Edited version of private advice

Authorisation Number: 1051755407536

Date of advice: 17 September 2020

Ruling

Subject: GST and supply of support and marketing services

Question

Is your supply of marketing and support services to the non-resident company a GST-free supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, your supply of marketing and support services to the non-resident company is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act. In this instance no GST is payable on the supply.

Relevant facts

You are a marketing firm in Australia which provides marketing and sales activities to Australian clients and prospects on behalf of a non-resident company located outside Australia. You are registered for GST and are unrelated to the non-resident company.

The non-resident company provides a financial service in the form of data and analytics which are provided via access to computer applications and excel spreadsheets. The non-resident company does not provide any products/goods for its supplies.

The non-resident company is not registered and is not required to be registered for GST purposes in Australia. It is a non-resident entity for Australian taxation purposes with no Australian presence, that is no branch or permanent office for income and GST purposes.

There is no representative of the non-resident company in Australia when you supply your services to the non-resident company.

You have provided us with a copy of the executed contract you had with the non-resident company.

You advised that you undertake the following activities/services on behalf of the non-resident company:

a)    Sales lead generation via email and telephone contact with the non-resident company's prospective customers in Australia;

b)    Prospect development via email and telephone contact with the non-resident company's prospective customers in Australia;

c)    Act as an independent representative of the non-resident company with some pricing discussion with potential customers, subject to final approval by the non-resident company. All contracts are signed by the non-resident company outside Australia and are subject to final approval by the non-resident company.

d)    Representation of the non-resident company at industry events;

e)    Client service and support services are provided to clients;

f)     The promotion of the non-resident's products in Australia;

g)    Acting as local representative of the non-resident company in relation to its products;

h)    Interpreting the non-resident company's risk data and analysis for prospective customers and potentially explaining what they mean on behalf of the non-resident company.

The services you perform do not relate to real property in Australia. You do not enter into sales contracts with the non-resident company's clients in Australia.

Marketing services

You are marketing the non-resident company's risk data and analytics. The risk data is used for due diligence and proactive risk management across asset classes by various financial institutions in Australia. The data is provided to clients as a subscription service which is paid annually. Clients are able to access the non-resident company's data and analytics on their computer systems.

Client services

You provide the following client service function:

a)    support (answering questions, providing information) via email and telephone contact with the non-resident company's customers in Australia about its data and analytics and how the data can be interpreted. Clients also have questions about the risk itself and how it might be impacting their investment portfolios. There are no standard questions, clients ask many different types of questions about the risk;

b)    answering questions about contracts, pricing schedules or any question the client may have about the service being provided;

c)    representing the non-resident company at industry events such as conferences.

Support services

Clients are based anywhere around Australia. They are predominantly city based financial institutions. The clients are the large superannuation funds, banks and other financial institutions in Australia and so are likely registered for GST.

Clients have questions on how the data should be interpreted from time to time about the climate change data provided to them as the non-resident company's clients. Sometimes they have technical issues with accessing the data (which is via system passwords) provided by the non-resident company.

Local representative

Services relating to business development activities are:

a)    sales lead generation via email and telephone contact with prospective customers in Australia;

b)    prospect development via email and telephone contact to explain the data and analytics that the non-resident company provides;

c)    act as an independent representative of the non-resident company with some pricing discussion with potential customers, subject to final approval by the non-resident company. All contracts are signed by the non-resident company outside Australia and are subject to final approval by the non-resident company;

d)    the promotion of the non-resident company's products in Australia at industry conferences by talking about the data and analytics that the non-resident company develops;

a)    acting as local representative for any questions prospect have in relation to the non-resident company's data products;

b)    interpreting the non-resident company's risk scores for prospective customers and explaining what they mean in relation to the client's investment portfolio on behalf of the non-resident company.

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.

Summary

Your supply of marketing and support services to the non-resident company is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.

You need to obtain evidence that the Australian businesses are registered for GST before treating your supply of support services made to the non-resident company and provided to the Australian businesses in Australia as a GST-free supply under item 2.

Detailed reasoning

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 the above must be satisfied for your supply of marketing and support services to the non-resident company to be a taxable supply.

From the information given, your supply of marketing and support services 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 marketing and support services 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 marketing and support services input taxed.

GST-free supply

Relevant to your supply of marketing and support services 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 who is not in Australia when the thing supplied is done is GST-free if:

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 marketing and support services satisfy paragraph (a) of item 2 as:

·         your supply of marketing and support services 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 marketing and support 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.

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.

Paragraphs (a) and (b) in subsection 38-190(3) of the GST Act

Marketing services

When you supply your marketing services, we do not consider that you are providing these services to the potential clients of the non-resident company. You are only supplying information about the non-resident company's supplies to the potential clients and therefore your supply of marketing services is made and provided to the non-resident company. In this instance subsection 38-190(3) of the GST Act does not apply to this supply. Your supply of marketing services is GST-free under paragraph (a) of item 2.

Support services

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

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

Requirements (i) and (ii)

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; and

             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.

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.

You advised that the non-resident company's clients are large superannuation funds, banks and other financial institutions in Australia who are likely registered for GST. In this case, requirement (i) or (ii) applies when you supply your support services to the non-resident company and provide the support services to these Australian GST registered businesses (including their employees) in Australia. In this instance subsection 38-190(3) of the GST Act does not negate the GST-free status of your supply of support services under item 2.

Accordingly, the supply of support services that is made to the non-resident company and provided to the GST registered Australian businesses (including their employees) is GST-free under item 2.

You will need to obtain evidence that the Australian businesses are registered for GST before treating your supply of support services that is made to the non-resident company and provided to the Australian businesses as a GST-free supply under item 2. For example, you can obtain the ABN and a statement from the Australian business that they are registered for GST.

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 services made to the non-resident company and provided to the GST registered Australian businesses is GST-free under paragraph (a) of item 2.

You will need to obtain evidence that the Australian businesses are registered for GST before treating your supply of support services made to the non-resident company and provided to the Australian businesses as a GST-free supply under item 2.