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Edited version of your written advice
Authorisation Number: 1013107155805
Date of advice: 13 October 2016
Ruling
Subject: GST and recipient created tax invoices
Question 1
Can Entity A (you) rely on Goods and Service Tax: Recipient Created Tax Invoice Determination (No. 16) 2016 on Licences for Copyright Material for issuing Recipient Created Tax Invoice (RCTI 2016/16) where they purchase media content to provide to other entities and are required to pay a royalty?
Answer
Yes.
Relevant facts and circumstances
You are registered for GST and are in the business of sourcing media content to supply to other entities.
You hold licences to sell and distribute content from the relevant copyright owner.
Your turnover is not over $20 million.
Where you source the media content in Australia from an entity you report to the entity the royalty amount for them to invoice you and provide you with a tax invoice. This has been queried by the entities that hold the copyright as the industry practice is for the recipient to issue an RCTI.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 subsection 29-70(3).
Reasons for decision
RCTI 2016/16 allows a recipient of a taxable supply of a licence to sell or otherwise distribute copyright material to issue RCTIs in relation to the supply, provided the recipient determines the value of the taxable supply as set out in the determination.
Clause 6 provides that a recipient of a taxable supply of a licence to sell or otherwise distribute copyright material may issue a tax invoice call a RCTI for the supply, if the recipient:
(a) establishes the value of the taxable supply as a royalty based on the value of the sales, and
(b) satisfies the requirements set out in Clause 7.
Clause 7 provides that a recipient must satisfy the following requirement when issuing a RCTI under the determination:
(a) be registered for GST,
(b) set out the ABN of the supplier and the RCTI,
(c) issue the original or a copy of the RCTI to the supplier within 28 days of making, or determining, the value of a taxable supply and retain the original or the copy,
(d) the recipient must issue the original or a copy of an adjustment note to the supplier within 28 days of any adjustment and must retain the original or the copy,
(e) reasonably comply with its obligations under the taxation laws, and
(f) have either a written agreement with the supplier that meets the requirements of Clause 8, or a written agreement embedded in the RCTI that meets the requirements of Clause 9.
Clause 8 provides that the written agreement the recipient has with the supplier must:
(a) specify the supplies to which it relates;
(b) be current and effective when the RCTI is issued; and
(c) have the following conditions:
(i) the recipient can issue RCTIs in respect of the supplies;
(ii) the supplier will not issue tax invoices in respect of the supplies;
(iii) the supplier acknowledges that it is registered for GST when it enters into the agreement and that it will notify the recipient if it ceases to be registered for GST; and
(iv) the recipient acknowledges that it is registered for GST when it enters into the agreement and that it will notify the supplier if it ceases to be registered for GST.
Clause 9 provides that the embedded agreement in the RCTI that the recipient has with the supplier must contain the following statement:
The recipient and the supplier declare that this agreement applies to supplies to which this tax invoice relates. The recipient can issue tax invoices in respect of these supplies. The supplier will not issue tax invoices in respect of these supplies. The supplier acknowledges that it is registered for GST and that it will notify the recipient if it ceases to be registered. The recipient acknowledges that it is registered for GST and that it will notify the supplier if it ceases to be registered for GST. Acceptance of this RCTI constitutes acceptance of the terms of this written agreement. Both parties to this supply agree that they are parties to a RCTI agreement. The supplier must notify the recipient within 21 days of receiving this document if the supplier does not wish to accept the proposed agreement.
As you are acquiring and distributing copyright material under a license of the copyright owner and determine the value you will satisfy the requirements under RCTI 2016/16 provided you satisfy the requirements under clause 7 including having a written agreement with the supplier that meets the requirements of Clause 8, or a written agreement embedded in the RCTI that meets the requirements of Clause 9.