Edited version of your written advice

Authorisation Number: 1051317329346

Date of advice: 6 December 2017

Ruling

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

Question

Is the supply of services made by the Australian entity to the overseas company a GST-free supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, the supply of services made by the Australian entity to the overseas company is a GST-free supply under paragraph (a) of item 2 in the table in subsection 38-190(1) of the GST Act.

Relevant facts and circumstances

You are an Australian entity and registered for the goods and services tax (GST).

You have entered into an Agreement with a manufacturing company located outside Australia (manufacturer). The manufacturer is not registered for GST and does not have an office or presence in Australia. For your services you receive commission based on the sales order secured for the manufacturer.

You are required to promote the products of the manufacturer and establish distribution points within the agreed territory which includes Australia under the Agreement.

You pass on contact information of potential clients to the manufacturer. The product is purchased directly from the manufacturer and shipped to the customer in Australia. You are not involved with the sale.

You do not hold any stock, nor did you resell or invoice the distribution points in relation to the sale. The customer paid for the goods directly to the manufacturer and no money is passed through you for the goods sold by the manufacturer.

The Agreement provides that you shall provide any such reasonable assistance or support to the manufacturer’s technicians during their installation and commissioning of the manufacturer’s product in the Territory. To date you do not have any active or hands-on involvement and do not employ anyone to help with the installation or commissioning of the product. The technical installation staffs are supplied by the manufacturer and those technicians work with the customer on site. You are not involved in hiring, employing or contracting these installers at all. You supply assistance in the way of information only to the purchaser, mainly regarding the product delivery timeframe and the arrival schedule of the company’s installers.

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.

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 or furtherance of an enterprise that the supplier carries on; and

c. the supply is connected with Australia; and

d. the supplier is 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 of the above must be satisfied for your supply of services to be a taxable supply.

From the information given, your supply of services satisfies paragraphs (a) to (d) of section 9-5 of the GST Act as:

a. you make your supply for consideration; and

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

c. your supply is connected with Australia as it is 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 manufacturer is item 2 in the table in subsection 38-190(1) of 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.

Paragraph (a) of item 2

From the facts given, your supply of services satisfies paragraph (a) of item 2 as:

● your supply of services is made to a non-resident 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 is 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.

As paragraph (a) is satisfied there is no need to consider paragraph (b) of item 2.

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 facts given, subsection 38-190(3) of the GST Act does not apply to your supply of services as you have not provided your supply of services to another entity in Australia to date.

Further, if at any time you are required to provide your services to the installers who are either employees of the manufacturer or GST registered Australian entities engaged by the manufacturer to do the installation of the product for the customers in Australia, subsection 38-190(3) of the GST Act will not apply to your supply.

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