client's overseas clients in Australia as the supplies will be for the purposes of your overseas client's overseas clients' presences in Australia. Therefore, the requirement of paragraph 38-190(3)(b) of the GST Act will be satisfied.

As all of the requirements of subsection 38-190(3) of the GST Act will be satisfied, your supplies of the IT support services will not be GST-free under item 2 in the table in subsection 38-190(1) of the GST Act.

There are no other items in the table in subsection 38-190(1) of the GST Act under which your supplies of the IT support services will be GST-free.

There are no other provisions of the GST Act under which your supplies of the IT support services will be GST-free.

As all of the requirements of section 9-5 of the GST Act will be satisfied, you will make taxable supplies of the IT support services. Therefore, GST will be payable on your supplies of the IT support services.