Edited version of your written advice

Authorisation Number: 1013136905031

Date of advice: 8 December 2016

Ruling

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

Question

Based on the information given, was your supply of filming services of X videos in Australia made to the non-resident company a GST-free supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes. Based on the information received, your supply of filming services of X videos in Australia to the non-resident company was a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.

Relevant facts

You carry on your business activity in Australia and are registered for the goods and services tax (GST).

You were contacted by a staff of a company located outside Australia (non-resident company) in regard to filming services for X videos in Australia for their Australian client, an Australian company. The Australian company is registered for GST.

You agree to supply your services and equipment to the non-resident company under the verbal arrangement you have with the staff. You do not have a written contract with the non-resident company. The arrangement for your supply was discussed prior to the work being undertaken.

You organised the schedule and filming during the shooting. During editorial the staff would give feedback via electronic communication.

You did not have any direct contact or electronic communication from the Australian client. The Australian client would provide feedback of the edit to the staff who would forward details on to you. Your responsibility was to make any changes to the video based on their feedback.

The editing of the footage was outsourced to another Australian business who supplied you with X data files. These data files were sent via the internet to the non-resident company.

You retained the original footage on an electronic storage device purchased by the non-resident company and this is kept on an electronic storage device in Australia. You did not charge a fee for keeping the original footage.

You provided the staff with the link for your relevant account (internet file delivery platform). The staff then forwarded the link to the Australian client so that the Australian client could download the video data files from your relevant account. There was no arrangement with the staff for you to supply the files to the Australian client.

The Australian client acquired the video data files for its business.

You have invoiced the non-resident company for payment of your supplies. Your invoice itemises the cost for your services, equipment and goods used during the shooting. The price included GST.

You owned copyright of the video data files until payment is made in full. Copyright is then transferred to the non-resident company.

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 section 195-1 of the GST Act.

Characterisation of supply

From the information received you agreed to shoot and edit X videos and to provide the copyright of the video data files to the non-resident company upon receipt of payment. You have invoiced the non-resident company for your services, goods and equipment.

We consider you made a supply of filming services to the non-resident company. In the invoice you itemised the price for the use of your services, goods and equipment to the non-resident company. In this instance, it was a business decision you made when providing detail of the expenses you incur for filming services the X videos in the invoice since the non-resident company has acquired through your filming services the video data files and not the listed expenses in the invoice. The itemised items do not change the nature and character of your supply to the non-resident company which is filming services for the videos and providing copyright of the video data files to the non-resident company after receipt of payment.

Accordingly, your supply to the non-resident company is a supply of filming services (services). We will now determine the GST status of your supply of services.

GST status of your supply of services

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

a) the supplier makes the supply for consideration; and

b) the supply is made in the course of an enterprise that the supplies carries on; and

c) the supply is connected with Australia; and

d) the supplier is registered for GST.

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

You must satisfy all of the above for your supply to be a taxable supply and to be liable for GST.

From the information given you satisfy all requirements in paragraphs 9-5(a) to 9-5(d) of the GST Act when you supplied your services as:

a) you made your supply for consideration;

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

c) your supply is connected with Australia as the supply of services was done in Australia and made through a business 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 your supply of services to the non-resident company 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.

The requirement that the non-resident in item 2 is not 'in Australia' when the thing supplied is done is a requirement that the non-resident is not in Australia in relation to the supply when the thing supplied is done.

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 the Australian Securities and Investment Commission (ASIC); or

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

From the facts given, the company Done and Dusted Inc is not incorporated in Australia and is therefore a non-resident of Australia. The non-resident company is not carrying on business or activities at a fixed and definite place of its own in Australia. The requirement for the non-resident not to be 'in Australia in relation to the supply' is therefore satisfied.

The next step is to consider the paragraphs in item 2. Only one of the paragraphs needs to be satisfied for the supply of services to be GST-free under item 2.

Paragraph (a) of item 2

Paragraph (a) of item 2 requires that 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 satisfy paragraph (a) of item 2 since the supply is neither a supply of work physically performed on goods situated in Australia when the work was done, nor a supply directly connected with real property situated in Australia.

Your supply of services is GST-free to the extent that it is not negated by subsection 38-190(3) of the GST Act.

There is no need to consider paragraph (b) of item 2 since paragraph (a) of item 2 is satisfied.

For more in information on 'when a supply is a supply of work physically performed on goods and when a supply is directly connected with real property' refer to Goods and Services Tax Ruling GSTR 2003/7 available at www.to.gov.au

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

Subsection 38-190(3) of the GST Act before 1 October 2016

Subsection 38-190(3) of the GST Act provided 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.

Current subsection 38-190(3) of the GST Act

An amendment was made to subsection 38-190(3) of the GST Act recently. From 1 October 2016, the amended 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; and

c) for a supply other than an input taxed supply - none of the following applies:

i. the other entity would be an Australian-based business recipient of the supply, if the supply had been made to it;

ii. the other entity is an individual who is provided with the supply as an employee or officer of an entity that would be an Australian-based business recipient of the supply, if the supply had been made to it; or

iii. the other entity is an individual who is provided with the supply as an employee or officer of the recipient, and the recipient's acquisition of the thing is solely for a creditable purpose and is not a non-deductible expense.

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 and 61 in GSTR 2005/6 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 something), 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.

Based on the information given, you were not required to provide your services to the Australian client and you did not have any contact with the Australian client. In this instance subsection 38-190(3) of the GST Act is not applicable to the supply.

Your supply of services was therefore GST-free under paragraph (a) of item 2.