Edited version of your written advice

Authorisation Number: 1012766679630

Ruling

Subject: GST and supply of bitcoin by a non-resident company

Questions

1. Does the non-resident company make a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it supplies bitcoin to the Australian customer in the bitcoin transaction?

2. Does the non-resident company make a taxable importation under section 13-5 of the GST Act when it supplies bitcoin to the Australian customer in the bitcoin transaction?

Advice

1. No, the non-resident company does not make a taxable supply under section 9-5 of the GST Act when it supplies bitcoin to the Australian customer in the bitcoin transaction because all the requirements in section 9-5 of the GST Act are not satisfied.

2. No, the non-resident company does not make a taxable importation under section 13-5 of the GST Act when it supplies bitcoin to the Australian customer in the bitcoin transaction because section 13-5 of the GST Act is not applicable to the supply since bitcoin is not goods.

Relevant fact

You are a company registered outside Australia and you are not registered for the Australian goods and services tax (GST).

You sell bitcoin through machines (machines) in Australia which allow any person to buy bitcoin for Australian dollars in cash. Apart from selling bitcoin through the machines in Australia, you do not sell any other goods or services in Australia or conduct any business with any connection to Australia.

You have an agreement with the owner of the machines under which you are permitted to sell bitcoin through the machines, in exchange for paying commission to the owner. You have provided us with a copy of the agreement. Under the agreement, the owner does not have any authority to act for or on your behalf and does not have the authority to bind you to any contract. The owner is registered for GST.

You have entered into an arrangement with the owner to sell bitcoin directly to a customer physically present in Australia. You do not own or lease the machine, you merely have a licence to sell through the machine and the owner has the right to terminate this arrangement at the end of any given month.

The customer is an Australian resident for tax purposes and is physically present in Australia at the time of the bitcoin transaction. The bitcoin transaction with the Australian customer occurs as follows:

a) Customer provides details including a bitcoin public address at which they wish to receive the bitcoin;

b) Customer views the current rate offered by you;

c) The customer places order to purchase a specified amount of bitcoin at the rate;

d) The machine confirms the total price for the order in Australian dollars, including the price of the bitcoin;

e) Customer inserts into the machine the relevant amount of Australian dollar bank notes to pay for the order and press 'send';

f) Once payment in Australian dollars has been confirmed, the machine automatically notifies you that payment has been receives and provides the customer's public address for delivery from your bitcoin address;

g) You automatically send bitcoin to the customer's bitcoin public address either from a wallet on a server or device physically located outside Australia or a hosted wallet in your name (hosted outside Australia). Steps (f) and (g) are automated by software used by the machine and you;

h) The owner is obliged to release the sale proceeds in Australian dollars, less the owner's commission, to you or an entity nominated by you - the cash collector.

The cash collector will do one of the following (as agreed between it and you):

a) Collect the sale proceeds on your behalf and remit them to you as agreed, less the fees charged by the cash collector, which is either paid to the cash collector at the time of the transaction, or withheld by cash collector at the time it pays proceeds to you; or

b) Use the sale proceeds (less the fee charged by the cash collector) to acquire bitcoin on your behalf and then transfer that bitcoin to you for simplified remittance.

You have provided us with a copy of the agreement you have with the cash collector. The agreement provides that the cash collector is not your agent, does not have any authority to act for on your behalf other than as required to complete the services in the agreement, and at all times you retain full title and interest in any cash handled by the cash collector.

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 13-5

Reasons for decisions

Question 1

GST is payable on a taxable supply. You make a taxable supply under section 9-5 of the GST Act 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 for GST.

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

All of the above requirements must be satisfied for a supply to be a taxable supply under section 9-5 of the GST Act.

We will now consider whether you satisfy all of the above requirements based on the information you gave to us.

Paragraph 9-5(a) of the GST Act

You satisfy this paragraph as you make the supply of bitcoin for consideration.

Paragraph 9-5(b) of the GST Act

You satisfy this paragraph as you make the supply of bitcoin through the bitcoin business that you are carrying on.

Paragraph 9-5 (c) of the GST Act

Under subsection 9-25(5) of the GST Act, a supply of anything other than goods or real property is connected with Australia if:

a. the supply is done in Australia; or

b. the supplier makes the supply through an enterprise that the supplier carries on in Australia; or

c. all of the following apply:

i. neither paragraph (a) nor (b) applies in respect of the thing;

ii. the thing is a right or option to acquire another thing;

iii. the supply of the other thing would be connected with Australia.

You only need to satisfy one of the paragraphs in subsection 9-25(5) of the GST Act for the supply to be connected with Australia.

Goods and Services Tax Ruling GSTR 2000/31 discusses when a supply is connected with Australia.

Paragraph 9-25(5)(a) of the GST Act

Under paragraph 9-25(5)(a) of the GST Act from the connection with Australia requires that the thing supplied is done in Australia. The meaning of 'done' depends on the nature of the thing being supplied. 'Done' can mean, for example, performed, executed, completed, finished etc depending on what is supplied.

In regard to supply of a service, paragraph 65 of GSTR 2000/31 states:

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.

From the information received, you supply the bitcoin to the customer by transferring the bitcoin electronically from overseas to the customer's bitcoin public address after they paid for the bitcoin order via the machine. In this case, the supply of the bitcoin is done at the time you transfer the bitcoin to the customer's bitcoin public address and, as it is done overseas, the supply of bitcoin is not connected with Australia under paragraph 9-25(5)(a) of the GST Act.

Paragraph 9-25(5)(b) of the GST Act

If a supply of a thing is not connected with Australia because the thing is not done in Australia, the supply is connected with Australia if, under paragraph 9-25(5)(b) the supplier makes the supply through an enterprise that the supplier carries on in Australia. The concept of carrying on an enterprise in Australia is defined in terms of the definition of 'permanent establishment' in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) .

Specifically, under subsection 9-25(6) of the GST Act, the supplier carries on an enterprise in Australia if the enterprise is carried on through:

a) a permanent establishment (as defined in subsection 6(1) of the ITAA 1936); or

b) a place that would be such a permanent establishment if paragraph (e), (f) or (g) of that definition did not apply.

Paragraphs 86, 87 and 88 of GSTR 2000/31 state:

86. There is no specific set of circumstances which must be satisfied before a supply is connected with a permanent establishment. Rather, each case will be determined on the basis of the individual facts and circumstances. However, some factors that will usually indicate that the supply is made through a permanent establishment include:

• the permanent establishment has the authority to sign contracts or accept purchase orders for the supply;

• the permanent establishment has the authority to make important decisions in respect of the supply;

• the permanent establishment physically makes for example, manufactures or produces the supply;

• if the supply is a service, the service is provided by the permanent establishment;

• if the supply is the provision of advice or information such as a legal opinion, the permanent establishment provides that advice or information;

• if the supply is the grant, creation, assignment, transfer or surrender of a right, the permanent establishment grants, creates, assigns, transfer or surrenders that right.

87. The definition of permanent establishment for the purposes of subsection 9-25(6) of the GST Act is wider than the definition of permanent establishment found in subsection 6(1) of the ITAA 1936. This is because the exclusions from a permanent establishment in subsection 6(1) of the ITAA 1936 - paragraphs (e), (f) and (g) are not similarly excluded from the definition of permanent establishment for the purposes of subsection 9-25(6) of the GST Act.

88. Thus, permanent establishment for the purposes of subsection 9-25(6) means a place at or through which a person carries on any business and, without limiting the generality of the foregoing, includes:

a) a place where the person is carrying on business through an agent;

b) a place where the person has, is using or is installing substantial equipment or substantial machinery;

c) a place where the person is engaged in a construction project; and

d) where a person is engaged in selling goods manufactured, assembled, processed, packed or distributed by another person for, or at or to the order of, the first-mentioned person and either of those persons participates in the management, control or capital of the other person or another person participates in the management, control of both of those persons - the place where goods are manufactured, assembled, processed, packed or distributed.

From the information received we consider you are not making your supply of bitcoin through a permanent establishment in Australia as:

• The owner and the cash collector are not involved with your supply of bitcoin to the customer. You therefore are not carrying on your supply of bitcoin through them since they are not acting as your agent when you supply bitcoin to the Australian customer.

• According to paragraphs 114 and 115 GSTR 2014/13, the use of bitcoin machines does not involve transactions from, into or of an account as defined in the dictionary to the GST regulation. Bitcoin in the machines are not part of the machines payment system. Services providing through a bitcoin machine therefore, are not financial supplies. Accordingly, the machine you use is not considered to be substantial machinery at a place in Australia when you supply your bitcoin to the customer.

• You do not physically make (manufacture or produce) the bitcoin that you supply in Australia.

Accordingly, based on the above your supply of bitcoin is not connected with Australia. The requirements in subsection 9-25(5)(b) of the GST Act are not satisfied.

Subsection 9-25(5)(c) of the GST Act

This subsection is not applicable to your supply because the supply of bitcoin is not a supply of right or option to acquire other things where the supply of the other things would be connected with Australia.

Summary

Your supply of bitcoin to the Australian customer is not connected with Australia. Paragraph 9-5(c) of the GST Act is not satisfied.

Paragraph 9-5(d) of the GST Act

Under section 23-5 of the GST Act you are required to be registered for GST if:

a) you are carrying on an enterprise; and

b) your GST turnover meets the registration turnover threshold which currently is $75,000 and $150,000 for non-profit organisation.

When calculating your GST turnover under Division 188 of the GST Act you disregard supplies that are not connected with Australia.

You have advised that this is the only supply you make to Australian customers. As your supply of bitcoin is not connected with Australia, you will not be required to be registered for GST since this supply is not included when calculating your GST turnover

Summary

Your supply of bitcoin to the Australian customer is not a taxable supply under section 9-5 of the GST Act since all the requirements in that section are not satisfied.

Question 2

Taxable importation under division 13 of the GST Act relates to goods that are imported into Australia.

Bitcoin is not goods and therefore Division 13 of the GST Act is not applicable to your supply.