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Ruling

Subject: Recipient Created Tax Invoices

Question

Are you eligible to issue tax invoices as a recipient to their supplier under RCTI 2000/20 A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoices Determination (No 20) 2000 (RCTI 2000/20)?

Answer

Yes.

Relevant facts and circumstances

You are registered for GST.

You have an expected turnover of less then $1,000,000.

You are an enterprise conducting business in the information technology industry.

You provide access to information stored in registries to third parties.

The transactions are performed electronically, via a website and business to business (B2B) interface.

Your customers request reports for certain information.

You have entered into a licence agreement with an external provider to provide this service.

The licence agreement is for a limited period, in which you are the exclusive broker of the information. After the exclusive period, the agreement may be extended; however, your access to the data will not be exclusive.

You deliver the information requested by your customers in real time via the internet and the whole process is automatic once your customers lodge a request from your website.

At the end of each month, you charge your customers for the reports they requested by raising an invoice.

At a set time each month, you calculate the total funds received from customers for the previous month's transactions and issue an RCTI to the external provider for an amount equalling a percentage of the total funds received. The amount cannot be calculated by the external provider as they are only aware of the volume of the data provided and cannot determine the price.

The data transfer and accounting is performed on software that you have designed.

You wish to issue RCTIs for taxable supplies. You make no other types of supplies.

You described this transaction as operating similarly to a royalty.

You contend that it is simpler and more efficient to prepare RCTIs on behalf of the external supplier.

You have identified RCTI 2000/20 as a class of recipients in which you might belong.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999

Section 29-70

Reasons for decision

Paragraph 29-70(1)(a) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that a tax invoice for a taxable supply must be issued by the supplier unless it is an recipient created tax invoice (RCTI) (in which case it must be issued by the recipient of the supply).

Subsection 29-70(3) of the GST Act defines an RCTI as a tax invoice belonging to a class of tax invoices that the Commissioner has determined in writing may be issued by the recipient of a taxable supply.

Goods and Services Tax Ruling GSTR 2000/10 Goods and Services Tax: Recipient Created Tax Invoices (GSTR 2000/10) outlines the circumstances in which a recipient is entitled to issue RCTIs. An entity can issue RCTIs if the Commissioner has determined in writing that the nature of the industry in which the entity operates warrants the use of RCTIs.

The Commissioner has issued RCTI 2000/20 A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoices Determination (No 20) 2000 (RCTI 2000/20), which permits the recipient of a taxable supply of licensing to issue a tax invoice for that taxable supply. Clause 4 of RCTI 2000/20 states that:

4. A tax invoice that belongs to a class of tax invoices for a taxable supply of licensing may be issued by a recipient of that supply where the recipient:

(i) establishes the value of that supply as a royalty based on the value of the sales of the relevant item; and

(ii) satisfies the requirements set out in Clause 5.

Clause 5 of the Determination contains the requirements that must be satisfied by a recipient of a taxable supply before the recipient can issue RCTIs.

(a) the recipient must be registered for GST when the invoice is issued;

(b) the recipient must set out in the tax invoice the ABN of the supplier;

(c) the recipient must issue the original or a copy of the tax invoice to the supplier within 28 days of making, or determining, the value of a taxable supply and must retain the original or the copy;

(d) the recipient must issue the original or a copy of an adjustment note to the supplier within 28 days of the adjustment and must retain the original or the copy;

(e) the recipient must reasonably comply with its obligations under the taxation laws;

(f) the recipient must have either:

· a written agreement with the supplier specifying the supplies to which it relates, that is current and effective when the RCTI is issued, agreeing that:

(i) the recipient can issue tax invoices in respect of the supplies;

(ii) the supplier will not issue tax invoices in respect of the supplies;

(iii) the supplier acknowledges that it is registered for GST when it enters into the agreement and that it will notify the recipient if it ceases to be registered; and

(iv) the recipient acknowledges that it is registered when it enters into the agreement and that it will notify the supplier if it ceases to be registered for GST; or

(v) an agreement with the supplier embedded in an RCTI it issues that contains the following statement:

The recipient and the supplier declare that this agreement applies to supplies to which this tax invoice relates. The recipient can issue tax invoices in respect of these supplies. The supplier will not issue tax invoices in respect of these supplies. The supplier acknowledges that it is registered for GST and that it will notify the recipient if it ceases to be registered. The recipient acknowledges that it is registered for GST and that it will notify the supplier if it ceases to be registered for GST. Acceptance of this RCTI constitutes acceptance of the terms of this written agreement.

Both parties to this supply agree that they are parties to an RCTI agreement. The supplier agrees to notify the recipient if the supplier does not wish to accept the proposed agreement within 21 days of receiving this document.

(g) the recipient must not issue a document that would otherwise be a recipient created tax invoice, on or after the date when the recipient or the supplier has failed to comply with any of the requirements of this determination;

(h) if the recipient has a current GST turnover of less than $1,000,000, it must notify the Commissioner in writing of the recipient's intention to use recipient created tax invoices. This notification must be made before 14 days have elapsed after the first occasion that a recipient created tax invoice is issued by that recipient or before 14 days have elapsed after the signing of this Determination, whichever is later.

Clause 6 of the Determination gives definitions of the following terms:

· licensing means the entity with the legal power to do so authorising a second entity to sell or otherwise distribute a relevant item;

· relevant item means a play, a sound recording, a video recording, computer software, photographs (or similar item) or written work in which copyright can be held.

In your case, you provide companies with access information via a licence agreement with an external provider. You invoice the companies based on the number of requests for information they make.

Accordingly, the value of the supply the external provider makes to you varies with the volume of requests processed. The external provider are only aware of the volume of information transferred and are not aware of the pricing or discounting that you may pass on to the companies. You have exclusive access to the information under your licence agreement and have sole responsibility for valuing the information.

You are the only company that can establish a taxable supply of the information provided to you including GST. Hence, you meet the requirements of Clause 4(i) of RCTI 2000/20.

Therefore, your situation fits within the scope of RCTI 2000/20 and it would be appropriate for you to issue RCTIs to the external provider, provided all the requirements of Clause 5 of RCTI 2000/20 are met.