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Edited version of your written advice
Authorisation Number: 1012963538589
Date of advice: 10 February 2016
Ruling
Subject: Service provided by non-resident
Question
Are the supplies of services by a non-resident to Australian consumers connected with the indirect tax zone, and therefore taxable supplies?
Answer
Yes
Relevant facts and circumstances
• The entity is a non-resident for tax purposes
• The entity does not have a permanent establishment in the indirect tax zone
• The entity will commence providing a service to Australian customers in 20XX
• The Australian customers will not be provided with any propriety interest
• The Australian customers will enter into agreements via the internet.
• The service will utilise local infrastructure
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 Subsection 9-5(25).
Reasons for decision
For a supply to be a taxable supply the four requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) must be met. The entity will be making supplies for consideration; the supplies will be in the course or furtherance of an enterprise that they carry on; and that they will be registered or required to register for GST. Further, the supplies are not input taxed or GST-free.
Therefore, what needs to be determined is whether the supplies are connected with the indirect tax zone.
The supplies of services will be connected with the indirect tax zone if the 'thing is done' in the indirect tax zone; or provided through an enterprise carried on by the supplier in the indirect tax zone.
The entity will not be carrying on an enterprise in the indirect tax zone. In determining whether the supply is connected with the indirect tax zone, the supply itself must be characterised, as to whether it is a supply of a right or a service.
On the basis that consumers do not receive any proprietary interest the supply is characterised as a service.
In determining where a supply of the service is done, GSTR 2000/31 'Goods and services tax: supplies connected with Australia' provides guidance. Paragraph 64 GSTR 2000/31 notes that in respect of paragraph 9-25(5)(a) of the GST Act:
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.
As the supply utilises local infrastructure then the services will be done in Australia, and the supply therefore considered to be connected with the indirect tax zone.
As all the requirements of section 9-5 of the GST Act are therefore met, the supply of services by the non-resident is a taxable supply.