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Edited version of private advice
Authorisation Number: 1051650633063
Date of advice: 26 March 2020
Ruling
Subject: GST and the acquisition of public relation services by a non-resident
Question
Is the supply of the public relation services made by the Australian supplier to the non-resident company a taxable supply for the purposes of paragraph 11-5(B) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
No. The supply of the public relation services made by the Australian supplier to the non-resident business is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.
Relevant facts
You are a non-resident entity carrying on your business activity outside Australia. You are not registered for the Australian GST.
You represent an overseas based tourism and convention bureau. You are responsible for marketing an overseas destination in and outside Australia and ultimately increase the visitor numbers travelling from Australia and outside Australia to the overseas place.
You have contracted an Australian supplier to supply you with public relation (PR) services that promote the overseas destination in Australia. You have provided us with a copy of the PR Agency Services Agreement you have with the supplier.
You do not make any supplies to Australia and do not have employees to carry on your business for more than 183 days in a 12 month period in Australia.
You have one staff member who travels for short trips to Australia (not at the moment) which would be usually once a month for 2 days (on average). The purpose of going to Australia is sometimes to meet the Australian supplier to discuss forward planning and other times the trips are unrelated to the PR Service.
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
GST is payable on a taxable supply. A supply is a taxable supply under section 9-5 of the GST Act if:
- the supplier makes the supply for consideration; and
- the supply is made in the course or furtherance of an enterprise that the supplier carries on; and
- the supply is connected with Australia; and
- 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 the supply of PR services made to you by the supplier to be a taxable supply.
From the information given, the supplier's supply of PR services to you satisfies paragraphs (a) to (d) of section 9-5 of the GST Act as:
a) the supplier makes its supply of PR services to you for consideration; and
b) the supply is made in the course of a business that the supplier carries on; and
c) the supply is connected with Australia as it is made through a business that the supplier carries on in Australia; and
d) the supplier is registered for GST.
However, the supply of PR services made to you 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 the supply of PR services input taxed.
GST-free supply
Relevant to the supply of PR services made to you 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 the non-resident is not in Australia in relation to the supply 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 the supplier's supply of PR services to you satisfies paragraph (a) in item 2 as:
· the supplier makes its supply of services to you, a non-resident company who is not in Australia in relation to the supply at the time the supply is done; and
· the 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
The supply of PR services made to you is GST-free under paragraph (a) in item 2 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) in item 2 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.
When the supplier performs the PR services, we do not consider that the supplier is providing the PR services to the potential visitors of the overseas destination in Australia. Our view is the supplier is supplying information to the potential visitors of the overseas destination in Australia when performing the PR services and the PR services are made and provided to you. In this instance subsection 38-190(3) of the GST Act does not negate the GST-free status of the supply of PR services under item 2.
However, you have one staff that comes to Australia from time to time to discuss forward planning with the supplier. In this instance we need to consider the requirements in subsection 38-190(3) of the GST Act when the staff is in Australia and in contact with the supplier.
Paragraphs (a) and (b) in subsection 38-190(3) of the GST Act
Paragraphs (a) and (b) in subsection 38-190(3) of the GST Act are satisfied as the supply of the PR services is made to you and provided to your staff when the staff is in Australia and in contact with the supplier.
The next step is to consider the requirements in paragraph (c).
Paragraph (c) of subsection 38-190(3) of the GST Act
Only one of the requirements in paragraph 38-190(3)(c) needs to apply for the GST-free supply under item 2 to be negated under subsection 38-190(3) of the GST Act.
Requirements (i) and (ii) in paragraph 38-190(3)(c) do not apply to the supply of PR services that is made to you and provided to your staff since these paragraphs are for supplies that are provided to GST registered Australian businesses.
Requirement (iii)
When the supplier provides its supply of PR services to your staff, the acquisition made by the staff is for a creditable purpose since the staff is acquiring the services on your behalf, that is for your business purposes. In this instance requirement (iii) does not apply to the supply of PR services made by the supplier to you and provided to your staff.
Since the requirements in paragraph 38-190(3)(c) do not apply to the supply of PR services made by the supplier to you, subsection 38-190(3) of the GST Act does not negate the GST-free status of the supplier's supply of PR services made to you under item 2.
Summary
The supplier's supply of PR services made to you is GST-free under paragraph (a) of item 2.