Edited version of your written advice

Authorisation Number: 1013136969431

Date of advice: 8 December 2016

Ruling

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

Question 1

Based on the information given, will your supply of filming and post-production services for a number of videos in Australia to the non-resident company be a GST-free supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Advice

Yes. Based on the information given, your supply of filming and post-production services for a number of videos in Australia to the non-resident company will be 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 non-resident company located outside Australia in regard to the delivery of video data files which will be transmitted via an online file delivery platform.

The non-resident company has requested a quote for the filming of a number of videos in Australia and the post-production services. The non-resident company will acquire the videos for their business purposes and is not registered for GST.

You will own the copyright of the material until payment is made in full; the copyright will then be transferred to the non-resident company.

You advised that you will provide services and equipment to the non-resident company and, will itemise your services, equipment and the post-production services made by the third party in the invoice that you will provide to the non-resident company.

The post-production services will be outsourced to another Australian company who will supply you with video data files. These data files will be sent via the internet to the non-resident company.

The non-resident company will be involved in the creative process. You will receive brief via the staff of the non-resident company.

The third party involved with your supply to the non-resident company will be the editor for the post-production services.

The non-resident company is not in Australia at any time and will have no representative in Australia when you make your supply.

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 have been asked to provide a quote for the filming and post-production services of some videos in Australia. You will provide the copyright of the video data files to the non-resident company upon receipt of payment. You advised you will provide your services and equipment to the non-resident company when filming and editing the videos; you will invoice the non-resident company for your services, equipment and the post-production services made by the third party. These expenses will be itemised in the invoice.

We consider you made a supply of filming and post-production services to the non-resident company. You advised that in your invoice to the non-resident company, you will itemise the price for the use of your services, goods and equipment. In this instance, it is a business decision you will make when providing detail of the expenses you will incur for filming and editing the videos in the invoice since the non-resident company will acquire through your filming and post-production 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 and editing 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 and post-production 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 will supply your services as:

a) you will make your supply for consideration;

b) you will make 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 will be done in Australia and will be 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 non-resident company is not incorporated in Australia and is therefore a non-resident of Australia. The non-resident company is not carrying on any 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 will be done, nor a supply directly connected with real property situated in Australia.

Your supply of services is GST-free to the extent that it us 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, subsection 38-190(3) of the GST Act is not applicable to your supply of service since you will not be required to provide your services to another entity in Australia.

Your supply of services will be GST-free under paragraph (a) of item 2.