Edited version of your written advice

Authorisation Number: 1051341594031

Date of advice: 26 February 2018

Ruling

Subject: GST and supply of sales and marketing services

Question 1

Are you making a GST-free supply of sales and marketing services to the overseas company under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Advice

Yes, you are making a GST-free supply of sales and marketing services to the overseas company under paragraph (a) of item 2 in the table in subsection 38-190(1) of the GST Act.

Relevant facts

You are an Australian company and registered for GST.

You have entered into a written agreement with an overseas company for the provision of your consulting services in the areas of sales and marketing in Australia to the overseas company. You have provided us with a copy of the agreement.

For your sales and marketing services you receive a monthly fee and a monthly bonus. The overseas company will reimburse you for all reasonable expenses incurred as a result of rending the services contained in the agreement so long as they comply to the overseas’s expense reimbursement policies.

The overseas company is a manufacturing company and does not have an office or agent in Australia.

You promote the overseas company’s products to potential customers in Australia and take orders from the interested customers. You submit the customers’ order to the overseas company who will process the orders and arrange for the products to be delivered directly to the customers.

You do not collect payments from the customers when taking orders. Customers pay for the orders directly to the overseas company. You do not participate in the delivery or installation of the goods in Australia. You do not provide any training.

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 sales and marketing services to be a taxable supply.

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

a) you make your supply for consideration which consist of monthly fee, monthly bonus and reimbursement of your expenses; 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 sales and marketing 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 sales and marketing services input taxed.

GST-free supply

Relevant to your supply of sales and marketing services 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.

Precondition of item 2 – non-resident is 'not in Australia'

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 facts given your supply satisfy the precondition for item 2 as your supply is made to a non-resident company that is not in Australia in relation to your supply.

The next step is to consider the paragraphs in item 2.

Paragraph (a) of item 2

From the fact given, your supply of sales and marketing services satisfy paragraph (a) of item 2 as your 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

Your supply of sales and marketing 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 sales and marketing services are you are not required to provide your supply to another entity in Australia. Your supply of services is therefore GST-free under paragraph (a) of item 2.