Private ruling: GST and supply of services to non-resident
Date of advice: 21 March 2017
Published: August 2017

Ruling: Q1: From 1 October 201X, are you making a GST-free supply of services to the non-resident company under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) in respect to services carried out pursuant to the Agreement? Advice Yes. From 1 October 201X you are making a GST-free supply of services to the non-resident company under paragraph (a) of item 2 in the table in subsection 38-190(1) of the GST Act in respect to services carried out pursuant to the Agreement


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: Summary: 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 of services under the Agreement to be a taxable supply and 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 services to the non-resident company 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 services under the Agreement are made through a business that you carry on in Australia; and d) you are registered for GST. However, your supply of services under the Agreement 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 services under the Agreement input taxed. GST-free supply Relevant to your supply of services under the Agreement 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. Precondition of item 2 - non-resident is 'not in Australia' Goods and Services Tax Ruling GSTR 2004/7 provides guidance on when a non-resident is 'not in Australia' for the purposes of item 2. The requirement that the non-resident in item 2 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. Under paragraph 37 in GSTR 2004/7, 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. We consider that it would be reasonable for a supplier to conclude that a non-resident company is in Australia if: ● the company is registered with the Australian Securities and Investment Commission (ASIC); or ● the company has a permanent establishment in Australia for income tax purposes; Suppliers should be aware that even if a company is not registered with ASIC, it may still be in Australia on an application of the test at paragraph 37 in GSTR 2004/7. 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. The representative of a company may take on a variety of forms and capacities. For example, a company may be represented by anyone from a single employee to a branch of the company. It is therefore necessary, to identity the type of presence by a representative of a non-resident company in Australia that makes a company in Australia. To work out whether a company is in Australia in relation to the supply, it is necessary to examine the role the presence of the company's representative in Australia plays in relation to the supply. From the facts given, the non-resident company is a non-resident of Australia. The non-resident company is not carrying on a business or activities at a fixed and definite place of its own in Australia. Employees of the non-resident company do visit Australia for the purposes of meetings, seminars and trainings but these are usually for short periods of less than a week at a time. The presence of the employees does not make the non-resident company to be in Australia since your supply to the non-resident company is not for the purposes of these employees. The requirement for the non-resident not to be 'in Australia in relation to the supply' is therefore satisfied. The next step is to consider the paragraphs in item 2. Only one of the paragraphs needs to be satisfied for the supply of your services under the Agreement to be GST-free under item 2. 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. Goods and Services Tax Ruling GSTR 2003/7provides guidance on when a supply is a supply of work physically performed on goods and when a supply is directly connected with real property. Based on the information received, your supply of services satisfies paragraph (a) of item 2 since the services you made are 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 services is GST-free to the extent that it is not negated by subsection 38-190(3) of the GST Act. Paragraph (b) of item 2 This paragraph is not satisfied as the non-resident company is registered for GST. Subsection 38-190(3) of the GST Act From 1 October 201X 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. From the facts given, depending on the services to be supplied under the Agreement, some of the services are either provided to the non-resident company or to the non-resident company's clients who are located either in or outside Australia. Services provided to the non-resident company When you provide your services to the non-resident company, subsection 38-190(3) of the GST Act is not applicable. Your supply to the non-resident company in this instance is GST-free under paragraph (a) of item 2. Clients located outside Australia When you provide your services to the non-resident company's clients that are located outside Australia, subsection 38-190(3) of the GST Act is not applicable. Your supply to the non-resident company in this instance is GST-free under paragraph (a) of item 2. Clients located in Australia When you provide your services to the non-resident company's clients that are located in Australia, you satisfy paragraphs (a) and (b) of subsection 38-190(3) of the GST Act as you have an agreement with a non-resident for your supply and you are required to provide some of your services to entities located in Australia under the agreement. However, requirement (i) in paragraph subsection 38-190(3)(c) of the GST Act applies to your supply because from the facts given you provide your supply of services in Australia to GST registered Australian businesses and these businesses acquire the services for their business purposes. In this instance, subsection 38-190(3) of the GST Act does not negate the GST-free supply status of your supply of services to be provided to GST registered Australian businesses under item 2. Summary Your supply of services under the Agreement to the non-resident company is therefore GST-free under paragraph (a) of item 2 from 1 October 201X.

Relevant facts: You are a company incorporated in Australia and are registered for the goods and services tax (GST). | You have entered into an Agreement with a non-resident company. The scope of services you supply to the non-resident company under the Agreement is for the provision of marketing and sales support services including technical support and training services. You also provide relevant services. In addition to this, post sales services including training and onsite and remote installation are also provided by you under the Agreement. | Under the Agreement you are required to provide some of the services to Australian and overseas entities. The services are either performed from your office or at the sites of the clients of the non-resident company. The overseas entities are not in Australia when you provide your services to them. You charge a management fee to the non-resident company for the supply of these services. | The entities in Australia are Australian-based business recipients as defined in section 9-26(2) of the GST Act, that is the entities are registered for GST in relation to the business they carry on in Australia. The businesses also acquire the services in connection with the enterprise they are carrying on in Australia and not for private or domestic purposes. | Pursuant to the Agreement, you do not act as an agent for the non-resident company in any capacity. You do not have and will not represent that you have, any authority to bind the non-resident company, to assume or create any obligation, express or implied, to enter into any agreements regarding the non-resident company's products, or to make any warranties or representations on behalf of the non-resident company or in the name of the non-resident company. | The non-resident company is a non-resident for GST purposes, as defined in section 195-1 of the GST Act. It does not have a permanent establishment in Australia as defined in subsection 6(1) of the ITAA 1936. It is registered for GST in Australia. | The non-resident company is engaged in the production and supply of certain software products which are sold and marketed throughout the world. The software is delivered to the client via online download. For the sale of the software products, the non-resident company is required to provide some services to its clients in Australia and these services are delivered by you under the Agreement. | Employees of the non-resident company do visit Australia for the purposes of meetings, seminars and trainings but these are usually for short periods of less than a week at a time. The employees are sent to Australia to participate in seminars, meetings with you or conduct training for your staff for the purposes of providing marketing and technical information concerning your products. The employees are not in Australia for more than 183 days in a year and their presence are not in relation to the supply of services that you make under the Agreement. | The non-resident company does not supply services to private or domestic customers who are not registered for GST within Australia. | Reasons for decisions: 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.