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Edited version of your written advice
Authorisation Number: 1051442172671
Date of advice: 16 October 2018
Ruling
Subject: Supply of services to Australian resident
Question
Will Company B be making a taxable supply of services to the client?
Answer
No. Company B will not be making a taxable supply of services to the client.
Relevant facts and circumstances
Company B is based overseas.
Company B will provide an Australian-based business recipient (the client) with a licence to use online software, management and consulting services. The online software is hosted and supported overseas.
Company A is an Australian branch operation of a company based overseas. Company A is registered for GST.
Company A and Company B have the same shareholders and directors; however, they are not members of the same corporate group.
Company A and Company B will enter into agreement under which Company A will provide incidental services to the client. Company A will simply be providing a staff member to Company B to service its contract with the client.
The Company A staff member will act as first point of contact, raising and escalating any issues or development requirements to the relevant project managers at Company B. The staff member will be working from the office of the client.
Company B does not have any employee, officer, or agent in Australia carrying on its enterprise from a fixed place or from one or more places in Australia for more than 183 days in a 12 month period.
Company B will not have any employees or officers in Australia at the time when Company A provides its services.
Company A and its employee do not have authority to conclude contracts on behalf of Company B.
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 9-25
A New Tax System (Goods and Services Tax) Act 1999 section 9-26
Reasons for decision
GST is payable on a taxable supply.
Section 9-5 of the A New Tax System (Goods and Services tax) Act 1999 (GST Act) 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 under section 195-1 of the GST Act).
For the purpose of paragraph 9-5(c) of the GST Act, subsection 9-25(5) provides that a supply of anything other goods or real property would be connected with the indirect tax zone if:
(a) the thing is done in the indirect tax zone; or
(b) the supplier makes the supply through an enterprise that the supplier carries on in the indirect tax zone; or
(c) if the thing is a right or option to acquire another thing, the supply of the other thing would be connected with the indirect tax zone; or
(d) the recipient of the supply is an Australian consumer.
An Australian consumer is defined as an Australian resident entity that is not registered for GST; or if registered, does not acquire the thing supplied solely or partly for the purpose of its enterprise.
Under section 9-26 of the GST Act, the supply of anything other than goods or real property by a non-resident would not be connected with the indirect tax zone even if the thing is done in Australia provided:
● the supplier does not make the supply through an enterprise that the supplier carries on in the indirect tax zone; and
● the recipient is an Australian-based business recipient.
Section 9-27 of the GST Act provides that an entity carries on its enterprise in the indirect tax zone if one or more of its employees, officers or agents are in the indirect tax zone carrying on the entity’s enterprise from a fixed place or from one or more places in the indirect tax zone for more than 183 days in a 12 month period. Company B is a non-resident that does not have any employee, officer or agent carrying on its enterprise in the indirect tax zone. As such, Company B is not carrying on its enterprise in the indirect tax zone and will not make the supply of services to the client through an enterprise carried on in the indirect tax zone. The client is an Australian-based business recipient. Therefore, the supply of services by Company B to the client will not be connected with Australia even if the thing supplied is done in the indirect tax zone.
Paragraph 9-5(c) of the GST Act will not be satisfied. Accordingly, Company B will not make a taxable supply to the client.