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Ruling

Subject: GST and supply to non-resident entity

Question

Are you liable to pay goods and services tax (GST) on your supply of services to the non-resident entity?

Answer

No, you are not liable to pay GST on your supply of services to the non-resident entity.

Relevant facts and circumstances

You are registered for GST.

You entered into an agreement with a non-resident entity under which you will:

· process incoming inquiries from potential customers;

· provide assistance to current customers;

· negotiate with the property owners;

· monitor local rental offers;

· assist in the business development; and

· maintain a business banking account for the purpose of receiving payments from local customers.

The non-resident entity does not have any representative in Australia.

Upon instructions from the non-resident entity, you created invoices for the supply of accommodation to Australian residents travelling overseas.

When the payments for the invoices were credited to the bank account that you established under the terms of the contract, you were instructed to withdraw the money and send them to the suppliers of accommodation overseas.

After sending the money overseas, you suspected that the non-resident entity is engaged in fraudulent activities. This was confirmed by the authorities and by the bank which maintains your account.

You did not receive any payment for your services to the non-resident entity.

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 9-10 and

A New Tax System (Goods and Services Tax) Act 1999 section 38-190.

Reasons for decision

You are liable to pay GST on any taxable supply that you make.

According to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) you make a taxable supply if:

· you make the supply for consideration; and

· the supply is made in the course or furtherance of your enterprise; and

· the supply is connected with Australia; and

· you are registered or required to be registered for GST.

However, a supply is not a taxable supply to the extent that it is GST-free or input taxed.

A supply is defined in section 9-10 of the GST Act as any form of supply whatsoever and includes a supply of services. It does not matter whether it is lawful to do, to refrain from doing or to tolerate the act or situation constituting the supply.

Your supply of services to the non-resident was a supply for GST purposes. You made the supply for consideration, although you did not actually receive any payment for your services. The supply was made in the course of your enterprise. The supply was connected with Australia as you made the supply through your enterprise in Australia. You are registered for GST. Paragraphs 9-5(a) to 9-5(d) of the GST Act are satisfied. As such, your supply of services to the non-resident entity was a taxable supply unless the supply was GST-free or input taxed.

There is no provision in the GST Act under which your supply of services to the non-resident entity would be input taxed. What remains to be determined is whether the supply was GST-free.

Subsection 38-190(1) of the GST Act provides that, if certain conditions are met, supplies of things other than goods or real property are GST-free.

Item 2 in the table in subsection 38-190(1) of the GST Act (item 2) covers a supply made to a non-resident who is not in Australia when the thing supplied is done, and:

· 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

· the non-resident acquires the thing in carrying on its enterprise but is not registered or required to be registered for GST.

Subsection 38-190(3) of the GST Act provides that a supply covered by item 2 is not GST-free if:

· it is a supply under an agreement entered into, whether directly or indirectly with a non-resident; and

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

Based on the information that you provided, the non-resident entity is not in Australia when you made the supply of your service, and the supply is neither a supply of work physically performed on goods situated in Australia nor a supply directly connected with real property in Australia. Furthermore, the agreement did not require you to provide your services to another entity in Australia. Therefore, your supply of services to the non-resident entity was covered by item 2 and was GST-free under subsection 38-190(1) of the GST Act.

As your supply of services to the non-resident entity was not a taxable supply, you are not liable to pay GST on the supply.