Edited version of your written advice

Authorisation Number: 1051211997031

Date of Advice: 12 April 2017

Ruling

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

Question

Will your supply of professional services to the non-resident company be a GST-free supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) where you will be required to provide the services to an Australian company in Australia?

Advice

Yes, your supply of professional services 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 where you will be required to provide the services to an Australian company in Australia.

Relevant facts

You carry on a business in Australia and you are registered for the goods and services tax (GST).You supply professional services.

You have been contacted by a non-resident company to provide your professional services to its customer, an Australian company in Australia. The Australian company is registered for GST

The non-resident Company does not carry on any business operations at a fixed place in Australia.

You are neither an employee nor a manager of the non-resident company. You will be supplying the services to the Australian company as a subcontractor and on behalf of 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.

Detailed reasoning

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.

From the information received, your supply will satisfy paragraphs 9-5(a) to (d) of the GST Act as:

You will make the supply for consideration;

The supply will be made in the course of a business that you carry on;

The supply will be connected with Australia as it will be made through a business that you carry on in Australia;

You are registered for GST.

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

Your supply of professional services is not an input taxed supply under the GST Act.

GST-free supply

Relevant to your supply of professional 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 that is not in Australia when the thing supplied is done, and:

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

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.

Only one of the paragraphs in item 2 needs to be satisfied for your supply to be GST-free under 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.

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.

From the information received, your supply will satisfy paragraph (a) of item 2 as:

(a) Your supply will be made to a non-resident company that is not in Australia in relation to your supply;

(b) Your supply of professional services 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 professional services will be GST-free under paragraph (a) of item 2 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 as paragraph (a) is satisfied.

Subsection 38-190(3) of the GST Act

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:

It is a supply under an agreement entered into, whether directly or indirectly, with a non-resident; and

The supply is provided or the agreement requires it to be provided to another entity in Australia; and

For a supply other than an input taxed supply - none of the following applies:

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

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

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.

From the information received, your supply will satisfy paragraphs (a) and (b) of subsection 38-190(3) of the GST Act as you will have an agreement with a non-resident and under the agreement you will be required to provide your business to an Australian company. However, paragraph (c) in subsection 38-190(3) of the GST Act will not be satisfied since the Australian company to whom you will be required to provide your services is registered for GST and acquires your services for its business purposes.

Subsection 38-190(3) of the GST Act therefore will not negate the GST-free status of your supply under paragraph (a) of item 2. Your supply of professional services to the non-resident company will be GST-free under paragraph (a) of item 2 when you will be required to provide the services to the GST registered Australian company.