Edited version of private advice

Authorisation Number: 1051662736871

Date of advice: 29 April 2020

Ruling

Subject: GST and supplies to non-residents

Question 1

Is the supply that you make to the non-resident company a GST-free supply under section 38-190 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you receive income from the non-resident company for the related advertisements that the non-resident company puts on your uploaded videos?

Answer

Yes, the supply that you make to the non-resident company is a GST-free supply under paragraph (a) of item 2 in the table in subsection 38-190(1) of the GST Act when you receive income from the non-resident company for the related advertisements that the non-resident company puts on your uploaded videos.

Question 2

Is the supply of online courses and digital products made by you to overseas customers a GST-free supply under the GST Act when the Payment Platform remits the payments collected from the overseas customers regarding the online sales you made to these customers?

Answer

Yes, the supply of online courses and digital products you make to overseas customers located outside Australia at the time of the supply is a GST-free supply under paragraph (a) of item 2 in the table in subsection 38-190(1) of the GST Act when the Payment Platform remits the payments collected from the overseas customers regarding the online sales you made to these customers.

Relevant facts

You are an Australian company and you are registered for GST.

You upload videos to a video sharing platform

Online supplies

You also sell digital products to overseas and Australian customers via your website.

The customers are individuals and purchase the digital products for their private use. The overseas customers are located overseas when they purchase the digital products and these products are sent directly to the purchasers. You are not required to deliver the digital products purchased to any other entity.

All payments for your online products are done through your automated online browse store on your website. Customers purchasing your online products will make the payments through Payment Platform you have in place.

The Payment Platform remits the proceeds collected from the online sales to you and they identify the residency of the customers when collecting the payments.

Supply to non-resident company

You have entered into an Agreement with a non-resident company where the non-resident company pays you monthly for the related advertisements that it puts on your uploaded videos. You have provided us with a copy of the non-resident company's Online Terms of Service.

The amount of revenue that you are entitled to receive depends on the number of views accrued by the advertisements that are inserted into your videos.

You are not privy to other information pertinent to the calculation of the advertising revenue, including the locations from which your videos and the advertisements are viewed. Further you have no control and no oversight over which advertisers have their advertisements inserted into your videos.

The non-resident company does not have representative in Australia that is involved with the supply you make to it.

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 A New Tax System (Goods and Services Tax) Act (GST Act).

Question 1

Generally, GST is payable on a taxable supply. However a supply is not a taxable supply to the extent that it is GST-free.

You entered into a contract with the non-resident company under which you receive a share of advertising revenues earned through the advertisements inserted into the video content that you upload. Therefore, we take the view that you make a supply to the non-resident company by making your videos available for advertisements.

GST-free supply

Item 2 in the table in subsection 38-190(1) of the GST Act (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.

From the information given, paragraph (a) of item is satisfied when you make your supply as:

·         your supply is made to a non-resident who is not in Australia in relation to your supply when the supply is done; and

·         your 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.

Accordingly, your supply to the non-resident company is GST-free under paragraph (a) of 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) of item 2 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 facts given, subsection 38-190(3) of the GST Act does not apply to your supply made to the non-resident company as you are not required to provide your supply to another entity in Australia.

Your supply is made and provided to the non-resident company. Your supply to the non-resident company is therefore GST-free under paragraph (a) of item 2.

Question 2

Item 2 in the table in subsection 38-190(1) of the GST Act (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.

Precondition of item 2 - non-resident is 'not in Australia' when thing is done

Goods and Services Tax Ruling GSTR 2004/7 (available at ato.gov.au) provides guidance on when a non-resident is 'not in Australia' for the purposes of item 2.

In the case of supplies made to an individual we consider the physical location of the individual establishes whether that individual is in Australia when the thing supplied is done.

The thing that is done is the supply of digital products and online courses. The digital products are emailed to the individuals and online course is made at the time the transaction takes place and payment is received. In this instance the individual's presence is integral with the receipt of the digital products and online course.

Where the address provided by the individual is an overseas address, we consider the individual is located outside Australia. You advised that the non-resident individual is located overseas. Accordingly, where the non-resident individual is located outside Australia at the time of the supply of the digital product and online course, the requirement that the non-resident individual is 'not in Australia in relation to the supply' is satisfied. The next step is to consider the paragraphs in item 2.

Paragraph (a) of item 2

When the supply is made to individual located outside Australia, your supply of digital products and online courses satisfy paragraph (a) of item 2 as your supply of digital products and online course is neither a supply of work physically performed on goods situated in Australia when the supply is done, nor a supply directly connected with real property situated in Australia

Your supply of digital products and services to the individual located overseas is GST-free under paragraph (a) of item 2 to the extent that it is not negated by subsection 38-190(3) of the GST Act.

Paragraph (b) of item 2 does not apply to your supply as the purchasers are individuals and they make the purchase for private use.

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 facts given, subsection 38-190(3) of the GST Act does not apply to your supply of digital products and online course as you are not required to provide your supply to another entity in Australia.

Your supply of digital products and online courses is made and provided to the non-resident individual who has made the purchase. Your supply is therefore GST-free under item 2 where the individual is located outside Australia.