Edited version of private ruling

Authorisation Number: 1011751598658

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Ruling

Subject: GST and issue of tax invoice

Question

Can the Australian company on behalf of an overseas company, Company A issue a tax invoice to Company A's customer in regard to Company A's supply of goods to the customer in Australia and importation of the goods in Australia?

Advice

No, the Australian company cannot on behalf of Company A issue a tax invoice to Company A's customer in regard to Company A's supply of goods to the customer in Australia and importation of the goods in Australia because they are not acting as a resident agent of Company A for the purposes of Division 57 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Relevant facts

You are an Australian company and registered for the goods and services tax (GST).

You have a letter of understanding (contract) with an overseas company, Company A. As per contract, Company A appoints you as its agent to promote and service their products in Australia.

You do not assume the legal liabilities of buying and reselling Company A's products at this time as you do not have the financial strength to qualify as a reselling distributor of Company A.

You have no arrangement with Company A to supply anything in particular under the contract other than your services in promoting their products and providing information required to comply with the agent agreement. You keep Company A informed of business opportunities and advise on the needs of potential customers who Company A will offer their products to.

You have no authority to act in any capacity that may create any type of obligation on Company A with any party. Your role is purely advisory. Any tasks performed by you are for your own benefit. The tasks performed by you are to increase the likelihood of potential customers buying the products for which you will earn a commission.

You have visited a company in Australia and spoke to the officer in charge and then organised for Company A to supply a quote for the products to that officer. The officer then placed an order directly with Company A.

Company A has appointed a shipping agent to act on their behalf. The freight company has paid import duty and GST when clearing the products in Australia and these products were delivered to the end consumer's freight company.

As Company A does not have an ABN and is not registered for the GST, they cannot charge the end consumer GST to recover the GST paid to Customs.

Reasons for decision

The term 'agent' is not defined in the GST Act and therefore the general law of agency applies.

Goods and Services Tax Ruling GSTR 2000/37 (available at www.ato.gov.au) discuss transactions made by a principal through an agent.

Paragraphs 11, 12 and 61 of GSTR 2000/37 state:

11. For commercial law purposes, an agent is a person who is authorised, either expressly or implied, by a principal to act for that principal so as to create or affect legal relations between the principal and third parties.

12. The principal is bound by the acts of an agent as a result of the authority given to the agent. In cases of actual authority, the relationship between a principal and an agent is a consensual one so that no party can claim to be a principal's agent unless both parties consent to the creation of the agency.

61. Paragraph 29-70(1)(a) requires that the principal (as the supplier) must issue a tax invoice for a taxable supply. However, if a principal makes a taxable supply through an agent, section 153-15 allows either a principal or an agent, but not both, to issue the tax invoice. A principal may be liable to a penalty, under the TAA, if the principal and agent both issue separate tax invoices for the same taxable supply.

Accordingly, if you act as an agent for an entity, actions done on behalf of your principal are, in general law, the actions of the principal. For GST purposes, the principal has all of the GST obligations and entitlements and not the agent.

However, there is a special rule for agents acting for non-residents that is an exception to the general law rule.

Division 57 of the GST Act effectively makes resident agents acting for non-residents responsible for the GST consequences of what the non-residents do through their resident agents and entitles the resident agents to input tax credits for any creditable acquisitions or importations that the non-residents make.

Under subsection 57-5(1) of the GST Act, the GST payable on a taxable supply or 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.

Paragraphs 45 and 47 of GSTR 2000/37 discuss transactions made by a principal through an agent for the purposes of Division 57 of the GST Act and state.

45. …When an agent is authorised to undertake a transaction on behalf of the principal, thereby binding the principal to the legal effects of the transaction, then the transaction is made by the principal through the agent.

47... When the supply is made through an agent, it is necessary for the agent to make a supply for consideration on behalf the principal and it can only do that if it has the authority of the principal. Also the Explanatory Memorandum of the GST Act explains that the principles of the general law of agency are to be followed in applying GST law to agency relationships.

Based on the facts given, we consider that your role is neither of a nature that meets the context of a resident agent under Division 57 of the GST Act nor the definition of agent in the context of importing the goods to Australia under the general law of agency as:

§ you have no authority to act in any capacity that may create any type of obligation on Company A with any party under the agreement;

§ the supply of the products by Company A is not made through you since you do not have the authority to bind Company A to make the supply of the products to the end consumer as Company A has not given you the authority to sign any binding contract on their behalf. Consequently the supply is not made through you;

§ you neither order nor supply the products to the end user. You simply promote the products and do not supply them to the end user;

§ Company A does not enter the products in Australia through you but directly to the end user who is, in turn, invoiced for these goods. You therefore currently play no part in the process of importing them to Australia.

Accordingly, you only act as an agent for Company A in terms of marketing their products to potential customers in Australia.

Where a resident does not act as an agent for a non-resident Division 57 of the GST Act has no application. Thus any GST obligations rest with Company A as the supplier of the products. Consequently you cannot issue a tax invoice to the end consumer in relation to the supply of the products made by Company A or for their importation in Australia.