Edited version of your written advice

Authorisation Number: 1051229317409

Date of Advice: 24 May 2017

Ruling

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

Question

Are you liable to pay goods and services tax (GST) for the following services that are made under the Service Agreement you have with the non-resident company NRC

1. Providing market research

2. Supporting pre-sales meetings with Australian companies

3. Supporting pre-sales meetings with companies outside of Australia

4. Supporting the establishment of Australian operations

5. Supporting the establishment of operations outside of Australia.

Advice

Services 1 to 3

Where you are not required to be registered for GST, your supply relating to services 1 to 3 will be outside the scope of GST. You will therefore not liable to pay GST for the supply of these services.

Where you are registered or required to be registered for GST, you will not be liable to pay GST for services 1 to 3 as the supply of these services is GST-free under item 2 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Services 4 and 5

You have confirmed that no ruling is required for services 4 and 5 at the moment due to insufficient information.

Relevant facts

You carry on your business activity in Australia and currently you are not registered for GST.

You have entered into a Services Agreement with non-resident company (NRC) which is located outside Australia. You advised that the revenue under this agreement can be below or above the $75,000 for this year depending on the number of requests received from NRC.

NRC does not carry on any business activity at a fixed place or through an agent in Australia. It is not registered for GST and is not required to be registered for GST.

The objectives of the activities to be carried on by you under the Services Agreement are to support NRC. To deliver your support under the Services Agreement you will make the following services:

1. provide market research to NRC. NRC will utilise the information you give to them for business purposes;

2. support pre-sales meetings with Australian companies to NRC;

3. support pre-sales meetings with companies outside of Australia to NRC

4. support the establishment of Australian operations;

5. support the establishment of operations outside of Australia.

For services 4 and 5 you have confirmed that these services are not to be ruled due to insufficient information on how the establishment of the operations will be done. If they do occur in the future you will contact us for advice.

Pre-sales meetings are held with prospective NRC customers with the purpose of explaining the product and operational capabilities of NRC. NRC leads these discussions and you will be supporting these meetings and potentially participating in the meetings to provide information to the prospective customer around the subject of NRC's organisation. You will answer questions from prospective NRC customers in relation to the NRC's offering.

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 23-5

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.

Summary

Your supply of market research and supporting pre-sales meetings with Australian and overseas companies to NRC is GST-free under paragraph (a) of item 2 in the table in subsection 38-190(1) of the GST Act where you are registered for GST or required to be registered for GST. You will not be liable to pay GST in this instance.

Where you are not required to be registered for GST, your supply of market research and supporting pre-sales meetings with Australian and overseas companies to NRC is outside the scope of GST. You will not be liable to pay GST for these services.

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 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.

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

a) you make the supply for consideration;

b) the supply is made in the course of a business that you carry on;

c) the supply is connected with Australia as it is made through a business that you carry on in Australia.

The next step is to determine whether you are required to be registered for GST since you currently are not registered for GST.

Paragraph 9-5(d) of the GST Act

Under section 23-5 of the GST Act, a supplier is required to be registered for GST if:

a) the supplier carries on an enterprise; and

b) the supplier's GST turnover (current and/or projected) meets the GST registration turnover threshold (currently $A75,000 and $A150,000 for non-profit organisation).

The supplier can choose to register for GST if its GST turnover is less than $A75,000.

Goods and Services Tax Ruling GSTR 2001/7 (available at www.ato.gov.au) provides guidance on the meaning of GST turnover.

The current annual turnover is the sum of the values of all supplies made in a particular month plus the previous 11 months. The projected annual turnover is the sum of the value of all supplies made in a particular month plus the next 11 months.

The GST turnover is the gross business income (not the profit). Supplies that are connected with Australia are included when calculating the GST turnover even if these connected supplies are determined to be GST-free.

Accordingly when you calculate your GST turnover you will include all supplies that are connected with Australia (including where they are GST-free supplies). Where your GST annual turnover is $A75,000 or more, you will be required to be registered for GST. To register you can either call us on 13 28 66, register through your tax agent or online.

Where your GST annual turnover is less than $A75,000, you are not required to be registered for GST but can choose to register for GST.

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

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

GST-free supply

Relevant to your supply of p services to the non-resident company NRC 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:

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.

Only one of the paragraphs in item 2 needs to be satisfied for the 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 (available at ato.gov.au) provides guidance on when a non-resident is 'not in Australia' for the purposes of item 2.

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

● your supply is made to a non-resident company that is not in Australia in relation to your supply; and

● your supply of 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 services is 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:

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.

From the information received you only supply the Australian companies with information when meeting with them. In this instance, subsection 38-190(3) of the GST Act is not applicable as you are not required to supply your services to another entity in Australia.

Your supply of market research and supporting pre-sales meetings with Australian and overseas companies to NRC is GST-free under paragraph (a) of item 2.