Edited version of private advice

Authorisation Number: 1051789913643

Date of advice: 14 December 2020

Ruling

Subject: Supply of services to non-resident

Question

Is your supply of services to the non-resident GST-free?

Answer

Yes. Your supply of services to the non-resident is GST-free under item 2 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

This ruling applies for the following period:

15 December 20XX to 15 December 20XX

Relevant facts and circumstances

You are registered for GST.

You entered into a contract with a non-resident entity under which you will supply your services to the non-resident.

The non-resident is not registered or required to be registered for GST.

You are not required under the contract to provide your services to another entity in Australia.

The non-resident does not have any employee, officer or agent in Australia at the time you supply your services.

The services that you supply under the contract do not include work physically performed on goods situated in Australia and are not directly connected with a particular property 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

GST is payable on a taxable supply.

Section 9-5 of the GST Act states:

You make a taxable supply if:

you make the supply for *consideration; and

(a)  the supply is made in the course or furtherance of an *enterprise that you *carry on; and

(b)  the supply is *connected with the indirect tax zone; and

(c)  you are *registered, or *required to be registered.

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

(* denotes a term defined under section 195-1 of the GST Act)

Your supply of services to the non-resident is made for consideration and in the course of your enterprise. The supply is connected with the indirect tax zone as it is made through an enterprise that you carry on in Australia. You are registered for GST. All the requirements in paragraph 9-5(a) to 9-5(d) of the GST Act are satisfied; therefore, your supply of services to the non-resident is a taxable supply unless it is GST-free or input taxed.

There is no provision in the GST Act under which your supply of services would be input taxed; thus, what remains to be determined is whether your supply would be GST-free.

Item 2 in the table in subsection 38-190(1) of the GST Act (item 2) provides that a supply of anything, other than goods or real property, made to a non-resident who is not in in the indirect tax zone 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 the indirect tax zone when the work is done nor a supply directly connected with real property situated in the indirect tax zone; 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.

However, in accordance with subsection 38-190(3) of the GST Act, a supply covered by item 2 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 the indirect tax zone; 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.

You supply your services to the non-resident who is not in Australia at the time you make the supply. The non-resident acquires your services for the purpose of its enterprise but is not registered or required to be registered for GST. Furthermore, your supply of services does not involve work physically performed on goods situated in Australia and is not directly connected with real property in Australia. As such, the supply is covered by item 2 and is GST-free.

As you are not required under the contract to provide your services to another entity in Australia, subsection 38-190(3) of the GST Act does not apply to negate the GST-free status of your supply. Accordingly, your supply of services remains GST-free.