Edited version of your written advice

Authorisation Number: 1051318558443

Date of advice: 8 December 2017

Ruling

Subject: GST and supply of training services to non-resident companies

Question 1

Is GST payable on your supply of the training to company X, which is delivered overseas?

Answer

No.

Question 2

Is GST payable on your supply of the training to company X, which is delivered in Australia?

Answer

Your supply of training conducted in Australia under contract with company X will be GST-free if any of the following circumstances are present:

● the attendees would be Australian-based business recipients of the supplies of the training if they had purchased the training instead of company X

● the attendees are provided with the training as employees or officers of entities that would be Australian-based business recipients of the supplies of the training if the supplies of the training had instead been made to them (that is, if the entities that the attendees work for had instead purchased the training, instead of company X)

● company X is not registered for GST and the attendees they pay for are provided with the raining as employees or officers of company X

Question 3

Is GST payable on your supply of the training to company Y, which is delivered overseas?

Answer

No.

Question 4

Is GST payable on your supply of the training to company Y, which is delivered in Australia?

Answer

Your supply of training to company Y, which is delivered in Australia, will be GST-free if the attendees are not staff of company Y’s branch, if any, in Australia and any of the following circumstances are present:

● the attendees would have been Australian-based business recipients of the supplies of the training, if they had purchased the training instead of company Y

● the attendees are provided with the training as employees or officers of entities that would be Australian-based business recipients of the supplies of the training if the supplies of the training had instead been made to them (that is, if the entities that the attendees work for had instead purchased the training, instead of company Y)

● company Y is not registered for GST and the attendees are provided with the training as employees or officers of company Y and company Y’s purchase of the training is solely for a creditable purpose

Relevant facts and circumstances

You are a GST-registered Australian business operator, which supplies training services to overseas companies, and you deliver these services to people in Australia and overseas (normally a certain number of people). You have two major buyers/clients.

1st buyer is company Y domiciled overseas

The supply/service delivered to company Y is the facilitation of a corporate training program. The program is delivered to three separate groups in three locations:

● overseas country A group – delivered in overseas country A

● overseas country B group – delivered in overseas country A

● Australian group – delivered in Australia. Mostly Australian residents but with a smaller number who are overseas residents or overseas expats on project assignment in Australia.

You do not know the nature of company Y’s business.

The purchase order from company Y provides information about the nature of their business activities.

The purchase order from company Y shows an overseas phone contact number for the purchase order.

You do not know if company Y has a branch in Australia.

You do not know if the attendees paid for by company Y are employees of company Y.

2nd buyer is company X domiciled in overseas countries

Corporate training program delivered to a mix of people from around a certain region each time:

● 1@ cohort each year in overseas country A for mixed (region) local nationals

● 1@cohort each year in overseas country C for mixed (region) local nationals

● 1@cohort each year in overseas country B for mostly (overseas country) local nationals

● 1@cohort each year in Australia for (region) team. Mostly Australians but with a few from overseas countries.

Company X carries on a certain type of business.

Company X is an overseas company. Company X does not have a branch in Australia. Company X has registered offices in overseas countries.

You do not know if the attendees paid for by company X are employees of company X.

Legislative references

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 decisions

GST is payable on taxable supplies.

You make a taxable supply where you meet the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states:

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.

However, the supply is not a *taxable supply to the extent that it is

*GST-free or *input taxed.

(* Denotes a term defined in section 195-1 of the GST Act)

The indirect tax zone is Australia.

In your case, you meet the requirements of paragraph 9-5(a) to 9-5(d) of the GST Act. That is:

● you are supplying training for consideration (paragraph 9-5(a) of the GST Act)

● you are supply the training in the course or furtherance of an enterprise that you carry on (paragraph 9-5(b) of the GST Act)

● the supply is connected with Australia as you supply the training through an enterprise that you carry on in Australia (paragraph 9-5(c) of the GST Act); and

● you are registered for GST (paragraph 9-5(d) of the GST Act.

There are no provisions of the GST Act under which your supply of the training would be input taxed. Therefore, what remains to be determined is whether your supply of the training is GST-free.

The supply of the training will be GST-free if it meets the requirements of item 2 in the table in subsection 38-190(1) of the GST Act (item 2). If the requirements of item 2 are not met, the supply of the training will not be GST-free.

A supply of something, other than goods or real property, to a non-resident who is not in Australia when the thing supplied is done is GST-free under item 2 if:

(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.

However, there is an exception in subsection 38-190(3) of the GST Act where:

(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 have been an *Australian-based business recipient of the supply if the supply had instead 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 have been an Australian-based business recipient of the supply, if the supply had instead 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.

An entity is an Australian-based business recipient of a supply made to it if:

(a) the entity is registered for GST; and

(b) an enterprise of the entity is carried on in Australia; and

(c) the entity’s acquisition of the thing supplied is not solely of a private or domestic nature.

An acquisition is made for a creditable purpose to the extent that it is made in carrying on an enterprise. However, it is not made for a creditable purpose to the extent that:

(a) the acquisition relates to making supplies that would be input taxed; or

(b) the acquisition is of a private or domestic nature.

Question 1

You are supplying something other than goods or real property. You are supplying training services to a non-resident company (company X). The supply of the training is neither a supply of work physically performed on goods situated in Australia when the work is done nor a supply that is directly connected with real property situated in Australia.

Paragraphs 34, 37 and 41 of Goods and Services Tax Ruling GSTR 2004/7 explain how to determine whether a recipient is in Australia, for the purposes of item 2. They state:

34. We determine whether the not in Australia requirement is satisfied by determining whether the non-resident entity is in Australia in relation to the supply. If the entity is in Australia in relation to the supply, the entity does not satisfy the not in Australia requirement.

37. 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.

41. A non-resident company is in Australia in relation to the supply if the supply is solely or partly for the purposes of the Australian presence, for example, its Australian branch. If the supply is not for the purposes of the Australian presence but that Australian presence is involved in the supply, the company is in Australia in relation to the supply, except where the only involvement is minor.

Company X does not have a branch in Australia. Therefore, this non-resident recipient of your supply is not in Australia, for the purposes of item 2.

No exclusions from GST-free treatment under item 2 apply in regards to your supply of overseas training to Company X.

Therefore, GST does not apply to your supply of training to company X where it is delivered overseas.

Question 2

You are supplying something other than goods or real property. You are supplying training services to a non-resident company (company X) who is not in Australia. The supply of the training is neither a supply of work physically performed on goods situated in Australia when the work is done nor a supply that is directly connected with real property situated in Australia.

We shall now consider whether your supply of training to company X, which is delivered in Australia is provided to ‘another entity’ in Australia.

Paragraphs 61, 96 and 100 of Goods and Services Tax Ruling GSTR 2005/6 explains the ‘provided to another entity in Australia’ concept. They state:

61. Thus the expression 'provided to another entity' means, in our view, that in the performance of a service (or in the doing of some thing), 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.

96. If a supply is provided (or is required to be provided) to a non-resident individual who is physically in Australia when the thing supplied is done and that individual's presence in Australia is integral to, as distinct from being merely coincidental with, the provision of the supply, we consider that the supply is provided to that individual in Australia. The requirement in paragraph 38-190(3)(b) is satisfied and subsection 38-190(3) (assuming the other requirements of the provision are satisfied) negates the

100. If a supply is provided (or is required to be provided) to a resident individual who is physically in Australia when the thing supplied is done, the supply is provided to that individual in Australia. The requirement in paragraph 38-190(3)(b) is satisfied and subsection 38-190(3) negates the GST-free status of the supply (assuming the other requirements of that provision are satisfied).

You will supply training to company X, which you will deliver to third parties in Australia, that is, the attendees.

Where you deliver this training to a non-resident individual, you are providing a supply to an entity other than the non-resident purchaser of the training as the actual flow of the supply is to the attendees. The non-resident attendees’ presence in Australia is integral to the provision of the supply, given that the training is delivered in person at the Australian venue. Therefore, under such circumstances, you are making a supply to a non-resident recipient but providing the supply to another entity in Australia.

Where you deliver training to a resident individual, you are providing a supply to an entity other than the non-resident purchaser of the training as the actual flow of the supply is to the attendees. These resident attendees are physically in Australia when the training is delivered at the Australian venue. Therefore, under such circumstances, you are making a supply to a non-resident recipient but providing the supply to another entity in Australia.

Company X would be acquiring the training for a creditable purpose as:

● it would be acquiring the training in carrying on an enterprise;

● this acquisition would not relate to making supplies that would be input taxed, and

● this acquisition would not be of a private or domestic nature.

Company X’s acquisition of the training is not a non-deductible expense.

Your supply of training conducted at the Australian venue under contract with company X will be GST-free if any of the following circumstances are present:

● the attendees would have been Australian-based business recipients of the supplies of the training if they had purchased the training instead of company X

● the attendees are provided with the training as employees or officers of entities that would be Australian-based business recipients of the supplies of the training if the supplies of the training had instead been made to them (that is, if the entities that the attendees work for had instead purchased the training, instead of company X)

● company X is not registered for GST and the attendees they pay for are provided with the training as employees or officers of company X.

(Under these circumstances, the exclusion at subsection 38-190(3) of the GST Act would not apply).

Otherwise, GST will be payable on the supply of this training as all of the requirements of 9-5 of the GST Act would be met.

If you do not have documentary evidence that the requirements for GST-free treatment are met, you should classify the supply of training to company X, which is delivered in Australia, as taxable.

Question 3

You are supplying something other than goods or real property, to company Y, a non-resident.

The people attending the training in overseas country A will be from overseas country A and overseas country B. You are not dealing with the Australian branch, if any, of company Y. Therefore, company Y will not be in Australia in relation to the supply of this training.

The supply of the training is neither a supply of work physically performed on goods situated in Australia when the work is done nor a supply that is directly connected with real property situated in Australia.

No exclusions from GST-free treatment under item 2 apply.

Therefore, GST is not payable on your supply of training to company Y, which is delivered in overseas country A.

Question 4

You are supplying something other than goods or real property, to company Y, a non-resident.

You do not know if company Y has a branch in Australia.

Company Y will be in Australia in relation to your supply of training delivered in Australia if it has a branch in Australia and the attendees they pay for are staff of that branch. Under such circumstances, the training would be for the purposes of company Y’s Australian presence, given that the attendees would be staff of that branch under such circumstances.

The supply of the training is neither a supply of work physically performed on goods situated in Australia when the work is done nor a supply that is directly connected with real property situated in Australia.

Company Y’s acquisition of the training is not a non-deductible expense.

Your supply of training to company Y, which you will deliver in Australia will be GST-free under item 2 if the attendees are not staff of company Y’s branch, if any, in Australia and any of the following circumstances are present:

● the attendees would have been Australian-based business recipients of the supplies of the training if they had purchased the training instead of company Y

● the attendees are provided with the training as employees or officers of entities that would be Australian-based business recipients of the supplies of the training if the supplies of the training had instead been made to them (that is, if the entities that the attendees work for had instead purchased the training, instead of company Y)

● company Y is not registered for GST and the attendees are provided with the training as employees or officers of company Y and company Y’s purchase of the training is solely for a creditable purpose.

(Under these circumstances, the exclusion at subsection 38-190(3) of the GST Act would not apply).

Otherwise, GST would be payable on your supply of this training as the requirements of section 9-5 of the GST Act would be met.

If company Y sends an employee to training and that employee works in a division of company Y that provides certain things, company Y would not be acquiring that training solely for a creditable purpose, as those sorts of transactions are input taxed supplies.

If you do not have documentary evidence that the requirements for GST-free treatment are met, you should classify the supply of training to company Y, which is delivered in Australia, as taxable.