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Ruling

Subject: GST and international services

Question 1

Is GST payable on the supply of your services to ABC Co (ABC)?

Answer

No.

Question 2

Can you obtain a refund of the GST previously remitted to the ATO?

Answer

Refer to reasons for decision.

Facts

You operate a service business and are registered for GST.

You provided a copy of a letter which outlines the scope of work that you provide to ABC as the provision of share registry and corporate secretarial services, including:

· maintenance of Australian share registry of shareholders with unpaid balances relating to the deregistration of ABC in Australia

· dealing with queries from those shareholders on an ongoing basis

· paying out balances to shareholders as requested and following proof of identification as required

· act as registered agent of ABC in Australia

· attend to all lodgements required with the Australian Securities and Investment Commission (ASIC)

The scope of works set out in this letter is the same as the work you carried out for many years, but previously there had been no formal agreement.

You invoice ABC for providing your services and all invoices issued to date have included GST and these GST amounts were remitted to the ATO.

ABC is a company that has been registered in Australia with ASIC as a foreign company for a number of years. Its head office is overseas.

ABC has never operated in Australia or traded in Australia in any way. Its only function in Australia has been to have its securities listed on the Australian Stock Exchange (ASX).

You provided the following information regarding the services you provide to ABC.

Your function as registered agent of ABC in Australia relates to its registration in that regard with ASIC. The dealings with ASIC are in respect of services carried out in Australia with respect to the Australian corporate regulator only.

Your dealings with the Australian shareholders prior to the delisting related to people in Australia who had queries with respect to shares that were listed on the ASX. It did not involve dealing with shareholders on ABC's share registries in other countries except on a very occasional and very minimal basis - to the extent it could be considered negligible.

Your ongoing dealings with respect to the shareholders following the delisting is again relating to matters and people in Australia and does not involve giving advice to ABC overseas, though you may keep them apprised of the Australian queries.

Prior to the delisting of the ABC from the ASX, you handled the releases to the ASX and dealt with the ASX in that regard to ensure ABC's compliance with the ASX listing requirements.

You have also done work with respect to the delisting process. That involved appointing the Australian solicitors who acted on behalf of ABC in Australia, and working with both them and the ASX to prepare the appropriate documentation for the Australian shareholders. This work only involved shareholders of the company who were listed on the Australian share registry. It did not involve advice on share registries in jurisdictions outside of Australia.

Since the delisting process was completed, you now continue to invoice ABC for acting as the registered agent of a foreign corporation in Australia, and for maintaining the register of shareholders as already stated.

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 9-25.

A New Tax System (Goods and Services Tax) Act 1999 Section 9-70.

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-190(1).

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-190(3).

A New Tax System (Goods and Services Tax) Act 1999 Section 195-1.

Income Tax Assessment Act 1936 Section 6-1.
Tax Administration Act 1953 Subsection 105-65 (1).

Reasons for decision

Question 1

Summary

The supply of your share registry and corporate secretarial services to ABC is GST-free. Hence, GST is not payable on this supply.

Detailed reasoning

GST is payable on any taxable supply that you make.

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) sets out the requirements of a taxable supply and it states:

You make a taxable supply if:

· you make the supply for *consideration; and

· the supply is made in the course or furtherance of an *enterprise that you *carry on; and

· the supply is *connected with Australia; and

· you are *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.

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

The supply of your share registry and corporate secretarial services to ABC satisfies the requirements of paragraphs 9-5(a), 9-5(b), 9-5(c) and to 9-5(d) of the GST Act as:

· you receive consideration for the supply of the services

· the supply is made in the course of an enterprise that you carry on

· the supply is connected with Australia as the services are performed in Australia and made through an enterprise that you carry on in Australia, and

· you are registered for GST.

The supply of your share registry and corporate secretarial services is not input taxed under the GST Act or under any other Act. Therefore, what is left to determine is whether the supply is GST-free.

The supply of share registry and corporate secretarial services is not considered to be a supply of goods or real property. Hence, the GST status of this supply is appropriately considered under section 38-190 of the GST Act, which provides that certain supplies of things other than goods or real property, for consumption outside Australia, are GST-free. Of relevance are items 2 and 3 in the table in subsection 38-190(1) of the GST Act (item 2 and item 3).

Item 2

Item 2 provides that a supply of a thing (other than goods or real property) made to a non-resident is GST-free if it is a supply that is 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 the non-resident's *enterprise, but is not *registered or *required to be registered for GST.

A non-resident for GST purposes is an entity that is not an Australian resident for the purposes of the Income Tax Assessment Act 1936.

A company is a resident of Australia if:

· the company is incorporated in Australia, or

· the company is not incorporated in Australia but has either its central management or control in Australia or its voting power is controlled by shareholders who are residents of Australia.

On the information provided, ABC is not a resident of Australia for income tax purposes.

Goods and Services Tax Ruling GSTR 2004/7 provides guidance on when a non-resident is 'not in Australia' for the purposes of item 2.

The meaning of 'not in Australia'

The requirement that the non-resident in item 2 is not in Australia when the thing supplied is done is a requirement that the non-resident is not in Australia in relation to the supply when the thing supplied is done.

Paragraph 184 of GSTR 2004/7 states:

As the Australian location of the entity to which the supply is made at the relevant time is a proxy test for identifying when consumption occurs in Australia, we consider that the expression 'not in Australia' should be interpreted in the context of the supply in question. The expression 'not in Australia' requires, in our view, that the non-resident or other recipient is not in Australia in relation to the supply. This means that a non-resident or other recipient of a supply may satisfy the 'not in Australia' requirement if that entity is in Australia but not in relation to the supply…

Paragraphs 230 to 332 of GSTR 2004/7 discuss when a non-resident company is in Australia for the purposes of item 2 (and paragraph (b) of item 4).

A company being an artificial legal entity does not have a precise location and its presence can only be established through the presence of its representatives. The representatives of a company may take on a variety of forms and capacity and can include a branch of the company.

The presence of a non-resident company in Australia is the means by which consumption of the supply in Australia is identified.

We determine the presence of a foreign company in a jurisdiction according to jurisdictional law. At common law, a foreign company is amenable to the jurisdiction of an Australian court if the company carries on business within the court's jurisdiction through its own office or through an agent acting on behalf of the company and that office or agent has a fixed and definite place within the jurisdiction and the business has continued for a sufficiently substantial period of time. (paragraph 239 of GSTR 2004/7).

At paragraph 241 of GSTR 2004/7, we established a test where we consider that a non-resident company is in Australia if that company carries on business (or in the case of a company that does not carry on business, 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.

Paragraph 247 of GSTR 2004/7 provides that a non-resident company is in Australia if:

· the company is registered with ASIC, or

· the company has a permanent establishment is Australia for income tax purposes.

A company that is incorporated outside Australia is required to register as a foreign company with ASIC if it wishes to carry on a business in Australia.

Although registered with ASIC, a non-resident company to which the supplier makes a supply may be able to demonstrate to the supplier that, even though it is registered with ASIC or has a permanent establishment, on application of the test to its particular circumstances, the non-resident company is not in Australia. Alternately, even if a company is not registered with ASIC, it may still be in Australia on an application of the test. Similarly, even if a company does not have a permanent establishment in Australia for income tax purposes, it may still be in Australia on application of the test to its particular circumstances.

ABC is registered with ASIC as a foreign company under the Corporations Act 2001. The registration was required as a precursor of listing on the ASX. Furthermore, the registration required that a local agent (you) be appointed.

A non-resident company is considered to be carrying on business in Australia even though the activities carried on in Australia are not a substantial part of, or are no more than incidental to, the main objects of the company.

A non-resident company has a place of its own if it leases or owns a place at which it conducts through its servants or agents. However, a place of its own is not limited to such a place. A non-resident company occupies a place as a place of its own if it has a right to be there. Evidence of that right is generally to be found in the fact that the company's employees or agent occupy that place for the purposes of its business.

If a non-resident company does not have a fixed and definite place in Australia at, or through which, the business of the non-resident company is carried on in Australia, the company is not in Australia.

The word 'fixed' connotes a degree of permanence in the same location. A place may be fixed even if it only exists for a short time. Although 'fixed place' excludes a place that is purely temporary, it does not mean everlasting. It is a geographical place with some degree of permanence. The word 'definite' is used in the sense of a distinct place; that is a place that can be pointed to as the place at which the non-resident company's business is carried on.

For a non-resident company to be considered to be in Australia, the business of the non-resident company must have continued, or be intended to continue, at a fixed and definite place for a sufficiently substantial period of time. Sufficiently substantial period of time simply means that there is a period sufficient for the business of the non-resident company to be conducted in Australia.

If a non-resident company has no fixed or definite place of its own in Australia, it may still carry own business in Australia through an agent from some fixed and definite place. The key issue in this kind of situation is whether the non-resident company is itself carrying on business in Australia through a duly appointed agent, or whether the business being conducted is the agent's own business and the non-resident is merely one of its customers.

Paragraph 281 of GSTR 2004/7 lists factors which may be taken into account in determining whether a non-resident company can properly be regarded as carrying on business in Australia through an agent.

On the information provided, ABC did not directly lease or otherwise occupy premises in Australia. ABC has not operated its business in Australia.

Although you are listed as the local agent of ABC, this is for the purpose of their registration with ASIC and complying with their ASX obligations. The information provided do not indicate that you have power to contract nor have the authority to enter into legal relations with other entities in Australia on their behalf. We do not consider that ABC is carrying on its business in Australia through you as their agent.

Hence, we consider that ABC is 'not in Australia' in relation to your supply of share registry and corporate secretarial services when such supply is made.

The supply of your services must also satisfy the requirements of either paragraph (a) or paragraph (b) of item 2 for the supply to be GST-free.

Paragraph (a) and/or (b) of Item 2

Goods an Services Tax Ruling GSTR 2003/7 examines the meaning of the expressions 'directly connected with goods or real property' and 'a supply of work physically performed on goods' as used in subsection 38-190(1) of the GST Act.

Paragraph 21 of GSTR 2003/7 states:

21. Under items 1, 2 and 3 it is only where the connection between the supply and the goods or real property is a direct one that the location of goods or real property is regarded as the place where consumption occurs. The addition of the adverb 'directly' to the phrase 'connected with' implies a more emphatic connection between the supply and goods or real property. The inference is that the supply is so closely aligned with goods or real property that it is appropriate to treat the location of the goods or real property as the place where consumption occurs.

The supply of share registry and corporate secretarial services is not the supply of work physically performed on goods situated in Australia when the work is done. In addition, it is not a supply directly connected with real property situated in Australia. As such, the supply of your share registry and corporate secretarial services satisfies the requirements of paragraph (a) of item 2.

As the requirements of paragraph (a) of item 2 are satisfied, there is no need to consider if the requirements of paragraph (b) of item 2 are met.

However, item 2 is limited by subsection 38-190(3) of the GST Act.

Limitations of item 2

If the supply covered by item 2 is under an agreement entered into, whether directly or indirectly, with a non-resident entity and that supply is provided to another entity in Australia, or the agreement requires that it be so provided, subsection 38-190(3) of the GST Act negates the GST-free status of that supply.

Subsection 38-190(3) of the GST Act states:

Without limiting subsection 38-190(2) or (2A), 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.

GSTR 2005/6 which provides the Tax Office view on the operation of subsection

38-190(3) of the GST Act states at paragraphs 59 and 61:

59. The word 'provided' is used in subsection 38-190(3) to contrast with the term 'made' in item 2. In the context of section 38-190, the contrasting words indicate that if a non-resident contracts for a supply to be provided to another entity, the place of consumption should be determined with regard to the entity to which the supply is provided, not the entity to which the supply is made.

61. Thus the expression 'provided to another entity' means, in our view, that in the performance of a service (or in the doing of some thing), the actual flow of that supply is, in whole or part, to an entity that is not the non-resident entity with which the supplier made the agreement for the supply. The contractual flow is to one entity (the non-resident recipient) and the actual flow of the supply is to another entity.

In this case, the supply of share registry and corporate secretarial services is a supply under an agreement entered into with a non-resident entity.

Under your agreement with ABC what is being supplied is share registry and corporate secretarial services effecting ABC's compliance with their statutory obligations as required by ASX. The nature of the supply is such that the supply of services is provided to ABC. The supply is not provided to another entity. Hence, the contractual and actual flow of the services is to ABC.

Therefore, subsection 38-190(3) of the GST Act does not exclude your services from being GST-free under item 2 as the supply of your services is made and provided to ABC, a non-resident company not in Australia when the supply is made.

Accordingly, the supply of your services to ABC is GST-free under Item 2. Hence, GST is not payable on this supply.

Although it is no longer necessary to consider whether the supply is GST-free under item 3, the requirements of that provision are also satisfied and discussed below.

Item 3

Item 3 provides that a supply of a thing (other than goods or real property) is GST-free if it is:

a supply:

· that is made to a *recipient who is not in Australia when the thing supplied is done; and

· the effective use or enjoyment of which takes place outside Australia; other than a supply of work physically performed on goods situated in Australia when the thing supplied is done, or a supply directly connected with *real property situated in Australia.

Both paragraphs (a) and (b) of item 3 must be satisfied for the supply to be GST-free.

Paragraph (a) of item 3

Similar to the precondition of item 2 discussed above, paragraph (a) of item 3 requires that the recipient must not be in Australia in relation to the supply when it is done (that is, when services is provided/performed). As stated above, on the information provided, ABC is 'not in Australia' in relation to the supply of your share registry and corporate secretarial services. Hence, paragraph (a) of the item 3 is satisfied.

Paragraph (b) of item 3

Paragraph (b) of item 3 requires that the place of effective use or enjoyment of a supply to be determined (that is, whether the place is outside Australia).

Goods and Services Tax Ruling GSTR 2007/2 examines the circumstances in which the effective use or enjoyment of a supply takes place outside Australia for the purposes of paragraph (b) of item 3. We take a two step approach to work out whether effective use or enjoyment of a supply takes place outside Australia. Firstly, we determine the entity to which the supply is provided (the providee entity). We then determine whether provision of the supply to the providee entity is outside Australia.

Paragraphs 52 to 54 of GSTR 2007/2 deal with identifying the entity to which the supply is provided (the providee entity). These paragraphs state:

52. A supply may be made and provided to the same entity, or may be made to one entity but be provided to another entity (or entities)...

53. The entity to which the supply is made is the recipient. The supplier may provide the supply to that recipient entity (in which case the recipient is also the providee) or may provide the supply to another entity (in which case the other entity is the providee).

54. A supply is provided to another entity if, in the performance of a service (or in the doing of some thing), the actual flow of that supply is to an entity that is not the recipient. The contractual flow is to the recipient and the actual flow of the supply is to another entity and thus the other entity is the providee.

On the information provided, the share registry and corporate secretarial services are supplied and provided directly to ABC, a non resident company. Hence, ABC is the providee entity. We consider that in all circumstances ABC has the actual use or enjoyment of the supply of share registry and corporate secretarial services. Our conclusion is that the actual flow of the supply is to ABC and not to any other entities.

The next step is to determine whether the effective use or enjoyment of the supply takes place outside Australia. Effective use or enjoyment of a supply only takes place outside Australia if there is provision of the supply to the providee entity outside Australia.

In relation to when the supply of your share registry and corporate secretarial services are made and provided to ABC, they are not in Australia in relation to the supply when you provide the supply. In this circumstance, the use and enjoyment of the supply of your share registry and corporate secretarial services is outside Australia.

It is noted, as discussed in item 2 above, that the supply of your share registry and corporate secretarial services is neither a supply of work physically performed on goods situated in Australia nor a supply directly connected with real property situated in Australia. Hence, paragraph (b) of item 3 is satisfied.

Therefore, the supply to ABC of the share registry and corporate secretarial services is GST-free under item 3.

In summary, the supply of your share registry and corporate secretarial services is GST-free under both items 2 and 3, though only one of these items needs to be satisfied for the supply to be GST-free.

Question 2

Summary

Where the requirements as discussed below are satisfied, you may be able to obtain a refund of the GST previously remitted to the ATO.

Detailed reasoning

You advised that you have included GST in the fees when you invoiced ABC. As discussed in question 1 above, the supply of your share registry and corporate secretarial services is GST-free.

Subsection 105-65 (1) of the Tax Administration Act 1953 (TAA) provides that where GST is incorrectly included in the price of a non-taxable supply, the Commissioner need not give a refund or credit the overpaid amount to the supplier when one of the following apply:

· the Commissioner is not satisfied that the supplier has reimbursed the GST incorrectly included in the price to the recipient of the supply or

· the recipient is registered or required to be registered for GST.

However, where the above conditions are met, subsection 105-65(1) of the TAA provides that the Commissioner is not required to refund the amount, but has a discretion to do so.

Accordingly, you are required to refund the GST included in your fees to ABC, before you can receive a refund of the overpaid amount from the ATO.

The ATO does not require you to provide a refund in any particular way. It is your business decision how you would arrange to provide a refund to ABC before seeking a refund from the ATO. You will need to keep accurate and complete records for all refunds to demonstrate the total amount of refunds you have provided. You should also cancel the original tax invoices and reissue new invoices.

Miscellaneous Taxation Ruling MT 2010/1 sets out the Commissioner's view on section 105-65 of the TAA.

It is possible for a supplier to claim a refund by revising their previous activity statements in which GST was reported incorrectly. If a supplier has an entitlement to a refund, it may also be possible to claim in on the current activity statement using the concessions outlined in the publication Correcting GST mistakes. A supplier may also be able to claim a refund using the form Notification of entitlement to GST refund.

There is a four year limit on claiming a GST refund. The time limit for a GST refund takes effect four years from the end of the tax period of the relevant activity statement in which the transaction was included. Further information is available in the publication Time limits on GST refund.

All rulings and publications referred to above are available from our website www.ato.gov.au