Edited version of your written advice

Authorisation Number: 1051504864463

Date of advice: 10 April 2019

Ruling

Subject: GST and supply of support, training and demonstration to a non-resident

Question 1

Is the supply of support, training and demonstration made by you to the non-resident company and provided to businesses located in and outside Australia under the Agreement a GST-free supply under section 38-190 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Advice

Supply provided to overseas business

Your supply of support, training and demonstration made to the non-resident company and provided to businesses located outside Australia under the Agreement is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.

Supply provided to business in Australia

Your supply of support, training and demonstration made to the non-resident company and provided to GST registered businesses located in Australia is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.

For the provision of support and training to the Australian businesses you need to obtain evidence that the Australian businesses are registered for GST before treating your supplies to them as GST-free under item 2 in the table in subsection 38-190(1) of the GST Act.

Where the business located in Australia is not registered for GST, the supply of support and training made to the non-resident company and provided to that business in Australia is a taxable supply under section 9-5 of the GST Act. However, the supply of demonstration is made and provided to the non-resident company and is GST-free under item 2 in the table in subsection 38-190(1) of the GST Act.

Relevant facts

You are a company incorporated into Australia and registered for the goods and services tax (GST).

You have entered into an agreement for the supply of your services to a non-resident company located outside Australia.

The non-resident company is in the business of providing an online platform to businesses located at various places around the world. Clients just receive login details to their site once they signed up with the non-resident company. They then build their site either using external web developers or they do it themselves.

The non-resident company does not have a presence in Australia and does not have any employed representatives in Australia. It outsources certain services to you and your services are provided via the non-resident company’s platform.

You provide support, training and demonstration to businesses located worldwide using the non-resident company’s platform and to potential clients for the non-resident company.

The clients either lodge a support ticket online or call the support line to report an issue. You will respond to support tickets lodged on the non-resident company’s platform, sent via email or received by phone calls. You will then log into the platform and access the specific business’s site, assess the problem and either fix it or escalate the issue to the non-resident company’s development team. This is all done via computer access to platform.

You currently provide support to businesses located worldwide and the latter are clients of the non-resident company. Where the businesses are in Australia you assumed that the businesses are registered for GST and you hold no information or details about them. You assume clients in other countries are registered for their country’s specific taxes and you do not hold any information or details of them as well.

Any client other than Australian businesses you would assume would be classified as a non-resident of Australia. As you provide support and troubleshooting via a platform you cannot determine the actual whereabouts of the clients at any given time. Any client could be in different country on business and lodge a support ticket.

You also do online demonstration of how the platform works and have done this to businesses located in the territory assigned to you.

You have even assisted potential clients in emerging markets outside the current territory. The non-resident company does not currently operate in those markets but there is a long term strategy to grow in to new territories.

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 support, training and demonstration to be a taxable supply.

From the information given, your supply of support, training and demonstration 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 support, training and demonstration 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 support, training and demonstration input taxed.

GST-free supply

Relevant to your supply of support, training and demonstration 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 support, training and demonstration satisfy paragraph (a) of item 2 as:

● your supply of support, training and demonstration is made to a non-resident company who is not in Australia in relation to your supply when the supply is done; and

● your supply of support, training and demonstration 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.

However, paragraph (a) of item 2 is limited by subsection 38-190(3) of the GST Act.

There is no need to consider paragraph (b) 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.

You supply support, training and demonstration to the current and potential clients of the non-resident company who are located in and outside Australia.

Clients not located in Australia

Where the clients are located outside Australia, subsection 38-190(3) of the GST Act does not apply to your supply of support, training and demonstration. Your supply is GST-free under paragraph (a) in item 2 in this instance.

Clients located in Australia

Where the clients are located in Australia, it is relevant to consider whether subsection 38-190(3) of the GST Act applies when you supply support and training to the clients.

For the supply of demonstration we do not consider that subsection 38-190(3) of the GST Act applies as the supply of demonstration is made and provided to the non-resident company and the clients are receiving information as a result of the demonstration and not the supply of demonstration itself.

We will now consider subsection 38-190(3) of the GST Act for the supply of support and training to clients located in Australia.

Supply of support and training

Paragraphs (a) and (b) in subsection 38-190(3) of the GST Act are satisfied as your supply of support and training is made under an agreement with the non-resident company and under the agreement you are required to provide the supply to clients who are located in. Australia.

Paragraph (c) of subsection 38-190(3) of the GST Act

Requirement (i)

The term ‘Australian based business recipient’ describes the relationship that a recipient has with a particular supply. An entity is an ‘Australian-based business recipient’ of a supply that is made to it if:

i. the entity is registered for GST;

ii. an enterprise of an entity is carried on in Australia; and

iii. the acquisition of the thing supplied is not solely of a private or domestic nature.

Where the clients that are carrying on their business activities in Australia are registered for GST, requirement (i) applies to the supply of support and training you make to the non-resident company and provide to the clients in Australia. In this instance subsection 38-190(3) of the GST Act does not negate the GST-free status of the supply of support and training under item 2.

Accordingly, the supply of support and training that is provided to GST registered clients carrying on their business activities in Australia is GST-free under item 2. You will need to obtain evidence that the clients are registered for GST before treating your supplies of support and training that are provided to the clients GST-free under item 2.

Where the clients are not registered for GST, requirement (i) does not apply. In this instance subsection 38-190(3) of the GST Act will negate the GST-free status of the supply under item 2. The supply is a taxable supply under section 9-5 of the GST Act.

Requirement (ii)

An employee or officer is provided with a supply in their capacity as an employee or officer if the supply was provided to them in the performance of their duties or as part of their remuneration.

Where the supply of services is provided to personnel of the clients and these clients are registered for GST, requirement (ii) applies to the supply of support and training you make to the personnel of these clients. Subsection 38-190(3) of the GST Act will not negate the GST-free status of the supply. The supply is GST-free under item 2.

You will need to obtain evidence that the Australian clients are registered for GST before treating your supply of support and training that are provided to the personnel of these Australian clients GST-free under item 2.

Where the clients are not registered for GST, requirement (ii) does not apply. In this instance subsection 38-190(3) of the GST Act will negate the GST-free status of the supply under item 2. The supply is a taxable supply under section 9-5 of the GST Act.

Requirement (iii)

Requirement (iii) requires that the acquisition is solely for a creditable purpose and is not a non-deductible expense.

An acquisition is solely for a creditable purpose where the thing is acquired solely for business purposes and the acquisition does not relate to making supplies that would be input taxed.

Division 69 of the GST Act is about non-deductible expenses and lists supplies that are generally not creditable acquisitions for non-resident employers, for example entertainment expenses such as dinners, cocktail parties tickets for sightseeing tours.

From the information provided the non-resident company does not have any employee in Australia in relation to the supply. Requirement (iii) is not relevant.

Summary

Your supply of support, training and demonstration made to the non-resident company and provided to GST registered clients located in Australia and to clients located outside Australia is GST-free under item 2.

You will need to obtain evidence that the Australian clients are registered for GST before treating your supply of support and training to them as GST-free under item 2.

Where the business in Australia is not registered for GST, your supply of support and training made to the non-resident company and provided to that business is a taxable supply. However your supply of demonstration is made and provided to the non-resident company and is GST-free under item 2.