Edited version of your written advice

Authorisation Number: 1012909511077

Date of advice: 11 November 2015

Ruling

Subject: GST and supply of services to a non-resident

Question

Is the Australian entity making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it supplies its services to the non-resident company NRCo?

Advice

Yes. The Australian entity making a taxable supply under section 9-5 of the GST Act when it supplies its services to the non-resident company NRCo

Relevant fact

You are an Australian entity and registered for goods and services tax (GST).

You have entered into a contract with a non-resident company, NRCo in which you agree to provide a range of services including training and technical support services to staff of Australian companies that sell NRCo's products in Australia. You invoice NRCo for these services.

You advised your services are neither a supply of work physically performed on goods situated in Australia nor a supply directly connected with real property situated in Australia. All services are done in Australia.

NRCo is incorporated outside Australia and is not a resident of Australia for income tax purposes. It does not carry on an enterprise in Australia through a branch, an agent or a representative and does not have a permanent establishment in Australia. It is neither registered with the Australian Securities and Investments Commission nor registered for GST in Australia.

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 38-190

Reasons for decision

Note: Where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act.

GST is payable on a taxable supply. Under section 9-5 of the GST Act, an entity makes a taxable supply if:

(a) the supply is made for consideration; and

(b) the supply is made in the course or furtherance of an enterprise that the entity carries on; and

(c) the supply is connected with Australia; and

(d) the entity is registered for GST.

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

Your supply of services to NRCo satisfies paragraphs 9-5(a) to 9-5(d) of the GST Act as:

(a) you make the supply for consideration; and

(b) the supply is made in the course of an enterprise that you carry on in Australia; and

(c) the supply of services is connected with Australia as the services are done through an enterprise that you carry on in Australia; and

(d) you are registered for GST.

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

There is no provision under the GST Act that makes your supply of services input taxed.

GST-free supply

Relevant to the supply of services you make to NRCo is 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.

Accordingly, where the provisions in either (a) or (b) above are met, the supply will be GST-free if the non-resident is not in Australia when the thing supplied is done (that is, when the services are performed).

Precondition of item 2 - non-resident is 'not in Australia'

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.

Under paragraph 37 of 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

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

In addition, if a non-resident company is determined to be in Australia on the basis of the above test, it is necessary to determine if the company is in Australia in relation to the supply when the supply is done (that is, when the services are performed).

NRCo is a non-resident company and does not carry on any business through a branch, an agent or a representative in Australia and does not have any presence in Australia in relation to your supply of services. In this case NRCo is 'not in Australia' in relation to your supply of services. The precondition of item 2 is therefore satisfied.

Paragraph (a) of item 2

From the information provided, when you supply your services to NRCo the requirements in paragraph (a) of item 2 are satisfied as:

• the supply of services is made to a non-resident who is not in Australia when the thing supplied is done; and

• the supply of services 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.

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

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

Limitations of item 2 - subsection 38-190(3) of the GST Act

Subsection 38-190(3) of the GST Act provides that, without limiting subsection 38-190(2) or (2A), a supply covered by item 2 in that table 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.

You advised that under the contract with NRCo you are required to provide the services in Australia and it is staff of Australian companies that sell NRCo's products that are in receipt of these services. In this instance, subsection 38-190(3) of the GST Act is applicable as you are required to provide your services to another entity in Australia at the request of NRCo.

Your supply is therefore no longer GST-free under item 2 by virtue of subsection 38-190(3) of the GST Act.

Summary

Your supply of services to NRCo is a taxable supply under section 9-5 of the GST Act.