Edited version of your private ruling

Authorisation Number: 1012441738325

Ruling

Subject: Supply of services to non-resident companies

Question

Is the supply of project management and construction services from you to the non-resident company GST-free?

Answer

Yes, your supply of project management and construction services to the non-resident company is GST-free.

Relevant facts and circumstances

You are an Australian resident and you are registered for GST.

The non-resident company contracts with you to organise the erection of the stands for a trade show which took place in Australia.

You supply project management and construction services to the non-resident company. You provided the ATO with a copy of your Tax Invoice to the non-resident company for your project management and construction services (with no GST included). You also provided a copy of your quotation to the non-resident company which includes the job description.

You subcontract local contractors to carry out the work. These contractors are not your employees and have no contact with the non-resident company.

You are not the non-resident company's agent. The non-resident company has no presence in Australia. It does not do business in Australia itself or through an Australian agent. It is not registered or required to be registered for GST. The non resident company will not be present in Australia when the stands are erected. They do not attend the trade show.

The non-resident company has a contract with another non-resident organisation (NR-B) for the construction of the stands. The end user of the stands is NR-B, who sends staff to manage the stands and exhibit their goods/services on the days of the trade shows.

Your role is to write to the organiser of the trade show to submit your design and signage for the stands and ensure that your design complies with the regulations of the show. You then subcontract to various Australian companies to do the work.

The sub-contractors you hire will charge you directly for their supply of labour. The work done includes installation, artwork, electrical connection, painting and lighting, and dismantling the stands after the trade shows.

You do not have a contract with NR-B. NR-B sends staff to Australia during the trade show and you give them your mobile phone number in case anything goes wrong with the stands or the equipment you hire to the non resident company.

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 Paragraph 9-5(b)

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 9-5(d)

A New Tax System (Goods and Services Tax) Act 1999 Section 9-20

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)

Reasons for decision

A supply will be a taxable supply where the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) are satisfied. Section 9-5 of the GST Act 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 defined term under section 195-1 of the GST Act)

Connected with Australia

Paragraph 61 of Goods and Services Tax Ruling (GSTR) 2000/31 states:

61. A supply of anything other than goods or real property is connected with Australia if:

· the thing is done in Australia (paragraph 9-25(5)(a));

· the supplier makes the supply through an enterprise that the supplier carries on in Australia (paragraph 9-25(5)(b)); or ….

Paragraphs 65 and 66 of GSTR 2000/31 further state:

65. If the 'thing' being supplied is a service, the supply of that service is typically done where the service is performed. If the service is performed in Australia, the service is done in Australia and the supply of that service is connected with Australia under paragraph 9-25(5)(a). This is the case even if the recipient of the supply is outside Australia.

66. However, the supply of a service to an offshore recipient may be GST-free under section 38-190….

The supply of your project management and construction services satisfies the requirements under paragraphs 9-5(a), 9-5(b), 9-5(c) and 9-5(d) of the GST Act as the supply that you make is for consideration, you make the supply in the course of an enterprise that you carry on in Australia, the supply is connected with Australia because your supply of services is performed in Australia, and you are registered for GST in Australia respectively.

However, under section 9-5 of the GST Act, a supply is not a taxable supply to the extent that it is input taxed or GST-free. The supply of your project management and construction services is not input taxed under the GST Act. Therefore, it remains to be determined whether your supply is GST-free.

GST-free:

Subsection 38-190(1) of the GST Act specifies the circumstances where the supply of things other than goods or real property, for consumption outside Australia is GST-free.

Although the service you provide is connected with Australia in that you are organising the construction of trade stands for a trade show event held in Australia, it does not alter the nature of the supply as one of the performance of a service. You did not sell the stands or the equipment to the non-resident company as you are just hiring the stands and the equipment to the non-resident company for the duration of the trade show. Your supply is of neither goods nor real property. As such, it is appropriately considered under subsection 38-190(1) of the GST Act.

Item 2 in the table in subsection 38-190(1) of the GST Act (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:

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 for GST.

Non-resident is not in Australia when the thing supplied is done

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

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 and control in Australia or its voting power is controlled by shareholders who are residents of Australia.

On the information provided the non resident company is not a resident of Australia for income tax purposes.

As stated in paragraph 37 of Goods and Services Tax Ruling GSTR 2004/7, 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:

a) at or through a fixed and definite place of its own for a sufficiently substantial period of time, or

b) through an agent at a fixed and definite place for a sufficiently substantial period of time.

You have advised that the non-resident company does not carry on a business of its own in Australia nor does it carry on a business through a representative in Australia. Therefore, based on the information provided, we consider that the non-resident company is not in Australia in relation to your supply of project management and construction services when the supply is made.

Your supply of project management and construction services to the non-resident company must also satisfy the requirements of either paragraph (a) or paragraph (b) of item 2 for the supply to be GST-free.

Paragraph (b) of item 2

You advise that the non-resident company acquires your supply of services in carrying on their enterprise, but the non-resident company does not carry on business in Australia themselves or through an agent. The non resident company is not registered for GST nor is it required to be registered for GST in Australia.

Therefore, your supply of project management and construction services satisfies the requirements of item 2 in the table in subsection 38-190(1) 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:

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

b) 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, your supply of project management and construction services is a supply under an agreement entered into with a non-resident, therefore paragraph 38-190(3)(a) is satisfied.

What is being supplied is a service of project management and construction services of stands at a trade show in Australia. In this case, there is no expressed agreement between you and the non-resident company in your quotation, which requires you to provide your supply of project management and construction services to another entity within Australia.

We understand the non-resident company is not the end user of the trade stands, it is NR-B who conducted exhibitions at the trade stands. We also understand you are on stand by for any call from the exhibitors in case any problem with the erection of the stands or the equipment arises, such as malfunctioning of the equipment. However, this duty is in relation to your supply of project management and construction services to the non-resident company. Your supply enables the non-resident company to satisfy their own contract with NR-B. Your supply is not a supply to the exhibitors at the stands in Australia. Therefore, your supply is not excluded by subsection 38-190(3) of the GST Act from being GST-free.

As your project management and construction services satisfies the requirements in item 2 in the table in subsection 38-190(1) of the GST Act and is not excluded from being GST-free by subsection 38-190(3) of the GST Act, the supply is a GST-free supply.

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