Edited version of private advice

Authorisation Number: 1051654653683

Date of advice: 01 April 2020

Ruling

Subject: GST and supply of translating and proofreading services

Question 1

Was the supply of translating services you made to the non-resident company (Company A) a GST-free supply under section 38-190 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

Answer

Yes the supply of translating services you made to Company A was a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.

Question 2

Were the supplies of translating and proofreading services you made to the non-resident company (Company B) a GST-free supply under section 38-190 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes. the supplies of translating and proofreading services you made to Company B were GST-free supplies under item 2 in the table in subsection 38-190 of the GST Act.

Relevant facts

You are a sole trader and supplied your services to two non-resident companies - Company A and Company B.

You were registered for GST when you supplied your services to the non-resident companies.

Supply to company A

You agreed to supply translating services to Company A.

You did the translation from your home office. You did the work on your personal computer using the translation software provided by Company A. After the translation was done you emailed the work to the project managers of Company A who were located overseas.

The translating services you made were not directly connected with any properties in Australia or related to residential properties in Australia. The services were not work performed on goods located in Australia.

Company A is located outside Australia and has subsidiaries, affiliates, division, related entities and companies worldwide. You were not required to provide your services to any of them. You were also not required to provide your services to anyone in Australia.

Company A is not registered for GST and did not have any employee in Australia that was involved with your supply of translating service.

Supply to Company B

You entered into an Agreement with Company B for the supply of translating and proofreading services.

You worked directly with and only with Company B. You did the translating work from your home. You did the work on your personal computer and used the translation software provided by Company B. You emailed the translation to the project managers of company B who were located outside Australia.

Company B is a non-resident company and is located outside Australia. It is not registered for GST. It did not have any employee in Australia that was involved with your supply of translating and proofreading services.

The translating services you made were not directly connected with any properties in Australia and were not work performed on goods located 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

Questions 1 and 2

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

a)    the supplier makes the supply for consideration; and

b)    the supplier makes the supply through a business that it carries on; and

c)    the supply is connected with Australia; and

d)    the supplier is registered for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

Your supply of translating and proofreading services satisfied paragraphs 9-5(a) to 9-5(d) of the GST Act as:

a)    you made the supply for consideration; and

b)    you made the supply through a business that you carry on in Australia; and

c)    the supply of services was connected with Australia as it was made through a business that you carry on in Australia; and

d)    you were registered for GST in the financial year 2017/2018.

However, your supply of services would not be a taxable supply to the extent that it was GST-free or input taxed.

Your supply of services was not input taxed under the GST law.

GST-free supply

Relevant to your supply of services made to Company A and Company B 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 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.

Where the services satisfy the requirements in item 2, the supply of services is GST-free to the extent that it is not negated by subsection 38-190(3) of the GST Act.

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.

Supply of translating services to Company A

From the information given your supplies of translating services to Company A satisfied paragraph (a) in item 2 as:

·         you made your supply of translating services to a non-resident company who was not in Australia in relation to the supply at the time you did the translation; and

·         the supply of translating services was neither a supply of work physically performed on goods situated in Australia when the work was done, nor was a supply that was directly connected with real property situated in Australia

The supply of translating services you made to Company A was GST-free under paragraph (a) in item 2 to the extent that the supply was not negated by subsection 38-190(3) of the GST Act.

You were not required to provide your translating services to anyone in Australia. Subsection 38-190(3) of the GST Act did not apply to your supply of translating services made to Company A in this instance.

Further when you emailed the translation to Company A's project manager, subsection 38-190(3) of the GST Act did not apply as the project manager was located outside Australia.

Accordingly, your supply of translating services made to Company A and provided to its project manager was GST-free under paragraph (a) in item 2.

There is no need to consider paragraph (b) in item 2 as paragraph (a) is satisfied.

Supply of translating and proofreading services to Company B

From the information given your supplies of translating and proofreading services to Company B satisfied paragraph (a) in item 2 as:

·         you made your supply of translating and proofreading services to a non-resident company who was not in Australia in relation to the supply at the time you did the translation and proofreading; and

·         the supply of translating and proofreading services was neither a supply of work physically performed on goods situated in Australia when the work was done, nor was a supply that was directly connected with real property situated in Australia

The supply of translating and proofreading services you made to Company B would be GST-free under paragraph (a) in item 2 to the extent that the supply was not negated by subsection 38-190(3) of the GST Act.

You were not required to provide your translating and proofreading services to anyone in Australia. Subsection 38-190(3) did not apply to your supply of translating and proofreading services made to Company B in this instance.

Further when you emailed the translation to Company B's project managers, subsection 38-190(3) of the GST Act did not apply as the project managers were located outside Australia.

Accordingly, your supply of translating and proofreading services made to Company B and provided to its project managers was GST-free under paragraph (a) in item 2.

There is no need to consider paragraph (b) in item 2 as paragraph (a) is satisfied.