Private ruling: GST and supply of marketing services to a non-resident
Date of advice: 19 December 2016
Published: May 2017

Ruling: Q1: Is the supply of marketing services made by the Australian company to the non-resident company a GST-free supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? Advice Yes. The supply of marketing services made by the Australian company to the non-resident company is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.


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: Detailed Reasoning - Detailed reasoning: Note : Where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in section 195-1 of the GST Act. GST is payable on a taxable supply. A supply is a taxable supply under section 9-5 of the GST Act if: a) the supplier makes the supply for consideration; and b) the supply is made in the course of an enterprise that the supplies carries on; and c) the supply is connected with Australia; and d) the supplier is registered for GST. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. You must satisfy all of the above for your supply to be a taxable supply and to be liable for GST. From the information given you satisfy the requirements in paragraphs 9-5(a) to (d) of the GST Act when you supply your marketing services as: a) you make your supply for consideration; b) you make the supply in the course of an enterprise that you carry on in Australia; c) your supply is connected with Australia as the marketing services are done in Australia and made through a business that you carry on in Australia; and d) you are registered for GST. However, your supply of marketing services is not a taxable supply to the extent that it is GST-free or input taxed. There is no provision under the GST Act that makes your supply of marketing services input taxed. GST-free supply Relevant to your supply of marketing services to the non-resident company is 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 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 (a) 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. Paragraph (a) of item 2 Paragraph (a) of item 2 requires that the supply of services 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. Based on the information received, your supply of marketing services satisfies paragraph (a) of item 2 since: ● your supply is made to a non-resident company that is not in Australia in relation to your supply; and ● your 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. Your supply of marketing services is GST-free to the extent that it is not negated by subsection 38-190(3) of the GST Act. There is no need to consider paragraph (b) of item 2 since paragraph (a) of item 2 is satisfied. | Detailed Reasoning - Limitations of item 2: Subsection 38-190(3) of the GST Act before 1 October 2016 Subsection 38-190(3) of the GST Act provided that, without limiting subsection 38-190(2) or (2A), a supply covered by item 2 in that table 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. Current subsection 38-190(3) of the GST Act An amendment was made to subsection 38-190(3) of the GST Act recently. From 1 October 2016, the amended subsection 38-190(3) of the GST Act provides that without limiting subsection 38-190(2) or (2A), a supply covered by item 2 in that table 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; 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. Based on the information received, subsection 38-190(3) of the GST Act is not applicable as the marketing services are provided to the non-resident company and not to the potential subscribers. The potential subscribers are being supplied with information about subscribing for the product. Summary Your supply of marketing services to the non-resident company is GST-free under item 2.

Relevant facts: You are an Australian company and registered for GST. | You have a Licence Agreement with a non-resident company (licensor) in which the licensor has agreed to grant you a licence to market and sell subscription to its product pursuant to the terms in the Agreement. You receive a marketing fee for your supply. | You only do the marketing of the subscription for the product to individuals and companies located in Australia. Potential subscribers will enter into contract with the non-resident company to subscribe for the product.