Edited version of private advice

Authorisation Number: 1052006585631

Date of advice: 12 September 2022

Ruling

Subject: GST and the supply of services to a foreign company

Question

Are you making a GST-free supply undersection 38-190 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you supply services to an overseas entity?

Answer

Yes, you are making a GST-free supply under section 38-190 of the GST Act when you supply services to an overseas entity.

Relevant facts and circumstances

You are registered for the goods and services tax (GST) and located in Australia.

You and foreign company entered into an agreement where the foreign company engages you to provide services.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 38-190

Reasons for decision

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

You entered into an agreement with the non-resident company under which you receive consideration. Therefore, we take the view that you make a supply to the non-resident company.

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 the indirect tax zone when the thing supplied is done, and:

(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 for GST.

Only one of the paragraphs in Item 2 needs to be satisfied.

From the information given, paragraph (a) of Item 2 is satisfied when you make your supply as:

•                     your supply is made to a non-resident who is not in the indirect tax zone 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 the indirect tax zone when the work is done, nor a supply directly connected with real property situated in the indirect tax zone.

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 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 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.

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 of services under the agreement to the non-resident company is therefore GST-free under paragraph (a) of Item 2.