Edited version of your private ruling

Authorisation Number: 1012506647318

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Ruling

Subject: goods and services tax (GST) and promotional services supplied to non-residents
Question 1

Is GST payable on your supplies of services under the first agreement?

Answer

GST is not payable on your supply of the service of promoting overseas style goods under the first agreement.

GST is payable on your supply of the service of promoting your customer under the first agreement.

Question 2

Is GST payable on your supply of the service of arranging for an Australian based writer to visit an overseas country under the second promotion agreement?

Answer

No.

Relevant facts and circumstances

You are registered for GST.

You import goods and sell them to wholesalers and retailers in Australia.

You propose to market, advertise and promote, in Australia, goods that you sell under specified brands (promotion).

You will control all aspects of any promotion and pay all the costs and expenses relating to the applicable promotion.

You propose to offer non-resident government bodies the opportunity to participate in or benefit (either directly or indirectly) from a promotion on the basis that such entities will pay you an agreed amount (such payment representing a partial or the full reimbursement or recovery of promotion costs).

You propose to supply various promotional related services to non-resident government bodies, for example, a specified body. These bodies have a presence overseas as well as a presence in Australia.

The services will be as follows:

First agreement

Under the first agreement you will promote overseas style goods in Australia. This could be for example, displaying the goods at an event in Australia. You will also promote your customer, for example, by displaying their logo on a marquee at the event or through TV advertisements. Your customers will pay you for these services.

Second agreement

Under the second agreement, you will arrange for an Australian based writer to visit an overseas country to find out more about overseas style goods. The hope is that when the writer returns to Australia they will write an article about overseas style goods, however, you have no control over whether they do so. Your customer would agree to reimburse you for part or all of the travel and accommodation expenses that you pay in relation to the writer's visit to the overseas country.

Under the first agreement and second agreement, your customer's overseas head office will sign the contract for your services.

Your customer's presence in Australia will facilitate the promotion agreements by putting your representatives in contact with your customer's head office in the overseas country.

Your customer's presence in Australia may from time to time perform an audit function regarding the performance of your services. This would involve you providing a report to your customer's Australian office which evidences the performance of your obligations.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1)

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

A New Tax System (Goods and Services Tax) Act 1999 section 9-40

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

Reasons for decisions

Questions 1 and 2

Summary

Your supply of the service of promoting overseas style goods under the first agreement is GST-free under item 2 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)(item 2) because:

· the services are not goods or real property

· you supply the services to a non-resident who is not in Australia in relation to your supply 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.

Your supply of the service of promoting your customer under the first agreement is not GST-free under item 2 or item 3 in the table in subsection 38-190(1) of the GST Act (item 3) because your customer is in Australia in relation to this supply when the thing supplied is done.

Your supply of the service of arranging for a writer to visit an overseas country is GST-free under item 2 because:

· the services are not goods or real property

· you supply the services to a non-resident who is not in Australia in relation to your supply 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.

Detailed reasoning

GST is payable by you on your taxable supplies.

You make a taxable supply where you satisfy the requirements of section 9-5 of the GST Act, which 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 term defined in section 195-1 of the GST Act)

You meet the requirements of paragraph 9-5(a) to 9-5(d) of the GST Act. This is because:

· you are supplying services for consideration

· you supply these services in the course or furtherance of an enterprise that you carry on

· these supplies are connected with Australia, and

· you are registered for GST.

There are no provisions of the GST Act under which your supplies are input taxed.

Therefore, what remains to be determined is whether your supplies are GST-free.

Subsection 38-190(1) of the GST Act specifies circumstances where the supply of things other than goods or real property, for consumption outside Australia is GST-free. Your services are neither goods nor real property. As such, the supply of your services is appropriately considered under subsection 38-190(1) of the GST Act.

Item 2

A supply of something other than goods or real property is GST-free under item 2 if the supply 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-residents enterprise, but is not registered or required to be registered for GST.

Item 3

A supply of something other than goods or real property is GST-free under item 3 if

(a) the supply is made to a recipient who is not in Australia when the thing

supplied is done; and

(b) 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.

Paragraph 31 of Goods and Services Tax Ruling GSTR 2004/7 states:

31. The requirement that the non-resident in item 2, or the recipient in item 3, is not in Australia when the thing supplied is done is a requirement, in our view, that the non-resident or recipient is not in Australia in relation to the supply when the thing supplied is done.

In accordance with GSTR 2004/7, where a recipient of a supply is an entity other than an individual, the entity is in Australia in relation to the supply if the supply is solely or partly for the purposes of the Australian presence, for example, its Australian branch, representative office or agent if it is a non-resident company or the Australian head office if it is an Australian incorporated company. If the supply is not for the purposes of the Australian presence but that Australian presence is involved in the supply, the recipient is in Australia in relation to the supply, except where the only involvement is minor.

First agreement

The service of promoting overseas style goods

You are supplying the service of promoting overseas style goods under the first agreement. You supply this service to a non-resident government entity that has a presence overseas as well as in Australia. This service is not for the purposes of the recipient's presence in Australia and the presence of the recipient in Australia is involved with the supply in only a minor way.

Hence, your supply of the service of promoting overseas style goods is a supply to a non-resident who is not in Australian in relation to this supply when the thing supplied is done.

This supply is neither a supply of work physically performed on goods situated in Australian when the work is done nor a supply directly connected with real property situated in Australia.

Hence, you make a GST-free supply of this service under item 2.

Therefore, you do not make a taxable supply of this service. Hence, GST is not payable on your supply of this service.

The service of promoting your customer

Your customer under the first agreement has a presence overseas as well as in Australia. When you promote your customer, this promotes the customer's presence in Australia as well as overseas. Hence, when you supply the service of promoting your customer, the supply is partly for the purposes of your customer's Australian presence.

Therefore, your supply of the service of promoting your customer is a supply to a recipient who is in Australia in relation to this supply when the thing supplied is done.

Hence, you do not make a GST-free supply of this service under item 2 or item 3.

There are no provisions of the GST Act under which your supplies of this service are GST-free.

Therefore, as all of the requirements of section 9-5 of the GST Act are met, you make a taxable supply of these services. Hence, GST is payable by you on your supply of these services.

Second agreement

You are supplying the service of arranging for a writer to visit an overseas country with the hope that the writer will write an article about overseas style goods. You supply this service to a non-resident government entity that has a presence overseas as well as in Australia. This service is not for the purposes of the recipient's presence in Australia and the presence of the recipient in Australia is involved with the supply in only a minor way.

Hence, your supply of the service of arranging for a writer to visit an overseas country is a supply to a non-resident who is not in Australian in relation to this supply when the thing supplied is done.

This supply is neither a supply of work physically performed on goods situated in Australian when the work is done nor a supply directly connected with real property situated in Australia.

Hence, you make a GST-free supply of this service under item 2.

Therefore, you do not make a taxable supply of this service. Hence, GST is not payable on your supply of this service. The reimbursement of travel and accommodation expenses is consideration for this supply.