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Edited version of your written advice
Authorisation Number: 1013139525791
Date of advice: 15 February 2017
Ruling
Subject: GST and supplies made by a non-resident to a resident
Question 1
Does GST apply to the supply of a membership subscription for which you receive annual membership fees paid by Australian resident members to Entity A?
Answer
Due to an amendment to the GST Act that takes effect from 1 October 2016 the arrangement will need to be addressed in how the GST Act applies before and after the amendment.
Pre 1 Oct 2016
No.
Post 1 Oct 2016
No.
Relevant facts and circumstances
Entity A is a non-resident entity and a wholly owned company of Entity B, a company resident outside of Australia.
Entity A provide annual membership subscription to entities worldwide including Australia. The membership subscription entitles members with access to research, decision support tools and education. Members are mainly companies, although some members are partnerships. Many entities have multiple memberships based on the individuals nominated by the entity to take up membership.
You stated that you provided to your subscribers (that is, members) the information via access from your website. Your website is maintained outside Australia and you have no domain in Australia.
You also provide retention activities are such things as optional meetings/seminars/presentations which may be held in Australia.
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 subsection 9-25(5), and
A New Tax System (Goods and Services Tax) Act 1999 section 9-26.
Reasons for decision
Pre 1 October 2016 amendment
GST is payable on a taxable supply. Section 9-5 of the GST Act provides that 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 for GST.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
All the requirements in section 9-5 of the GST Act need to be satisfied for the supply of services to be a taxable supply.
From the information received, you make the supply of services for consideration being the subscription amount and you make the supply in the course of an enterprise that you carry on. Paragraphs 9-5(a) and 9-5(b) of GST Act are therefore satisfied.
Paragraph 9-5 (c) of the GST Act considers if 'the supply is connected with the indirect tax zone'. Under subsection 9-25(5) of the GST Act, a supply of anything other than goods or real property is connected with Australia if:
(a) the thing is done in Australia; or
(b) …
Under paragraph 9-25(5)(a) of the GST Act we consider that the thing being supplied is a service the supply of that service is typically done where the service is performed. In your case, the supply of membership services (access to research, decision support tools and education) is made outside of the indirect tax zone.
With the exception of the following services that are made by another entity on your behalf that are done in Australia under a subcontract:
● Providing ongoing day to day customer services to Members,
● Assisting Members, and
● Providing member retention activities.
From the information received, your supply of services, where they are done in the indirect tax zone by another entity, will be connected with Australia as such subsection 9-25(5) of the GST Act is satisfied.
However, paragraph 93 of Goods and Services Tax Ruling GSTR 2000/31 provides guidance when a supply is connected with Australia and provides that if the doing of one part of a thing may reasonable be regarded as merely incidental to the doing of another part of the supply, the incidental part is taken to be done where the part to which it is incidental is done.
Therefore, in this circumstance we take the position that the services that the other entity makes to Entity A, under contract, are part of the services Entity A makes to their Australian members are incidental to the doing of the other part of the supply under the subscription for a member in Australia.
Accordingly, the supply under the membership subscriptions is not connected with Australia and paragraph 9-25(5)(a) of the GST Act is not satisfied.
Since your supply of the membership services is not connected with Australia, paragraph 9-5(c) of the GST Act is not satisfied and the supply is not taxable.
Furthermore in relation to the GST registration requirements under paragraph 9-5(d) of the GST Act, you are currently not registered for GST. Also, as the supply of your membership services are not connected with Australia, this supply is excluded from the calculation of your GST turnover for GST registration purposes.
Accordingly, your supply of membership services is not a taxable supply under section 9-5 of the GST Act. There is no need to consider whether your supply of services is GST-free or input taxed since GST is not applicable to the supply.
Post 1 October 2016 amendment
GST is payable on a taxable supply. Section 9-5 of the GST Act provides that 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 for GST.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
All the requirements in section 9-5 of the GST Act need to be satisfied for the supply of services to be a taxable supply.
From the information received, you make the supply for consideration being the subscription amount and you make the supply in the course of an enterprise that you carry on. Paragraphs 9-5(a) and 9-5(b) of GST Act are therefore satisfied.
Paragraph 9-5 (c) of the GST Act considers if 'the supply is connected with the indirect tax zone'. Under subsection 9-25(5) of the GST Act, a supply of anything other than goods or real property is connected with Australia if:
(a) the thing is done in Australia; or
(b) …
Under paragraph (a) we consider that if the thing being supplied is a service the supply of that service is typically done where the service is performed. In your case, the supply of the membership services (access to research, decision support tools and education) is made outside of the indirect tax zone.
As the following services under the membership made by Entity A below are done in Australia under a subcontract with another entity they will be connected with Australia under subsection 9-25(5) of the GST Act.
● Providing ongoing day to day customer services to Members,
● Assisting Members, and
● Providing member retention activities.
However, section 9-26 of the GST Act is relevant in this situation as this provision
is for supplies by non-residents that are not connected with the indirect tax zone. Of particular relevance is item 1 in the table in subsection 9-26(1) of the GST Act and provides:
(1) A supply is not connected with the indirect tax zone if:
(a) The supplier is a non-resident; and
(b) The supplier does not make the supply through an enterprise that the supplier carries on in the indirect tax zone; and
(c) The supply is covered by an item in this table:
Item 1 Inbound intangible supply
A supply of anything other than goods or real property if:
(a) the thing is done in the indirect tax zone; and
(b) the recipient is an Australian-based business recipient of the supply.
Under subsection 9-26(2) of the GST Act an entity is an Australian based business recipient of a supply made to an entity if:
(a) the entity is registered; and
(b) an enterprise of the entity is carried on in the indirect tax zone; and
(c) the entity's acquisition of the thing supplied is not solely of a private or domestic nature.
Therefore, as Entity A is a non-resident, does not make the supply of services through an enterprise that Entity A carries on in the indirect tax zone, and where Entity A makes part of the supply in the indirect tax zone to an Australian-based business recipient the supply will not be connected with the indirect tax zone.
Consequently, Entity A's supply under the subscription will not satisfy section 9-5 of the GST Act and will be out of scope for GST.