Edited version of your private ruling

Authorisation Number: 1012534199852

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Ruling

Subject: GST and supplies by a non-resident

Questions

1. Are the following supplies made by the non-resident entity to entities in Australia taxable supplies?

(a) advertising services

(b) access to online information

(c) magazines

(d) events

2. If the supplies made by the non-resident to entities in Australia are taxable supplies, can the non-resident enter into reverse charging agreements with those entities?

Answers

1. The following supplies made by the non-resident to entities in Australia are not taxable supplies under section 9-5 of the GST Act:

(a) advertising services

(b) access to online information

(c) magazines

(d) events

The supplies of advertising services, access to online information and events may be taxable supplies under section 84-5 of the GST Act.

2. Where section 84-5 of the GST Act applies to the supplies made by the non-resident to entities in Australia, the GST payable on these supplies are reverse charged to the recipient.

Relevant facts and circumstances

The non-resident entity is not registered for goods and services tax (GST). It does not have a presence in Australia through which it carries on its business or makes its supplies.

The non-resident has a subsidiary in Australia.

The non-resident entered into an agreement with the subsidiary (the agreement) under which the subsidiary will promote, sell and market the products of the non-resident.

The non-resident provides information, and advertising platforms online from overseas. These are supplied through the non-resident's websites which are all hosted in the overseas.

The non-resident supplies advertising space in the form of advertising banners which the non-resident's employees overseas create for the customers, or in the form of a business directory. The business directory allows a customer to showcase its business and products. Generally, a client signs up for a 12-month contract to be listed on the non-resident's websites.

The non-resident supplies information made up of news and features derived from contributors, researchers and editors of the non-resident. The non-resident does this by providing online access to its websites by subscription which is usually for 12 months.

Under the terms and conditions, the information obtained by subscribers are for their own use only, for instance, for internal presentations, board packs and anything that aids them in business decision making. The non-resident stipulates that the data are not divulged to other parties without consent and that the brand needs to be referenced whenever used.

The non-resident also sells one-off reports in portable document format (pdf).

The non-resident has a print division which distributes magazines worldwide. The subscription to the magazines are generally free, otherwise, it is for a small subscription fee. The magazines are imported into Australia by the subscribers, not by the non-resident.

The non-resident has an events division based overseas. No events are held in Australia.

In Australia, a sales person from the subsidiary will engage with a potential customer and log in to a Customer Relationship Manager (CRM) system. The sales person will then take the deal through several stages in the CRM system until a sale is agreed and contracts are signed. The contracts are standardized by the non-resident and are part of the CRM system. The terms and conditions are unable to be varied without the non-resident's consent. As such, the subsidiary merely acts as the non-resident's agent in entering into the contracts. The contracts are finalised in the overseas.

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 83-5 and

A New Tax System (Goods and Services Tax) Act 1999 section 84-5.

Reasons for decisions

1. Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (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 term defined under section 195-1 of the GST Act).

In this case, the supplies made by the non-resident to entities in Australia are for consideration and in the course of its enterprise. As such, the requirements in paragraphs 9-5(a) and 9-5(b) of the GST Act are satisfied. Therefore, we must determine whether paragraphs 9-5(c) and 9-5(d) of the GST Act are also satisfied.

A supply of anything other than goods or real property that is not connected with Australia is not a taxable supply under section 9-5 of the GST Act. However, the supply may be a taxable supply if the conditions in section 84-5 of the GST Act are met unless the supply is GST-free or input taxed.

According to section 84-5 of the GST Act, a supply of anything other than goods or real property that is not connected with Australia is a taxable supply if:

· the recipient of the supply acquires the thing supplied solely or partly for the purpose of an enterprise that the recipient carries on in Australia, but not solely for a creditable purpose; and

· the supply is for consideration; and

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

A thing is acquired for a creditable purpose to the extent that the entity acquires it in carrying on its enterprise. However, the entity does not acquire the thing for a creditable purpose to the extent that the acquisition relates to making input taxed supplies or the acquisition is of a private or domestic nature.

While the supplies made by the non-resident are for consideration, we do not have information on whether the entities in Australia are registered or required to be registered for GST and they acquire the supplies from the non-resident solely or partly for a creditable purpose. Therefore, this ruling will not determine whether the supplies made by the non-resident are taxable supplies under section 84-5 of the GST Act.

Advertising services

Paragraph 9-25(5)(a) of the GST Act provides that a supply of anything other than goods or real property is connected with Australia if the thing is done in Australia.

'Thing' is defined to mean anything that can be supplied or imported such as a service, advice, information or a right. It is the subject of the supply.

The meaning of 'done' depends on the nature of the 'thing' being supplied. 'Done' can mean, for example, performed, executed, completed, or finished.

Goods and Services Tax Ruling GSTR 2000/31 explains when a supply is connected with Australia under section 9-25 of the GST Act.

According to paragraph 65 of GSTR 2000/31, a supply of service is connected with Australia if the service is performed in Australia.

Based on the information provided, the advertising services are physically performed overseas as advertising banners are designed by the employees overseas and, in the case of advertising in the form of a business directory, the client's information are included in that directory and published on websites that are hosted overseas. As such, we consider that the non-resident's supply of advertising services is not done in Australia, and thus is not connected with Australia under paragraph 9-25(5)(a) of the GST Act.

Paragraph 9-25(5)(b) of the GST Act provides that a supply of anything other than goods or real property is connected with Australia if the supplier makes the supply through an enterprise that the supplier carries on in Australia.

The non-resident does not have a presence in Australia through which it carries on its business or makes supplies. While the subsidiary promotes, sells and markets the products of the non-resident, its role is limited to completing the standard contracts using the non-resident's CRM system which are finalised overseas. The subsidiary is unable to vary the terms and conditions of

the contracts without the non-resident's consent. As such, we consider that the non-resident does not make the supply of advertising services through an enterprise that it carries on in Australia. Accordingly, the supply of the advertising services is not connected with Australia under paragraph 9-25(5)(b) of the GST Act.

As the supply of the advertising services is not connected with Australia, the requirement in paragraph 9-5(c) of the GST Act is not satisfied. The supply is not a taxable supply under section 9-5 of the GST Act.

However, the supply of the advertising services will be a taxable supply if section 84-5 of the GST Act applies.

Access to online information

The non-resident supplies business information by providing online access to its websites by subscription. The subscription gives the customer a right to access the non-resident's websites and use the information pursuant to the terms and conditions of the contract.

According to paragraph 203 of GSTR 2000/31, a right is created, granted, transferred, assigned or surrendered in Australia if the creation, grant, transfer, assignment or surrender is effected in Australia. For example, if the right to use intellectual property is granted by the execution of a written contract, the grant of that right is done in Australia if that contract is made in Australia.

In this case, the subsidiary completes the contracts in Australia using the non-resident's CRM system. However, the contracts are sent overseas where they are finalised. As such, we consider that the non-resident's supply of access to business information and knowledge database is not done in Australia. The supply is not connected with Australia under paragraph 9-25(5)(a) of the GST Act.

The supply is also not connected with Australia under paragraph 9-25(5)(b) of the GST Act because the non-resident does not make the supply through an enterprise that it carries on in Australia.

As the supply of access to online information is not connected with Australia, the requirement in paragraph 9-5(c) of the GST Act is not satisfied. The supply is not a taxable supply under section 9-5 of the GST Act.

However, the supply of access to business information and knowledge database will be a taxable supply if section 84-5 of the GST Act applies.

Magazines

Magazines that are supplied by the non-resident for no consideration will not satisfy paragraph

9-5(a) of the GST Act and; thus, will not be a taxable supply.

Where the magazines are supplied for consideration, the supply will satisfy the requirement in paragraph 9-5(a) of the GST Act.

Subsection 9-25(3) of the GST Act provides that a supply of goods that involves the goods being brought to Australia is connected with Australia if the supplier either:

· imports the goods into Australia; or

· installs or assembles the goods in Australia.

The non-resident does not import the magazines into Australia or install or assemble them in Australia. Therefore, the supply of the magazines is not connected with Australia under subsection 9-25(3) of the GST Act. The requirement in paragraph 9-5(c) of the GST Act is not satisfied. Accordingly, the supply of the magazines is not a taxable supply.

Events

The supply of an event is connected with Australia if the event is held in Australia. Therefore, the events that the non-resident supplies are not connected with Australia under paragraph 9-25(5)(a) of the GST Act as they are not held in Australia.

The supply of the events is also not connected with Australia under paragraph 9-25(5)(b) of the GST Act as the non-resident does not make the supply through an enterprise that it carries on in Australia.

As the supply of the events is not connected with Australia, the requirement in paragraph 9-5(c) of the GST Act is not satisfied. The supply is not a taxable supply under section 9-5 of the GST Act.

The supply of the events may be a taxable supply under section 84-5 of the GST Act unless the supply is GST-free under subsection 38-190(1) of the GST Act.

Item 3 in the table in subsection 38-190(1) of the GST Act (item 3) provides that a supply of things (other than goods or real property) is GST-free if:

(a) it 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.

Refer to Goods and Services Tax Ruling GSTR 2004/7 for more information on the application of item 3, and to Goods and Services Tax Ruling GSTR 2007/2 for explanation of when the effective use or enjoyment of a supply takes place outside Australia. The rulings are available from www.ato.gov.au

1. In accordance with section 9-40 of the GST Act, the supplier must pay the GST payable on a taxable supply that it makes. However, if section 83-5 or section 84-5 of the GST Act applies to the supply, the GST is payable by the recipient of the supply.

Subsection 83-5(1) of the GST Act provides that the GST on a taxable supply is payable by the recipient of the supply, and is not payable by the supplier, if:

(a) the supplier is a non-resident; and

(b) the supplier does not make the supply through an enterprise that the supplier carries on in Australia; and

(c) the recipient is registered or required to be registered for GST; and

(d) the supplier and the recipient agree that the GST on the supply be payable by the recipient.

Paragraph 83-5(2)(a) of the GST Act further provides that section 83-5 does not apply if the supply is a taxable supply under Division 84 of the GST Act.

As regards the supplies made by the non-resident, the supply of advertising services, the supply of access to online information, and the supply of events are supplies of things other than goods or real property. If the requirements in section 84-5 of the GST Act are met, and the supplies are not GST-free, the supplies are taxable supplies. However, the GST payable on the supplies are reverse charged to the recipient.

The supply of magazines is not a taxable supply as explained in the response to question 1. Therefore, section 83-5 of the GST Act will not apply. The supply of the magazines is a supply of goods; thus, the supply will not be a taxable supply under section 84-5. There is no GST to be reverse charged.