Edited version of your written advice

Authorisation Number: 1013061959176

Date of advice: 11 August 2016

Ruling

Subject: GST and supplies to a non-resident entity

Questions

1. Is your supply to the non-resident entity access to the server physically located in the indirect tax zone subject to GST?

2. Is your supply to the non-resident entity of access to the cloud server notionally based in outside the indirect tax zone subject to GST?

3. Is your supply of services to the non-resident entity subject to GST?

4. Is the cost that you incur and on-charge to the non-resident entity subject to GST?

5. Is your supply of services performed by your employees while outside the indirect tax zone subject to GST?

Answers

1. No. Your supply to the non-resident entity of access to the server physically located in the indirect tax zone is not subject to GST.

2. No. Your supply to the non-resident entity of access to the cloud server notionally based outside the indirect tax zone is not subject to GST.

3. No. Your supply of services to the non-resident entity is not subject to GST.

4. No. The cost that you incur and on-charge to the non-resident entity is not subject to GST.

5. No. Your supply of services performed by your employees while outside the indirect tax zone is not subject to GST.

Relevant facts and circumstances

You are registered for GST.

You provide the non-resident entity access to a server physically located in your offices in the indirect tax zone and to a cloud server that is notionally based outside the indirect tax zone.

You also provide services to the non-resident entity. Occasionally, you provide these services by sending your employees outside the indirect tax zone to perform the work.

The non-resident entity has ceased operating in the indirect tax zone but is now in the process of moving its operations outside the indirect tax zone.

You bill the non-resident entity monthly for the access to the servers and for the services that you provide.

The amount you bill for the services consists of labour costs calculated on an hourly basis and of the cost that you incur in the course of providing those services.

According to the Australian Business Register (ABR), the non-resident entity is not registered for GST.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5 and

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

Reasons for decision

GST is payable on a taxable supply.

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 the indirect tax zone; 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)

You receive payments for your supplies to the non-resident entity. You make the supply in the course of carrying on your enterprise. The supply is connected with the indirect tax zone as you make it through an enterprise that you carry on in the indirect tax zone. You are registered for GST. All the requirements in paragraphs 9-5(a) to 9-5(d) of the GST Act are satisfied. Therefore, your supplies to the non-resident entity are taxable supplies unless the supplies are GST-free or input taxed.

1. Supply of access to the server physically based in in the indirect tax zone

Under subsection 38-190(1) of the GST Act certain supplies of things, other than goods or real property, for consumption outside the indirect tax zone are GST-free.

Item 2 in the table in subsection 38-190(1) (item 2) provides that a supply that is made to a non-resident who is not in the indirect tax zone when the thing supplied is done is GST-free if:

(a) the supply is neither a supply of work physically performed on goods situated in the indirect tax zone when the work is done nor a supply directly connected with real property situated in the indirect tax zone; 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.

As the non-resident entity has ceased operating in the indirect tax zone and has now moved its operations outside the indirect tax zone, your supply is made to a non-resident entity that is not in the indirect tax zone at the time of supply. The non-resident entity acquires access to the server in carrying on its enterprise but is not registered for GST. Paragraph (b) of item 2 is satisfied. Therefore, your supply to the non-resident entity of access to the server physically located in the indirect tax zone is GST-free under item 2. Accordingly, the supply is not subject to GST.

2. Supply of access to the cloud server notionally based outside the indirect tax zone

As stated in the answer to question 1 above, your supply is made to a non-resident entity that is not in the indirect tax zone at the time of supply; and the non-resident entity acquires access to the server in carrying on its enterprise but is not registered for GST. Therefore, your supply to the non-resident entity of access to the cloud server notionally based outside the indirect tax zone is GST-free under item 2. Accordingly, the supply is not subject to GST.

3. Supply of services

You make the supply of your services to a non-resident entity that is not in the indirect tax zone at the time of supply; and the non-resident entity acquires your services in carrying on its enterprise but is not registered for GST. Therefore, your supply of services to the non-resident entity is GST-free under item 2. Accordingly, the supply is not subject to GST.

4. Cost incurred and on-charged

The cost that you incur in the course of providing your services to the non-resident entity is a business expense which when you on-charge becomes part of the consideration for your supply of services.

As mentioned in the response to question 3 above, your supply of services is GST-free under item 2. Accordingly, the cost that you incur and on-charge to the non-resident entity is not subject to GST.

5. Supply of services performed outside the indirect tax zone

Your supply of services is GST-free under item 2 because of paragraph (b). Where your services are performed in the indirect tax zone the supply may be taxable; however, such is not the case. Accordingly, the supply of services performed by your consultants outside the indirect tax zone is not subject to GST.