Private ruling: GST and international services
Published: July 2012

Ruling: Q1: Is the supply to you of registry services GST-free? | A1: Yes. Facts You operate a manufacturing business. You were incorporated many years ago under the laws of a foreign country, with headquarters or central management and control located in the capital city of that foreign country. You are currently listed in a number of stock exchanges around the world. You were listed on the Australian Stock Exchange (ASX) for a number of years, ending a few years ago. You traded on the ASX by way of CHESS Depository Interests (CDIs). You decided to delist from the ASX due to the low level of CDIs quoted on the ASX and the low level of trading on the ASX compared to other exchanges. You have not at any time had an office or other permanent establishment in Australia. You have not carried on a business in Australia, either at or through a place of your own or through an agent at a fixed or definite place. You have not entered into any contracts in Australia concerning manufacturing activities, with any such contracts instead being entered into in Country X. You are registered with the Australian Securities & Investments Commission (ASIC) as a foreign company. You have appointed an Australian company secretary who is also described as an 'external advisor'. For ASX purposes your address is in Australia. You acquired services from an Australian supplier (Aus Co), which provides share registry services for companies listed on the ASX. You provided a copy of a registry services agreement (RSA) between you and Aus Co dated a number of years ago for the supply of security registry services effective from the date of the agreement. The services to be provided in accordance with the RSA are listed in the schedule and includes: · Establish and maintain registers and process transactions and data to enable you to meet statutory, stock exchange listing and securities clearing house registry requirements. The fees payable to Aus Co under the RSA are set out in the schedule and includes: · Maintenance fee charged as a bundled fee based on certain assumptions regarding holder numbers and assumes a normal level of investor calls and correspondence. · Consulting fees charged on a per hour basis · Web broadcasting fees charged on a per broadcast basis · Disbursements charged at cost plus an internal administrative fee Aus Co issues monthly invoices stating that they are for 'Professional fees in connection with maintenance of the company's share register for the month of'. A further breakdown is given including: · Maintenance (at varying rates of $ per month per shareholder) · Dividends (reconciliation of bank account) · Disbursements (such as postage, document storage, stationery) You have a number invoices on hand from Aus Co covering the certain period and include a total of $XX of GST. Recently, you formally asked Aus Co to reconsider the GST treatment of their supplies to you. Aus Co have resisted any change to the treatment of its supplies as taxable supplies and have not provided you with a refund of the GST. You are neither registered nor required to be registered for GST in Australia. You only require advice on the application of section 38-190 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to your acquisition of the registry services.


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 11-5. | A New Tax System (Goods and Services Tax) Act 1999 Section 11-20. | 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: Under section 11-20 of the GST Act you are entitled to an input tax credit for any creditable acquisition that you make. The amount of the input tax credit is the amount equal to the GST payable on the supply of the thing acquired. Section 11-5 of the GST Act states: You make a creditable acquisition if: (a) you acquire anything solely or partly for a *creditable purpose; and (b) the supply of the thing to you is a *taxable supply; and (c) you provide, or are liable to provide, *consideration for the supply; and (d) you are *registered, or *required to be registered. (*denotes a defined term in the GST Act) From the information provided, GST was included in the consideration you paid to Aus Co for the supply of its registry services. However, as you are neither registered nor required to be registered for GST in Australia, you are not entitled to an input tax credit. Hence, you cannot obtain a refund directly from this office for the GST included in the price of the supply of registry services by Aus Co. However, even if you were registered for GST, you will not be entitled to input tax credit if the supply to you is not a taxable supply as required by paragraph 11-5(b) of the GST Act. Whether or not a supply is a taxable supply depends on the supplier's circumstances. A supplier will make a taxable supply if all of the requirements of section 9-5 of the GST Act are met. Section 9-5 of the GST Act provides that a taxable supply is made 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 for GST. However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed. Although Aus Co may satisfy the requirements of paragraphs 9-5(a), 9-5(b), 9-5(c) and 9-5(d) of the GST Act and the supply is not input taxed, the supply of registry services is not a taxable supply to the extent that it is GST-free. The supply of registry 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 and item 3). | Detailed Reasoning - 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 it is a supply that is made to a non-resident who 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. A non-resident for GST purposes is an entity that is not an Australian resident for the purposes of the Income Tax Assessment Act 1936 . A company is a resident of Australia if: · the company is incorporated in Australia, or · the company is not incorporated in Australia but has either its central management and control in Australia or its voting power is controlled by shareholders who are residents of Australia . On the information provided, you are not a resident of Australia. Goods and Services Tax Ruling GSTR 2004/7 provides guidance on when a supply is made to a non-resident who is not in Australia for the purposes of item 2. The requirement in item 2 that the non-resident is not in Australia when the thing supplied is done is a requirement that the non-resident is not in Australia in relation to the supply when the thing supplied is done. | Detailed Reasoning - The meaning of 'not in Australia': The requirement that a supply is made to a non-resident who is 'not in Australia' 'when the thing supplied is done' is in effect a proxy test for determining where the supply to that entity is consumed. Paragraph 184 of GSTR 2004/7 states: 184. As the Australian location of the entity to which the supply is made at the relevant time is a proxy test for identifying when consumption occurs in Australia, we consider that the expression 'not in Australia' should be interpreted in the context of the supply in question. The expression 'not in Australia' requires, in our view, that the non-resident or other recipient is not in Australia in relation to the supply . This means that a non-resident or other recipient of a supply may satisfy the 'not in Australia' requirement if that entity is in Australia but not in relation to the supply… Paragraphs 230 to 332 of GSTR 2004/7 discuss when a non-resident company is in Australia for the purposes of item 2 (and paragraph (b) of item 4). A company being an artificial legal entity does not have a precise location and its presence can only be established through the presence of its representatives. The representatives of a company may take on a variety of forms and capacity and can include a branch of the company. The presence of a non-resident company in Australia is the means by which consumption of the supply in Australia is identified. We determine the presence of a foreign company in a jurisdiction according to jurisdictional law. At common law, a foreign company is amenable to the jurisdiction of an Australian court if the company carries on business within the court's jurisdiction through its own office or through an agent acting on behalf of the company and that office or agent has a fixed and definite place within the jurisdiction and the business has continued for a sufficiently substantial period of time. (paragraph 239 of GSTR 2004/7) At paragraph 241 of 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. Paragraph 247 of GSTR 2004/7 provides that a non-resident company is in Australia if: · the company is registered with ASIC, or · the company has a permanent establishment in Australia for income tax purposes. A company that is incorporated outside Australia is required to register as a foreign company with ASIC if it wishes to carry on a business in Australia. Although registered with ASIC, a non-resident company to which the supplier makes a supply may be able to demonstrate to the supplier that, even though it is registered with ASIC or has a permanent establishment, on application of the test to its particular circumstances, the non-resident company is not in Australia. Alternately, even if a company is not registered with ASIC, it may still be in Australia on an application of the test. Similarly, even if a company does not have a permanent establishment in Australia for income tax purposes, it may still be in Australia on application of the test to its particular circumstances. You are registered with ASIC as a foreign company under the Corporations Act 2001 . The registration was required as a precursor to listing on the ASX. Furthermore, the registration required that a local agent (the external advisor) be appointed. A non-resident company is considered to be carrying on business in Australia even though the activities carried on in Australia are not a substantial part of, or are no more than incidental to, the main objects of the company. A non-resident company has a place of its own if it leases or owns a place at which it conducts through its servants or agents. However, a place of its own is not limited to such a place. A non-resident company occupies a place as a place of its own if it has a right to be there. Evidence of that right is generally to be found in the fact that the company's employees or agent occupy that place for the purposes of its business. If a non-resident company does not have a fixed and definite place in Australia at, or through which, the business of the non-resident company is carried on in Australia, the company is not in Australia. The word 'fixed' connotes a degree of permanence in the same location. A place may be fixed even if it only exists for a short time. Although 'fixed place' excludes a place that is purely temporary, it does not mean everlasting. It is a geographical place with some degree of permanence. The word 'definite' is used in the sense of a distinct place; that is a place that can be pointed to as the place at which the non-resident company's business is carried on. For a non-resident company to be considered to be in Australia, the business of the non-resident company must have continued, or be intended to continue, at a fixed and definite place for a sufficiently substantial period of time. Sufficiently substantial period of time simply means that there is a period sufficient for the business of the non-resident company to be conducted in Australia. If a non-resident company has no fixed or definite place of its own in Australia, it may still carry own business in Australia through an agent from some fixed and definite place. The key issue in this kind of situation is whether the non-resident company is itself carrying on business in Australia through a duly appointed agent, or whether the business being conducted is the agent's own business and the non-resident is merely one of its customers. Paragraph 281 of GSTR 2004/7 lists factors which may be taken into account in determining whether a non-resident company can properly be regarded as carrying on business in Australia through an agent. On the information provided, you did not directly lease or otherwise occupy premises in Australia. You have not conducted your bottling operation in Australia. Furthermore, there is nothing to indicate that you are carrying on your business in Australia, through an agent. Hence, you are 'not in Australia' in relation to the supply of Aus Co's services. | Detailed Reasoning - Paragraph (a) and/or (b) of item 2: The supply of your services must also satisfy the requirements of either paragraph (a) or paragraph (b) of item 2 for the supply to be GST-free. | Detailed Reasoning - 'Directly connected with goods or real property' and 'a supply of work physically performed on goods': Goods an Services Tax Ruling GSTR 2003/7 examines the meaning of the expressions 'directly connected with goods or real property' and 'a supply of work physically performed on goods' as used in subsection 38-190(1) of the GST Act. Paragraph 21 of GSTR 2003/7 states: 21. Under items 1, 2 and 3 it is only where the connection between the supply and the goods or real property is a direct one that the location of goods or real property is regarded as the place where consumption occurs. The addition of the adverb 'directly' to the phrase 'connected with' implies a more emphatic connection between the supply and goods or real property. The inference is that the supply is so closely aligned with goods or real property that it is appropriate to treat the location of the goods or real property as the place where consumption occurs. On the information provided, the supply of Aus Co's services is not the supply of work physically performed on goods situated in Australia. In addition, it is not a supply directly connected with real property situated in Australia. As such, the supply of Aus Co's services to you satisfies the requirements of paragraph (a) of item 2. As the requirements of paragraph (a) of item 2 are satisfied, there is no need to consider if the requirements of paragraph (b) of item 2 are met. | Detailed Reasoning - Exclusion: The scope of item 2 is limited by subsection 38-190(3) of the GST Act which provides that a supply covered by item 2 is not GST-free if: · it is a supply under an agreement entered into, whether directly or indirectly, with a *non-resident; and · the supply is provided or the agreement requires it to be provided, to another entity in Australia. GSTR 2005/6 which provides the ATO view on the operation of subsection 38-190(3) of the GST Act states at paragraphs 59 and 61: 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 in 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. Before it can be determined whether a supply is provided (or is required to be provided) to another entity, it is essential that the supply be properly characterised as the supply of a service, right or some other thing. It is also necessary to establish the exact nature of the supply to determine to which entity that service or thing is provided. In some instances, it is inherent in the nature of the supply that the supply is provided to a particular entity. In this case, the supply of the registry services is a supply under an agreement entered into with you, a non-resident. What is being supplied by Aus Co under the RSA is registry services effecting your compliance with your statutory obligations as required by ASX. The nature of the service is such that the supply of registry services is provided to you. The supply is not provided to another entity. Hence, the contractual and actual flow of the services is to you. Therefore, subsection 38-190(3) of the GST Act does not exclude Aus Co's services to you from being GST-free under item 2 as the supply of its services is made and provided to you, a non-resident company not in Australia when the supply is made. Therefore, based on the information provided, the supply to you by Aus Co of the registry services is GST-free under item 2. Although it is no longer necessary to consider whether the supply is GST-free under item 3, the requirements of that provision are also satisfied and discussed below. | Detailed Reasoning - Item 3: Item 3 provides that a supply of a thing (other than goods or real property) is GST-free if it is: a supply: (a) that 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; other than a supply of work physically performed on goods situated in Australia when the thing supplied is done, or a supply directly connected with *real property situated in Australia. Both paragraphs (a) and (b) of item 3 must be satisfied for the supply to be GST-free. | Detailed Reasoning - Paragraph (a) of item 3: 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 the services are provided/performed). As stated above, from the information provided, you are 'not in Australia' in relation to the supply of registry services by Aus Co. Hence, paragraph (a) of the item 3 is satisfied. | Detailed Reasoning - Paragraph (b) of item 3: 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. On the information provided, the registry services are supplied and provided directly to you, a non-resident company. Hence you are the providee entity. We consider that in all circumstances you have the actual use or enjoyment of the supply of registry services. Our conclusion is that the actual flow of the supply is to you and not to any other entities. The next step is to determine whether the effective use or enjoyment of the supply takes place outside Australia. Effective use or enjoyment of a supply only takes place outside Australia if there is provision of the supply to the providee entity outside Australia. In relation to when the supply of registry services are made and provided to you, you are not in Australia in relation to the supply when Aus Co provides the supply. In this circumstance, the use and enjoyment of the supply of registry services is outside Australia. It is noted, as discussed in item 2 above, that the supply of registry services is neither a supply of work physically performed on goods situated in Australia nor a supply directly connected with real property situated in Australia. Hence, paragraph (b) of item 3 is satisfied. Therefore, based on the information provided, the supply to you by Aus Co of the registry services is GST-free under item 3. In summary, on the information provided, the supply of the registry services is GST-free under both items 2 and 3, though only one of these items needs to be satisfied for the supply to be GST-free. For your information, where a supplier has incorrectly treated a GST-free supply as taxable, the recipient may be able to obtain a refund of the GST from the supplier. Where the supplier has already remitted the GST to the ATO, the supplier may be able to obtain a refund of the GST incorrectly included in the price of the GST-free supply. However, there may be time limits that would prevent the ATO from refunding some amounts to the supplier.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.