Private ruling: Supply of services to non-resident
Date of advice: 16 October 2018
Published: December 2018

Ruling: Q1: Will Company A be making a taxable supply of services to Company B? | A1: No. Company A will not be making a taxable supply of services to Company B. The supply will be GST-free.

Relevant facts and circumstances: Company A is an Australian branch operation of a company based overseas. Company A is registered for GST. Company B is based overseas. Company B will provide an Australian-based business recipient (the client) with a licence to use online software, management and consulting services. The online software is hosted and supported overseas. Company A and Company B have the same shareholders and directors; however, they are not members of the same corporate group. Company A and Company B will enter into agreement under which Company A will provide incidental services to the client. Company A will simply be providing a staff member to Company B to service its contract with the client. The Company A staff member will act as first point of contact, raising and escalating any issues or development requirements to the relevant project managers at Company B. The staff member will be working from the office of the client. Company B does not have any employee, officer, or agent in Australia carrying on its enterprise from a fixed place or from one or more places in Australia for more than 183 days in a 12 month period. Company B will not have any employees or officers in Australia at the time when Company A provides its services. Company A and its employee do not have authority to conclude contracts on behalf of Company B.

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 9-27 | A New Tax System (Goods and Services Tax) Act 1999 section 38-190

Reasons for decision: Summary: GST is payable on a taxable supply. 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 the indirect tax zone; 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 term defined under section 195-1 of the GST Act) Company A will supply its services to Company B for a fee. Company A will make the supply in the course of carrying on its enterprise. The supply will be connected with the indirect tax zone as Company A will make it through an enterprise that it carries on in the indirect tax zone. Company A is registered for GST. All the requirements in paragraphs 9-5(a) to 9-5(d) of the GST Act will be satisfied. Therefore, Company A’s supply of services to Company B will be a taxable supply unless the supply will be GST-free or input taxed. There is no provision in the GST Act under which Company A’s supply of its services to Company B will be input taxed. Under subsection 38-190(1) of the GST Act certain supplies of things, other than goods or real property, for consumption outside the indirect tax zone are GST-free. Item 2 in the table in subsection 38-190(1) (item 2) provides that a supply that is made to a non-resident who is not 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 for GST. In accordance with subsection 38-190(3) of the GST Act, a supply covered by item 2 is not GST-free if: ● it is a supply under an agreement entered into with a non-resident; and ● the supply is provided, or the agreement requires it to be provided, to another entity in the indirect tax zone; and 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; or 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 supplied is solely for a creditable purpose and is not a non-deductible expense. Company A will make a supply to Company B, a non-resident that is not in Australia at the time of supply. The supply will not be a supply of work physically performed on goods situated in the indirect tax zone as the services that Company A will supply is merely to be the first point of contact for the client to raise and escalate any issues in relation to the software supplied by Company B. Therefore, the supply is covered by item 2. While Company A will provide the services to the client under an agreement with Company B, the exclusion in paragraph 38-190(3)(i) of the GST Act will not apply as the client would be an Australian-based business recipient if the supply had been made to it. Accordingly, Company A will not be making a taxable supply of services to Company B as the supply will be GST-free.