Edited version of private advice

Authorisation Number: 1051627334280

Date of advice: 16 January 2020

Ruling

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

Question

Are the supplies made by the Australian company to the non-resident company GST-free supplies under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) under the Agreement between the two entities?

Answer

Under the Agreement, the Australian company makes the following supplies to the non-resident company:

1.    A supply of goods which would be GST-free under item 1 in the table in subsection 38-185(1) of the GST Act where you ship the goods within 60 days from the date you either issue an invoice or receive the final payment from the non-resident company (whichever is first); and

2.    A supply of services which is GST-free under 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 an agreement with a non-resident company located outside Australia in which you agreed to supply goods and services to the non-resident company.

For the purchase of the goods, the non-resident company will pay a non-refundable deposit. This deposit will be offset from the payment of the purchase of the goods. You are responsible to ship the purchased goods to the non-resident and you advised that you will ship the goods within the 60 day period from the date you either issue an invoice or receive the final payment from the non-resident company.

The services will be provided by phone or online to the staff of the non-resident company located outside Australia. The non-resident company does not carry any business activity in Australia.

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.

Detailed reasoning

Taxable supply

GST is payable on a taxable supply. A supply is a taxable supply under section 9-5 of the GST Act if:

1. the supplier makes the supply for consideration; and
2. the supply is made in the course or furtherance of an enterprise that the supplier carries on; and
3. the supply is connected with Australia; and
4. 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 supplies to the non-resident company under the Agreement to be taxable supplies under section 9-5 of the GST Act.

Characterisation of supply

Before we consider the GST status of your supplies we need to determine the character of the supplies that you make to the non-resident company.

After considering all information you have provided we consider that you make the following distinct supplies to the non-resident company:

1. Supply of goods
2. Supply of services

We will now consider the GST status of each supply.

1.    Supply of goods

From the information given your supply of goods satisfies paragraphs 9-5(a) to (d) in 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 the supply involves you having the goods removed from Australia; and

d)    you are registered for GST.

However, your supply of goods to the non-resident company 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 goods to the non-resident company input taxed.

GST-free supply

Subsection 38-185 (1) of the GST Act provides when a supply of goods to be exported from Australia is GST-free.

Under item 1 in the table in subsection 38-185(1) of the GST Act (item 1) a supply of goods is GST-free if the supplier exports the goods from Australia before or within 60 days (or such period as the Commissioner allows) after:

·         the day on which the supplier receives any of the consideration for the supply; or

·         if, on an earlier day, the supplier gives an invoice for the supply - the day on which the supplier gives the invoice.

Goods and Services Tax Ruling GSTR 2002/6 provides guidance on when a supply of goods which is exported is GST-free under subsection 38-185(1) of the GST Act and what evidence the supplier needs to hold.

Under item 1 a supply of goods is GST-free where the supplier exports them from Australia and the export occurs within the 60 day period.

Paragraph 22 in GSTR 2002/6 provides that the requirement that the supplier is the entity that exports the goods is satisfied where either:

a)    the supplier contracts at the supplier's own expense with an international carrier for the transportation of the goods to a destination outside Australia; or

b)    the supplier is responsible for delivering the goods to the operator of a ship or aircraft who, or that, has been engaged by another party to transport those goods to a destination outside Australia; or

c)    the requirements of subsection 38-185(3) of the GST Act are met.

From the information given, you are responsible for the shipping of the goods to the non-resident company and you have advised you ship the goods within 60 days from the day you either issue an invoice or receive the final payment.

In this instance you have satisfied the requirements in item 1 where you ship the goods within 60 days from the date you either receive the final payment or issue an invoice to the NZ Company (whichever is first). Your sale of goods to the non-resident company is GST-free under item 1.

2.    Supply of services

From the information given your supply of services satisfies paragraphs 9-5(a) to (d) in 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 the supply of services is made through a business that you carry on in Australia; and

d)    you are registered for GST.

However, your supply of services to the non-resident company 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 to the non-resident company input taxed

GST-free supply

Relevant to your supply of services to the non-resident company 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.

From the information given your supply of services to the non-resident company satisfies paragraph (a) in item 2 as:

·         you make your supply of services to a non-resident company who is not in Australia in relation to your supply at the time the supply is done; 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 to the non-resident company is GST-free under paragraph (a) to the extent that the supply is not negated by subsection 38-190(3) of the GST Act.

There is no need to consider paragraph (b) as (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.

From the information given, all services are provided to the employees of the non-resident company who are located outside Australia. In this instance subsection 38-190(3) of the GST Act does not apply to your supply of services as your supply is made to the non-resident company and provided to the employees of the non-resident company who are located outside Australia.

Accordingly, your supply of services to the non-resident company is GST-free under item 2.