Edited version of your written advice

Authorisation Number: 1013007566235

Date of advice: 10 May 2016

Ruling

Subject: GST and supply of planning and marketing support services

Question 1

Is the provision of planning and marketing support services made by you to the non-resident company under the Agreement a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Advice

No. The provision of planning and marketing support services made by you to the non-resident company under the Agreement is a GST-free supply under paragraph (a) of item 2 in the table in subsection 38-190(1) of the GST Act to the extent the supply is not negated by subsection 38-190(3) of the GST Act.

Question 2

Is the provision of the sponsorship support and planning and marketing support made by you to the non-resident company under the Funding Agreement a taxable supply under section 9-5 of the GST Act?

Advice

The Funding Agreement provides that you are to supply planning and marketing support and supply of sponsorship support to the non-resident.

The supply of the planning and marketing support made by you to the non-resident company is a GST-free supply under paragraph (a) of item 2 in the table in subsection 38-190(1) of the GST Act to the extent the supply is not negated by subsection 38-190(3) of the GST Act.

The GST status of the support of the sponsorship support will depend on the contract or arrangement in place with the supplier and therefore can only be determined on the facts of each supply.

For tax invoice 1, you made a taxable supply of sponsorship support under section 9-5 of the GST Act to non-resident A when you contracted an Australian entity to provide the Australian activities to the non-resident A's employees in Australia.

In regard to tax invoice 2, for the supply of sponsorship support to non-resident B, you did not make any supply under subsection 9-10(4) of the GST Act to non-resident B because you made a supply of money when you gave the agreed amount of sponsorship fee directly to non-resident B.

Question 3

Is the grant of the sponsorship rights by the non-resident company to you described below a taxable supply for the purposes of 11-5(b) of the GST Act:

i. Scenario A:

• The non-resident company is not a resident of Australia nor has an Australian permanent establishment for tax purposes i.e. the client is not a company incorporated in Australia, nor does it carry on business in Australia. It neither has its central management and control in Australia, nor its voting power controlled by shareholders who are residents of Australia;

• The Sponsorship Agreement is executed within Australia; and

• The total Australian GST turnover for the client (including the value of supplies made in accordance with the terms of the Agreement) is more than $75,000.

ii. Scenario B: As above for Scenario A, with the exception of:

• The total Australian GST turnover for the client (including the value of supplies made in accordance with the terms of the Agreement) is less than $75,000; and

• The client is not registered for GST in Australia.

iii. Scenario C: As above for Scenario A, with the exception of:

• The Sponsorship Agreement is executed outside Australia; and

• The total Australian GST turnover made by the client may be less than or more than $75,000.

Advice

Scenario A:

The supply of sponsorship rights by the non-resident company to you is a taxable supply under section 9-5 of the GST Act for the purposes of paragraph 11-5(b) of the GST Act.

Scenario B:

The supply of sponsorship rights by the non-resident company to you is not a taxable supply under section 9-5 of the GST Act for the purposes of paragraph 11-5(b) of the GST Act.

Scenario C

Where the total Australian GST turnover of the non-resident company is less than $75,000, the supply of sponsorship rights by the non-resident company to you is not a taxable supply under section 9-5 of the GST Act for the purposes of paragraph 11-5(b) of the GST Act.

Where the total Australian GST turnover of the non-resident company is more than $75,000, the supply of sponsorship rights by the non-resident company to you is not a taxable supply under section 9-5 of the GST Act for the purposes of paragraph 11-5(b) of the GST Act.

Relevant fact

You an Australian company and registered for the goods and services tax (GST).

You supply planning and marketing support to non-residents who would be holding events in Australia under either an Agreement or a Funding Agreement you have entered with them.

The non-resident does not have an Australian permanent establishment for tax purposes because it is not a company incorporated in Australia. The non-resident does not carry on any business in Australia, and neither does it have its central management and control in Australia nor its voting power controlled by shareholders who are residents of Australia.

Representatives of the non-resident may be present in Australia from time to time during the preparatory stage leading up to the event or during the event in order to plan and organise the event. Their presence in Australia would be of up to a week at a time and they will not have at their constant disposal premise(s) or part of premise(s) owned by another entity in Australia. The representatives may be:

• employees of the non-resident involved in the planning and logistics of the event,

• paid executives of the non-resident to attend planning meetings; or

• volunteer office bearers for short logistical visits.

The non-resident may appoint an Australian professional organiser (PCO) or an ITO to plan and organise the event. There is no direct relationship between the PCO/ITO and you. You contract with the non-resident to provide planning and marketing support. If the PCO/ITO acts as agent for the non-resident, there may be consultation and financial flows between you and the PCO/ITO under the agency agreement with prior approval of the non-resident. You are not privy to arrangement between ITO/CPO and the non-resident.

Agreement

Under the Agreement you supply planning and marketing support to the non-resident and in return the non-resident will grant you sponsorship rights.

In regard to planning activity, you provide advice to the non-resident on products and services available in Australia and, connect the non-resident to appropriate contacts to assist in the logistics of the events.

The marketing support you supply for the event may include:

• the development of a logo for the event;

• attending international seminars to promote the non-resident's Australian event; and

• communicating with potential delegates regarding the event in the period leading up to and during the event.

You discuss with the non-resident what marketing support is most appropriate for its needs and will then deliver on this during the lead up to the event. This will be items for the website or postcards and flyers or a promotional DVD of its executive promoting Australia as the destination for the event. You will work with the non-resident on the timeline for the implementation of the activities. Third party involvement with the marketing may include an external supplier such as a video production company or a supplier of exhibition booth overseas.

You design/create event logo, customised DVD, promotional banners, printed collateral products and the purpose of these products is to create awareness of the Australian event and to encourage attendance. The monetary value will vary according to the quantities produced. The products are delivered to the non-resident for dispersal to potential delegates at either Australian or overseas opportunities.

Funding Agreement

Under the Funding Agreement, you provide sponsorship support and planning and marketing support for an agreed amount to the non-resident and the non-resident will grant you with sponsorship rights equivalent to the total amount of the supply of sponsorship support and planning and marketing support.

Under the Event Funding Agreement the sponsorship support is a sponsorship fee which will be used towards the cost of a venue hire or to a visit an Australian attraction. You will make payment to Australian based suppliers as agreed with and authorised by the non-resident on receipt of a tax invoice and documentation for services rendered.

As examples of how the sponsorship fee is used, you have provided us with copies of two tax invoices and a copy of an agreement you had with the supplier of the Australian activity.

Tax invoice 1

Tax invoice 1 is for an activity to be done in Australia. The invoice was addressed to you and was sent directly to you for payment. You made the payment to the supplier and no payment was made to non-resident A.

You entered into an agreement with the supplier of the Australian activity and in the agreement you requested that the Australian activity to be provided to the employees of non-resident A. You agreed to pay an initial payment for the provision of the activity and to pay the supplier the remaining amount after the employees did the activities.

Tax invoice 2

The tax invoice from the supplier was addressed to non-resident B, the client with whom you had the Funding Agreement and provided details of the amount to be paid.

The invoice was provided to you as evidence that the expenditure was incurred by non-resident B. A separate invoice was issued to you by non-resident B for the agreed sponsorship fee and you paid that amount to non-resident B.

You had no arrangement with the supplier and their documentation was simply proof of expenditure. The supplier was not aware of your agreement with non-resident B and therefore you had no communication with the supplier on this matter. Non-resident B was responsible to make the payments to the supplier for that tax invoice.

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 9-10(4)

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

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Detailed reasoning

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

Question 1

Your planning and marketing support to the non-resident includes supply of goods (design and production of conference logo, DVD, banners printed collateral and supplying promotional goods at marketing opportunities).

In this instance we have to determine the character of the supplies being made when you supply the planning and marketing support to the non-resident for the Australian event.

Characterisation of supply

Where a transaction comprises a bundle of features and acts, it may be necessary to characterise what is supplied to determine whether a particular provision applies in whole or in part. The characterisation should be undertaken in a manner that is consistent with the object of the particular statutory provision in issue.

By having regard to the essential character or features of the transaction it can be ascertained whether a supply contains separately identifiable taxable and non-taxable identifiable parts or it is a composite supply of one thing.

It is a composite supply of one thing if one part of the supply should be regarded as being the dominant part, with the other parts being integral, ancillary or incidental to that dominant part.

Goods and Services Tax Ruling GSTR 2001/8 provides guidance on mixed and composite supplies. Paragraph 59 of GSTR 2001/8 provides some indicators on when a part may be integral, ancillary or incidental to a supply and includes:

• You would reasonable conclude that it is a means of better enjoying the dominant thing supplied, rather than constituting for customers an aim in itself; or

• It represents a marginal proportion of the total value of the package compared to the dominant part; or

• It is necessary or contributes to the supply as a whole, but cannot be identified as the dominant part of the supply; or

• It contributes to the proper performance of the contract to supply the dominant part.

Based on the information you gave us, we consider you are making a composite supply with the planning and marketing support as the dominant part of your supply. The goods (production of conference logo, DVD, banners printed collateral and supplying promotional goods at marketing opportunities) are incidental to your supply of planning and marketing support as the goods are necessary to contribute to the supply of the dominant part as a whole and also contribute to the proper performance of the contract you have with the non-resident in regard to the planning and marketing support for an event in Australia.

For GST purposes, the planning and marketing support is a supply of services. We will now consider the GST status of the supply of services in regard to the planning and marketing support for an event in Australia.

GST status of the supply of services

A supply is a taxable supply under section 9-5 of the GST Act if:

(a) you make the supply for consideration;

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

(c) the supply is connected with the indirect tax zone (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.

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

(a) you make the supply for consideration; and

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

(c) your supply is connected with Australia as the supply is 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 a GST-free or input taxed supply.

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

GST-free supply

Relevant to your supply of services that you make to the non-resident 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.

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 in 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

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

We consider that it would be reasonable for a supplier to conclude that a non-resident company is in Australia if:

• the company is registered with ASIC; or

• the company has a permanent establishment in Australia for income tax purposes.

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).

A non-resident company 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. If the supply is not for the purposes of the Australian presence but that Australian presence is involved in the supply, the company is in Australia in relation to the supply except where the only involvement is minor.

The non-resident company does not have a permanent establishment in Australia, does not carry on any business in Australia and neither does it have its central management and control in Australia nor its voting power controlled by shareholders who are residents of Australia. In this case the non-resident 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 the non-resident 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.

Your supply of services is GST-free under paragraph (a) of item 2 to the extent it is not negated by subsection 38-190(3) of the GST Act.

Paragraph (b) of item 2

Under paragraph (b) of item 2, a supply is GST-free if the non-resident entity acquires its services in acquiring on its business, and is neither registered nor required to be registered for GST.

The supplier must be satisfied, on reasonable grounds that the non-resident is not required to be registered for GST before they can treat their supply as GST-free under paragraph (b) of item 2.

Where the supplier is not in a position to be aware of these circumstances, enquiries should be made of the non-resident. The Commissioner accepts that the supplier has reasonable grounds to be satisfied, if the non-resident has provided a signed written statement, declaring that they are not required to be registered. This is only accepted where the supplier has no reasons to believe the statement is not accurate.

From the facts the non-resident will hold an event in Australia. The entry to an event in Australia is connected with Australia and is a taxable supply if the supplier is registered for GST.

Where for supplies that are connected with Australia, the GST annual turnover (current and projected) of the non-resident is $75,000 or above, the non-resident will be required to be registered for GST. In this instance paragraph (b) of item 2 will not be satisfied.

Where the non-resident is not required to be registered for GST, paragraph (b) of item 2 will be satisfied as the non-resident acquires the services in acquiring on its business, and is neither registered nor required to be registered for GST. The supply will be GST-free to the extent it is not negated 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.

Paragraph (a) of subsection 38-190(3) of the GST Act

Paragraph (a) of subsection 38-190(3) of the GST Act is satisfied as you have entered into an agreement with the non-resident.

Paragraph (b) of subsection 38-190(3) of the GST Act

Goods and Services Tax Ruling GSTR 2005/6 provides guidance on the application of paragraph (b) in subsection 38-190(3) of the GST Act. Paragraphs 59, 61 and 62 state:

59. The word 'provided' is used in subsection 38-190(3) to contrast with the term 'made' in item 2. In the context of section 38-190, the contrasting words indicate that if a non-resident contracts for a supply to be provided to another entity, the place of consumption should be determined with regard to the entity to which the supply is provided, not the entity to which the supply is made.

61. Thus the expression 'provided to another entity' means in our view that in the performance of a service (or in the doing of some thing), the actual flow of that supply is, in whole or part, to an entity that is not the non-resident entity with which the supplier made the agreement for the supply. The contractual flow is to one entity (the non-resident recipient) and the actual flow of the supply is to another entity.

62. For example if a supply of entertainment services is made to a non-resident company and in the performance of that service the employees are the entities that are entertained, the actual flow of that service is to another entity, each employee. The supply is made to the non-resident company (the employer) and provided to another entity (each employee).

Thus the focal point in working out whether a supply is provided to another entity is the facts and circumstances of the doing of the thing supplied. By the supplier examining what it is required to do and in what circumstances, the supplier is able to objectively determine to whom the supply is provided.

As part of your planning activity, you provide advice to the non-resident on products and services available in Australia and, connect the non-resident to appropriate contacts to assist in the logistics of the events. Representative of the non-resident may be present in Australia from time to time during the preparatory stage leading up to the event or during the event in order to plan and organise the conference.

Further, the non-resident may appoint an Australian professional organiser (PCO) or an ITO to plan and organise the event. If the PCO/ITO acts as agent for the non-resident, there may be consultation and financial flows between you and the PCO/ITO under the agency agreement with prior approval of the non-resident. You are not privy to arrangement between ITO/CPO and the non-resident.

In regard to a non-resident having a representative in Australia for example an employee, paragraphs 122 to 124 in GSTR 2005/6 state the following:

Determining whether a supply made to a non-resident employer is provided to an employee in Australia

122. To determine whether a supply is provided to an employee, it is essential to examine the nature of the supply closely. By examining what is really being supplied and how that supply is carried out, it is possible to establish to whom the service or other thing is provided, that is, the employer or another entity, the employee. If the supply is provided to the employee it is then necessary to consider if the employee's presence at a particular location is integral to the provision of that supply.

123. For example, a non-resident sole trader engages an Australian accounting firm to prepare Australian tax returns for non-resident employees working in Australia. The service involves the accounting firm meeting with the employees in Australia and preparing their individual tax returns. The tax return services are about the tax obligations of each individual. The tax return preparation services in these circumstances are provided to the individual employee. The employee is in Australia when the service is performed and that employee's presence in Australia is integral to, as distinct from being merely coincidental with, the provision of the supply. The supply otherwise covered by item 2 is not GST-free.

124. Where an employee is involved with the provision of a supply, the weight to be given to that fact differs according to the circumstances of the supply in question. In the above example, the fact that the employee has contact with the supplier strongly indicates, in the circumstances of the supply, that the supply is provided to that employee. On the other hand, contact by an employee with a supplier is of little relevance in circumstances where the employee's involvement with the provision of the supply is simply to facilitate the provision of the supply to the non-resident employer. This is the case where, for example, an employee of a non-resident employer interacts with a law firm in circumstances where the firm is providing legal advice concerning a business venture of the non-resident employer.

Representative in Australia

Where your contact with the representative in Australia allows you to facilitate the provision of your supply of planning services to the non-resident under the agreement (for example arranging an appropriate contact for the representative), you are not considered to be providing your supply to the representative. In this instance subsection 38-190(3) of the GST Act does not apply.

Where at any time you provide services that are personal to the representative that is, the services are of a kind that must be received by the representative (for example supply of travel that is undertaken by the representative, supply of entertainment or supply to facilitate the visa application for that representative while in Australia or other supplies that applied to that person), subsection 38-190(3) of the GST Act is applicable. That part of the supply to the non-resident will not be GST-free under item 2. You will need to apportion the consideration you receive between the GST-free and taxable supplies you make to the non-resident on a fair and reasonable basis.

Goods and Services Tax Ruling GSTR 2001/8 which is available from the legal database of www.ato.gov.au may be of assistance in regard to apportioning the consideration.

Contact with PCO/ITO or any third entity in Australia

If as part of making your supply of services to the non-resident, you are involved with the PCO / ITO or any third entity in regard to the organisation of the Australian event and/or in the holding of the Australian event with the approval of the non-resident, subsection 38-190(3) of the GST Act will apply. That part of your supply is not GST-free under item 2 and you will need to apportion the consideration you receive between the taxable and GST-free supplies you make to the non-resident.

Summary

Your supply of planning and marketing support services is GST-free under paragraph (a) of item 2 to the extent it is not negated by subsection 38-190(3) of the GST Act.

Where subsection 38-190(3) of the GST Act is applicable, you will need to apportion the consideration for the taxable and GST-free supply under a fair and reasonable basis.

Question 2

Under the executed Confidential Event Funding Agreement, you provided sponsorship support and planning and marketing support for an agreed amount to the non-resident and the non-resident will grant you with sponsorship rights equivalent to the total amount of the supply of sponsorship support and planning and marketing support.

Planning and Marketing support

As discussed in question 1, your supply of planning and marketing support to the non-resident is GST-free to the extent that it is not negated by subsection 38-190(3) of the GST Act.

Sponsorship support

Under the Event Funding Agreement the sponsorship support is a sponsorship fee which will be used towards the cost of a venue hire or to a visit an Australian. You will make payment to Australian based suppliers as agreed with and authorised by the non-resident on receipt of a tax invoice and documentation for services rendered.

Tax invoice 1

In the Funding Agreement, you and non-resident A agreed that the sponsorship fee is to be used for the provision of Australian activities to the employees of non-resident A when they are in Australia in regard to the sponsorship support. Accordingly the character of the supply of sponsorship support to be made to non-resident A is the provision of the Australian activities to the employees of the non-resident.

To supply your sponsorship support to non-resident A, you contracted an Australian supplier for the provision of the Australian activities to the employees. In this instance subsection 38-190(3) of the GST Act is applicable to your supply of sponsorship support since it is the employees who are in receipt and enjoying the Australian activities though it was made to non-resident A. Your supply of sponsorship support is therefore a taxable supply under section 9-5 of the GST Act.

Invoice 2

In this case you and non-resident B agreed that for the sponsorship support the sponsorship fee is to be used for a hired venue. You made the payment of the sponsorship fee to non-resident B on receipt of an invoice from them and a copy of the tax invoice that non-resident B has received from the supplier of the hired venue. You had no involvement, agreement or arrangement with the supplier of the hired venue in regard to its supply to non-resident B .In this instance, we consider you only provided money to non-resident B so that non-resident B could pay all or part of the consideration of the venue it acquired from the supplier of the hired venue.

A supply of money is not a supply under subsection 9-10(4) of the GST Act. Accordingly, you have not made any supply to non-resident B when you agreed to supply the sponsorship support to non-resident B and to pay the agreed amount directly to them.

Note: The money you paid to the non-resident is part of the consideration of the acquisition of sponsorship rights from the non-resident since the sponsorship fee and the planning and marketing support are the total amount payable as consideration for the grant of the sponsorship rights.

Summary

The supply of marketing and support services will be GST-free under paragraph (a) of item 2 in the table in subsection 38-190(1) of the GST Act to the extent it is not negated by subsection 38-190(3) of the GST Act.

The GST status of the support of the sponsorship support will depend on the contract or arrangement in place with the supplier.

You made a taxable supply of sponsorship support under section 9-5 of the GST Act to the non-resident when you contracted the Australian supplier to provide the Australian activities to the non-resident's employees in Australia.

For the supply of sponsorship support to the non-resident, you did not make any supply under subsection 9-10(4) of the GST Act to the non-resident because you made a supply of money when you gave the agreed amount of sponsorship fee directly to the non-resident.

Question 3

A supply is a taxable supply under section 9-5 of the GST Act if:

(a) you make the supply for consideration;

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

(c) the supply is connected with the indirect tax zone (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.

Scenario A:

The supply of the sponsorship rights by the non-residents satisfies all the requirements in section 9-5 of the GST Act and therefore is a taxable supply.

Scenario B

The supply of the sponsorship rights is not a taxable supply under section 9-5 of the GST Act as the non-resident is not required to be registered for GST. The supply will not be subject to GST.

Scenario C

The supply of the sponsorship rights is not a taxable supply under section 9-5 of the GST Act and therefore not subject to GST as the supply is not connected with Australia and the non-resident is not required to be registered for GST.

Where the GST annual turnover is more than $75,000, the non-resident is required to be registered for GST in Australia. However, the supply of the sponsorship rights is not a taxable supply under section 9-5 of the GST Act because the supply is not connected with Australia when the agreement is executed outside Australia.