Private ruling: GST and supply of services
Published: October 2013

Ruling: Question | Is GST payable on the supply of training services to a non-resident entity, NR Co, where the training is conducted in Australia? | Answer | Yes.

Relevant facts and circumstances: You are a provider of education/training and consultancy services. You are registered for GST. NR Co, a specialist technical training services organisation, requested you to provide a quotation to deliver a course in a certain city for X number of people. You provided NR Co a quote, which includes delivery, handbook, lunch and teas. Your quote to deliver the course in the city was accepted by NR Co's client XYZ Co. NR Co then provided you with the names of the participants who are all employees of XYZ Co. Due to changes in the participants travel arrangements, the course was delivered in certain city as a one-day session on Month 20XX. You do not have a written agreement with NR Co and only emails confirming offer for scope of training and acceptance of offer are held. NR Co is a company registered in Country X. You have been advised that NR Co has an associated company in Australia but that company is currently dormant. Your dealings with regards to the provision of the training services are with the Country X office of NR Co. NR Co is neither registered nor required to be registered for GST in Australia. NR Co requested you to issue the invoice in the name of ABC Co, a company based in Country W. You are not aware of the arrangement between NR Co, XYZ Co and ABC Co.

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 Subsection 9-25(3). | A New Tax System (Goods and Services Tax) Act 1999 Subsection 9-25(5). | A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-190(1). | A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-190(3).

Reasons for decision: Summary: GST is payable on the supply of training services to NR Co where the training is conducted in Australia. | Detailed Reasoning - Detailed reasoning: You are liable to pay the GST on any taxable supply that you make. Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states: You make a taxable supply if: (a) you make the supply for *consideration, and (b) the supply is made in the course or furtherance of an *enterprise that*you carry on; and (c) the supply is *connected with Australia; and (d) 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 defined term in the GST Act.) In this case, you make the supply of training services for consideration, the supply is made in the course of an enterprise that you carry on and you are registered for GST. Hence, the requirements of paragraphs 9-5(a), 9-5(b) and 9-5(c) of the GST Act are satisfied. It remains to be determined whether the supply is connected with Australia under paragraph 9-5(c) and whether the supply is GST-free or input taxed. Connected with Australia Subsection 9-25(5) of the GST Act provides that a supply of anything other than goods or real property is connected with Australia if: (a) the thing is done in Australia; or (b) the supplier makes the supply through an enterprise that the supplier carries on in Australia; or (c) all the following apply: (i) neither paragraph (a) nor (b) applies in respect of the thing; (ii) the thing is a right or option to acquire another thing; (iii) the supply of the other thing would be connected with Australia. 'Thing' is defined in section 195-1 of the GST Act to mean anything that can be supplied or imported. Things other than goods or real property that can be supplied include services, advice, information, rights, obligations to do anything, or any combination of these things. Under paragraph 9-25(5) of the GST Act the connection with Australia requires that the 'thing' being supplied is 'done' in Australia. Goods and Services Tax Ruling GSTR 2000/31 which is about supplies connected with Australia, gives further explanation as to when supplies are done in Australia. In relation to the supply of a service, paragraph 65 of GSTR 2000/31 states: Supply of a service 65. If the thing being supplied is a service, the supply of that service is typically done where the service is performed. If the service is performed in Australia, the service is done in Australia and the supply of that service is connected with Australia under paragraph 9-25(5)(a). This is the case even if the recipient of the supply is outside Australia. Although you have an agreement to supply the training services to NR Co, a company based in Country X, you are required to provide the training services in Australia to the employees of NR Co's client. As you perform the training services in Australia, your supply is connected with Australia. Accordingly, paragraph 9-5(c) of the GST Act is satisfied. GST-free or input taxed The supply of training services, in the circumstances described, is not input taxed. It remains to be determined if the supply is GST-free. The supply of your training services is not considered to be a supply of goods or real property. Hence, the GST status of this supply is appropriately considered under section 38-190 of the GST Act, which provides that certain supplies of things other than goods or real property, for consumption outside Australia, are GST-free. Of relevance, are items 2 and 3 in the table in subsection 38-190(1) of the GST Act. Item 2 in the table in subsection 38-190(1) of the 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 the 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 a supply to be GST-free under Item 2 there is a precondition that the entity must not be in Australia in relation to the supply when it is done. As stated above, if the thing being supplied is a service, the supply of that service is typically done where the service is performed. In this circumstance, you perform the training services for the Country X entity in Australia; the service is therefore done in Australia. At paragraph 37 of Goods and Services Tax Ruling GSTR 2004/7, we established a test where we consider that a non-resident company is in Australia if that company carries on business (or in the case of a company that does not carry on business, carries on its activities) in Australia: (a) at or through a fixed and definite place of its own for a sufficiently substantial period of time; or (b) through an agent at a fixed and definite place for a sufficiently substantial period of time. In addition, if a non-resident company is determined to be in Australia on the basis of the above test, it is necessary to determine if the company is in Australia in relation to the supply, when the supply is done (that is, provided/performed). The information you provided indicates that NR Co is a non-resident company who is registered in Country X and has its principal office in Country X. Further, NR Co had no representatives (agent, branch or subsidiary) in Australia that was involved in your supply. Your dealings under your agreement for the provision of training services were with NR Co in Country X. Hence, NR Co is considered 'not in Australia' in relation to your supply. In addition, the supply of your training services satisfies the requirements of paragraph (a) of Item 2. This is because your training services do not involve work physically performed on goods situated in Australia, nor is it work directly connected with real property situated in Australia. However, having met the requirements of Item 2 it is necessary to consider subsection 38-190(3) of the GST Act. Subsection 38-190(3) of the GST Act provides that a supply which is 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 Australia. Goods and Services Tax Ruling GSTR 2005/6 at paragraphs 59 and 61 provide guidance in relation to the expression provided to another entity, and state: 59. The word provided is used in subsection 38-190(3) to contrast with the term made in item 2. In the context of section 38-190, the contrasting words indicate that if a non-resident contracts for a supply to be provided to another entity, the place of consumption should be determined with regard to the entity to which the supply is provided, not the entity to which the supply is made. 61. Thus the expression provided to another entity means, in our view, that the performance of a service (or in the doing of some thing), the actual flow of that supply is, in whole or part, to an entity that is not the non-resident entity with which the supplier made the agreement for the supply. The contractual flow is to one entity (the non-resident recipient) and the actual flow of the supply is to another entity. Where the recipient is a company with employees in Australia it is necessary to consider whether the supply is provided to the employees. We consider that a supply is provided to an employee of a company, if the supply is of a kind that must be rendered or received by an employee such as training services or the supply is personal to the employee. In this circumstance, under your agreement with NR Co, you provide the training services in Australia to the employees of NR Co's client. Accordingly, subsection 38-190(3) of the GST Act excludes the supply of your training services that is provided to these employees (another entity) in Australia from being GST-free supply under Item 2. Therefore, the supply of your training services in Australia to NR Co, but provided to the employees of NR Co's client is not GST-free under Item 2. Item 3 in the table in subsection 38-190(1) of the GST Act (Item 3) Item 3 provides that a supply which is neither a supply of work physically performed on goods situated in Australia, nor directly connected with real property situated in Australia when the thing supplied is done, is GST-free where the supply: (a) is made to a recipient who is not in Australia when the thing supplied is done and (b) the effective use or enjoyment of which takes place outside Australia. Both paragraphs (a) and (b) of Item 3 must be satisfied for the supply to be GST-free. Similar to the precondition of Item 2 discussed above, paragraph (a) of Item 3 requires that the recipient must not be in Australia in relation to the supply when it is done (that is, when services is provided/performed). As stated above, on the information provided, NR Co is considered 'not in Australia' in relation to your supply, and therefore paragraph (a) of the Item 3 is satisfied. Paragraph (b) of Item 3 requires that the place of effective use or enjoyment of a supply to be determined (that is, whether the place is outside Australia). Goods and Services Tax Ruling GSTR 2007/2 examines the circumstances in which the effective use or enjoyment of a supply takes place outside Australia for the purposes of paragraph (b) of Item 3. We take a two step approach to work out whether effective use or enjoyment of a supply takes place outside Australia. Firstly, we determine the entity to which the supply is provided (the providee entity). We then determine whether provision of the supply to the providee entity is outside Australia. Paragraphs 52 to 54 of GSTR 2007/2 deal with identifying the entity to which the supply is provided (the providee entity). These paragraphs state: 52. A supply may be made and provided to the same entity, or may be made to one entity but be provided to another entity (or entities)... 53. The entity to which the supply is made is the recipient. The supplier may provide the supply to that recipient entity (in which case the recipient is also the providee) or may provide the supply to another entity (in which case the other entity is the providee). 54. A supply is provided to another entity if, in the performance of a service (or in the doing of some thing), the actual flow of that supply is to an entity that is not the recipient. The contractual flow is to the recipient and the actual flow of the supply is to another entity and thus the other entity is the providee. Under your agreement with NR Co, you supply training services. However, you provide, or are required to provide, the training services to the employees of NR Co's client and these are performed in Australia. It is the individuals (such as the employees of NR Co's client) who are actually using or enjoying the training services at the time that they are being trained. Hence, the providee entity is the individual (employee) who receive your training services. The providee entities (individuals) are in Australia when you perform your training services in Australia. Accordingly, the effective use and enjoyment of your training services does not take place outside Australia, and paragraph (b) of item 3 is not satisfied. Accordingly, the supply of your training services in Australia made to NR Co but provided to the employees of NR Co's client is not GST-free under Item 3. The supply of your training services is not GST-free under any other provision of the GST Act. Therefore, as all the requirements of section 9-5 of the GST Act are met, you are making a taxable supply when you supply training services to NR Co but provide the services in Australia to the employees of NR Co's client. All publications referred to above are available on the ATO website at www.ato.gov.au