Private ruling: GST on the importation of goods and supply of services to a non-resident

Ruling: Q1: Is the supply of the products (goods) by an Australian entity ('you') as an agent for an overseas supplier to Australian companies a taxable supply, where the goods been delivered directly from the overseas supplier to the Australian companies? | A1: No, the supply of the goods made through you, as the agent for the overseas supplier, to an Australian company is not a taxable supply, where the goods are delivered directly from the overseas supplier to an Australian company, and the Australian company imports the goods into Australia. You are not liable for GST as a resident agent for a non-resident principal under Division 57 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). You are not required to report on the activity statement(s) a sale of the goods that is not connected with Australia. | Q2: Is the supply of the goods by the overseas supplier to you a taxable supply for the purposes of determining your entitlement to claim an input tax credit (ITC) and for reporting on your activity statement(s)? | A2: No, as you are acting an agent for the overseas supplier (who is the principal) in relation to the supply to an Australian company, the overseas supplier is not making a supply to you, and you are not making an acquisition from them. You are not required to report on the activity statement(s) this acquisition. | Q3: Is the supply of your services in return for the commission from the overseas supplier subject to goods and services tax (GST)? | A3: No, the supply of your services to the overseas supplier in return for the commission is GST-free. You report at label G1 your total sales (which include all GST-free supplies), and also report at label G3 your other GST-free sales. | Q4: Are you entitled to claim ITCs when you acquire goods and services (such as accounting services, stationary and office equipments) in relation to your business activities? | A4: Yes, you are entitled to claim ITCs on any creditable acquisition of goods and services (such as accounting services, stationary and office equipments) in relation to your business activities. You report at label G10 all capital purchases, and at label G11 the non-capital purchases, but do not report purchases and importations that are not related to your business. Further, you report at label G13 purchases for making input taxed sales, at label G14 purchases without GST in the price, and at label G15 purchases for private use.

Relevant facts and circumstances: An Australian entity ('you') is registered for goods and services tax (GST). Your main business activity consists of sourcing products ('goods') from an overseas entity ('overseas supplier') for Australian companies. You earn income (commission) for your role in this transaction. In relation to a transaction for the supply of the goods, when you receive a purchase order from an Australian company, you then place an order with the overseas supplier for the specified products (goods). When the goods are ready, the overseas supplier will ship the goods directly to the Australian company. The goods are imported and cleared (that is, custom formalities are completed) by the Australian companies. The overseas supplier provides an invoice to you for the goods, and you invoice the Australian company. You protect your interest as the 'middle-agent' by invoicing the Australian company the same amount for the goods that the overseas supplier invoices you. You also invoice the overseas supplier for your services in return for the commission income. The Australian companies pay you (as the agent for the overseas supplier) and in turn you pay the overseas supplier, but retaining your portion of the commission income. Other additional information provided: You advised that there is no written agreement between you and the Australian companies in relation to the supply of the goods. There is also no written agreement between you and the overseas supplier in relation to these goods. You confirmed that you are acting as an agent for the overseas supplier when making the supply of the goods to the Australian companies, and that the supply of the goods is made by the overseas supplier to the Australian companies. The selling price for the goods is set by the overseas supplier. You do not charge a higher price to the Australian companies. The Australian companies are the importer of the goods into Australia. GST was paid to the Australian Customs Services ('Customs') by the Australian companies, who completed the customs formalities. The goods will be installed in Australia by the Australian companies. You advised that the goods may be shipped on Free On Board ('FOB') or Cost, Insurance and Freight ('CIF') terms. If the goods are provided on FOB terms, the overseas supplier is the owner of the goods until the goods are loaded on the ship. Once the goods are boarded on the ship, the Australian company is the owner of the goods. If the goods are provided on CIF term, the overseas supplier is the owner of the goods until the ship reaches the Australian Port, and the Australian company is the owner of the goods when the ship reaches the Australian Port. In relation to the warranty on the goods, there is no warranty given. However, in terms of quality issues, the Australian company may negotiate with the overseas supplier for replacement, compensation or discount on the balance amount to be paid. You are not involved in these negotiations. In relation to cancellation of orders for the goods, if an Australian company cancels an order, any deposit paid is forfeited and the overseas supplier loses the order, and you lose your commission. The overseas supplier is not registered or required to be required for GST in Australia. The overseas supplier (or its representatives) is not in Australia in relation to your services in return for the commission. There is no written agreement with overseas supplier in relation to these services, and no agreement to provide these services (in return for the commission) to another entity in Australia. You receive the commission for your services from the overseas supplier on completion of a sale of the goods to the Australian companies. The commission is calculated on a percentage basis. You receive certain percentage commission on the gross order values of the goods, depending on the orders. Your services to the overseas supplier, involve you: · contacting Australian companies that require the goods; · marketing the overseas supplier's goods to potential and existing clients; · taking orders from the Australian companies and follow up the orders; · liaising and providing shipment information to clients; · placing the orders with the overseas supplier and follow up on deliveries; and · co-ordinating the supply, demand and logistics of the orders. You incurred expenses (such as accounting fees) for your business activities. These expenses are all local expenses (incurred in Australia). · You have provided copies of the purchase orders, and invoice(s): · Purchase order issued by an Australian company to you; · Purchase order issued by you to the overseas supplier; · Invoice issued by you to an Australian company; · Invoice issued by the overseas supplier to you; and · Invoice issued by you to the overseas supplier for the commission. It is noted that the invoices are not 'tax invoices' and that the purchase order between you and the overseas supplier identifies who is the goods supplied/provided to (that is, the Australian company), the value of the order, shipment terms and the amount of commission payable to you.


Reasons for decision: Detailed Reasoning - Issue 1: We first need to determine who (that is, you or the overseas supplier) is making the supply of the goods to the Australian companies before the determining the GST status of the supply. Who is the supplier of the goods? You advised that you source goods from the overseas supplier for an Australian company in return for a commission (from the overseas supplier). You act as the middle agent between the overseas supplier and the Australian company. Further you confirmed that you are acting as an agent for the overseas supplier when making the supply of the goods to an Australian company, and that the supply of the goods is made by the overseas supplier to the Australian company. The selling price for the goods is set by the overseas supplier. You do not charge a higher price to the Australian company. In terms of quality issues, the Australian company may negotiate with the overseas supplier for replacement, compensation or discount on the balance amount to be paid. You are not involved in these negotiations. You receive the commission for your services (that is, sales and marketing) from the overseas supplier on the completion of the sale of the goods to the Australian company. Goods and Service Tax Ruling GSTR 2000/37 covers agency relationships. As stated at paragraphs 15 and 45 of GSTR 2000/37: 15. When an agent uses his or her authority to act for a principal, then any act done on behalf of that principal is an act of the principal... 45. ...When an agent is authorised to undertake a transaction on behalf of the principal, thereby binding the principal to the legal effects of the transaction, then the transaction is made by the principal through the agent. For further information on agency relationships, refer to GSTR 2000/37 which is available at the Australian Taxation Office (ATO) website at www.ato.gov.au. Accordingly, on the basis of the facts provided, where you are acting as agent on behalf of the overseas supplier in relation to the supply of the goods to an Australian company, it is considered that the transaction is made by the overseas supplier (as principal) through you (as their agent). Division 57 As discussed above, when a principal (that is, the overseas supplier) makes a relevant transaction through an agent (that is, you), the transaction is made by the principal (through the agent) not by the agent. Division 57 of the GST Act provides a special rule which effectively makes a resident agent acting for a non-resident responsible for the GST consequences of what the non-resident do through their resident agent. Section 57-5 of the GST Act states: (1) GST payable on a *taxable supply or *taxable importation made by a *non-resident through a *resident agent: (a) is payable by the agent; and (b) is not payable by the non-resident. (* denotes a defined term under section 195-1 of the GST Act). Paragraphs 97 to 99 of GSTR 2000/37 explain the special rules in Division 57 of the GST Act, and state: 97. Under the basic rules for GST, the supplier is liable for the GST on taxable supplies it makes and the entity making the taxable importation is liable for the GST on the importation. 98. However, if you are a resident and an agent under the general law for a non-resident principal who is registered or required to be registered, and taxable supplies or taxable importations are made by your principal through you, then the GST payable on these transactions is payable by you and not by the non-resident principal. Taxable supplies or taxable importations are made through you as an agent where you have the authority of the non-resident principal to make those transactions on its behalf. 99. The agency services supplied by you to the non-resident is a separate supply to the transactions being undertaken as resident agent on behalf of the non-resident. The supply of agency services is not considered under Division 57. The basic rules for GST apply to determine the amount of GST on these supplies. From the facts provided, you are an Australian resident. You advise that under your arrangements with the overseas supplier, you are acting as an agent for the overseas supplier in relation to the supply of the goods to an Australian company. To determine whether you (as a resident agent) are liable for GST on the transaction under section 57-5 of the GST Act, in relation to the relevant supply, we need to determine whether the overseas supplier (through you as agent on their behalf) makes a taxable supply of the goods to the Australian company. Taxable supply Under section 9-5 of the GST Act, an entity makes a taxable supply if: (a) the entity makes the supply for consideration; and (b) the supply is made in the course or furtherance of an enterprise that it carries on; and (c) the supply is connected with Australia; and (d) the entity is 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. The supply of goods by the overseas supplier to an Australian company will be taxable if all the requirements in section 9-5 of the GST Act are satisfied. Based on the facts provided, the overseas supplier (through you as their agent) receives consideration for the supply of the goods from the Australian company, the supply is made in carrying on the overseas supplier's business, and you advise that the overseas supplier is not registered or required to be registered for GST in Australia. We also need to determine whether the supply is connected with Australia for the purposes of paragraph 9-5(c) of the GST Act. Connected with Australia Section 9-25 of the GST Act defines when a supply is connected with Australia. For the supply of goods, subsection 9-25(3) of the GST Act states: (1) A supply of goods that involves the goods being brought to Australia is connected with Australia if the supplier either: (a) imports the goods into Australia; or (b) installs or assembles the goods in Australia Goods and Services Tax Ruling GSTR 2000/31 explains when a supply is connected with Australia under section 9-25 of the GST Act. Paragraphs 52 to 54 of GSTR 2000/31 cover the situation when goods are brought to Australia for the purposes of subsection 9-25(3) of the GST Act, and state: | Detailed Reasoning - Supplies of goods to Australia: 52. A supply of goods is connected with Australia if the supply involves those goods being brought to Australia and the supplier either imports the goods into Australia (paragraph 9-25(3)(a)) or installs or assembles the goods in Australia (paragraph 9-25(3)(b)). The import of the goods into Australia or the installation or assembly of the goods in Australia is a supply of goods to Australia. 53. This means that the supplier is either an exporter from outside Australia and importer into Australia, or an exporter from outside Australia and installer or assembler in Australia. 54. Paragraph 9-25(3)(a) does not apply to a supply of goods that involves goods being brought to Australia where the recipient imports the goods into Australia. GSTR 2000/31 at paragraph 129 further states: 129. A supply of goods that involves the recipient importing the goods into Australia is not connected with Australia under subsection 9-25(1) as the goods are not delivered, or made available, in Australia to the recipient of the supply. Also, the supply of goods is not connected with Australia under paragraph 9-25(3)(a) because the supplier does not import the goods. However, the recipient importer will make a taxable importation. Goods and Services Tax Ruling GSTR 2003/15 discusses the importation of goods into Australia. Paragraph 145 of GSTR 2003/15 state: 145. In circumstances where there are several parties that cause the goods to be brought to Australia, it is usual for the parties to agree which party takes responsibility for the completion of the customs entry formalities. It is this entity that imports the goods. For example, in a contract of sale a party's obligation to complete the customs formalities is established by adopting a particular Incoterm. According to ICC Incoterms 2000, the seller under DDP terms is responsible for customs formalities on importation, whereas under FOB, CIF or DDU terms, the buyer is responsible. You advised that the goods will be sourced from the overseas supplier and sent to Australia. In relation to a transaction for the supply of the goods, when you receive a purchase order from the Australian company, you then place an order with the overseas supplier for the specified products (goods). When the goods are ready, the overseas supplier will ship the goods directly to the Australian company. The goods are imported and cleared at Customs by the Australian company. GST was paid to Customs by the Australian company, who completed the customs formalities. You advise that the goods may be shipped on FOB or CIF terms, and that the Australian company installs the goods in Australia. On the basis of these facts, it is considered that the Australian company is the importer of the goods into Australia. When the recipient imports to, and installs the goods, in Australia, the supply of the goods to Australia is not connected with Australia. The supply of the goods by the overseas supplier (through you) to the Australian company does not satisfy subsection 9-25(3) of the GST Act and is not connected with Australia. As all the requirements of section 9-5 of the GST Act are not satisfied, the supply of the goods to the Australian company is non-taxable. Accordingly, the overseas supplier (through you as their agent) is not making a taxable supply to the Australian company under section 9-5 of the GST Act, and consequently you (as the resident agent for the overseas supplier) are not liable for GST on the supply of the goods to the Australian company under section 57-5 of the GST Act. Reporting on the activity statement(s) The booklet 'Goods and services tax - how to complete your activity statement' - NAT 7392 ('activity statement booklet') provides guidance on completing your activity statement(s). On page18 of this booklet, it provides that you do not report on label G1 amount receives for the sale that is not connected with Australia. | Detailed Reasoning - Issue 2: Creditable acquisition Section 11-5 of the GST Act defines the term 'creditable acquisition' and states that 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. One of the requirements of a creditable acquisition is that the supply of the thing to you is a taxable supply. As discussed above, on the basis of the facts provided, where you are acting as (resident) agent on behalf of the overseas supplier in relation to the supply of the goods to an Australian company, it is considered that the transaction is made by the overseas supplier (as principal) through you (as their agent). The supply of the goods is made by the overseas supplier to the Australian company, not a supply made to you. You are only the agent of the overseas supplier and do not make an acquisition of the goods from them. Accordingly, where you are acting as the agent for the overseas supplier (the principal) in relation to the supply of the goods to an Australia company, there is no supply of the goods to you, and no corresponding acquisition by you. Consequently, you are not entitled to claim an ITC on the supply of the goods made between the overseas supplier and the Australian company. Reporting on the activity statement On page 26 of the activity statement booklet, it provides that you do not report on label G11 purchases and importations which are not related to your business. You are not required to report on the activity statement(s) this acquisition. | Detailed Reasoning - Additional information - Issue 1 & 2: GST returns for non-residents and/or lodged by resident agents A non-resident is not required to give a GST return (such as activity statement) for a tax period if the non-resident's net amount for the tax period is zero; or the only taxable supplies or taxable importations that the non-resident made (that are attributable to the tax period) are made through a resident agent. If you are a resident agent acting for a non-resident and your net amount for a tax period is zero, you must lodge a return if your non-resident made taxable, GST-free or input taxed supplies, or creditable acquisitions through you. As stated above, the supply of goods by the overseas supplier to the Australian company does not satisfy subsection 9-25(3) of the GST Act and is not connected with Australia. The requirements of section 9-5 of the GST Act are not satisfied and the supply is non-taxable. Accordingly as the resident agent for the overseas supplier, you are not required to report these transactions for the supply of the goods to the Australian company in the GST return (activity statement(s)). Tax invoices for taxable supplies made through an agent Paragraph 29-70(1)(a) of the GST Act requires that the principal (as the supplier) must issue a tax invoice for a 'taxable supply'. However, if a principal makes a taxable supply through an agent, section 153-15 allows either a principal or an agent, but not both, to issue the tax invoice. Subdivision 153-B of the GST Act Section 153-50 of the GST Act provides that entities may enter into an arrangement under which an agent is treated as a separate supplier and/or acquirer. It is noted that for this to apply, both agent and the principal (that is, you and the overseas supplier) must be registered for GST. The effects of entering into such arrangements are covers in GSTR 2000/37, in particular at paragraphs 74 to 115. For further information on subdivision 153-B of the GST Act, refer to in this public ruling which is available on the ATO website at www.ato.gov.au. | Detailed Reasoning - Issue 3: The supply of your services to the overseas supplier in return for the commission will be a taxable supply if all the requirements in section 9-5 of the GST Act are satisfied. Based on the facts provided, the supply of your services to the overseas supplier satisfies paragraphs 9-5(a) to 9-5(d) of the GST Act as follows: (a) you make a supply of services in return for consideration by way of a commission; (b) the supply is made in the course of your business; (c) the services are performed/provided in Australia and/or the supply is made through an enterprise (business) that you carry on in Australia (and therefore the supply is connected with Australia); and (d) you are registered for GST in Australia. However, the supply of your services to the overseas supplier is not taxable to the extent that it is GST-free or input taxed. The supply of your services to the overseas supplier does not satisfy the input taxed provisions under the GST Act. The GST-free provisions are taken into consideration. GST-free Section 38-190 of the GST Act lists supplies of things other than goods or real property, for consumption outside Australia that are GST-free. Of relevance to the supply of your sales and marketing services to the overseas supplier is item 2 in the table in subsection 38-190(1) of the GST Act (Item 2). Under Item 2 a supply of things (other than goods or real property) is GST-free where 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 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. Accordingly, where the requirements of either paragraph (a) or (b) above are met, the supply will be GST-free if the non-resident is not in Australia when the thing supplied is done (that is, when the services are performed/provided). Non-resident not in Australia in relation to the supply For the supply of your services to be GST-free under Item 2, there is a precondition that the non-resident must not be in Australia in relation to the supply when it is performed/provided. Goods and Services Tax Ruling GSTR 2004/7 discusses when an entity is not in Australia when the thing supplied is done. Paragraph 37 of GSTR 2004/7 provides that a non-resident company is in Australia if that company carries on business (or in the case of company that does not carry on business, carries on its activities) in Australia through: (a) a fixed and definite place of its own for a sufficiently substantial period of time; or (b) 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, performed/provided). You advise that you are acting as an agent for the overseas supplier in relation to the supply of the goods to the Australian companies. For supplies of services (such as agency services) made by the agent to the non-resident company, that company is not in Australia in relation to the supply of those agency services. This is because the agent does not make the non-resident company in Australia in relation to supplies that the agent makes itself to the non-resident company. From the facts provided, the supply of your services are made and provided to the overseas supplier who is a non-resident entity. You advise that the overseas supplier is not in Australia in relation to your supply of the services, nor do they have any other representatives acting on their behalf in Australia in relation to those services. Accordingly, it is considered that the overseas supplier is 'not in Australia' in relation to the supply of your services in return for the commission for the purposes of Item 2. Paragraphs (a) and/or (b) of Item 2 Where a non-resident entity is not in Australia in relation to the supply when the thing supplied is done, it is necessary to determine if the other requirements in either paragraph (a) or (b) of Item 2 are satisfied. Under paragraph (a) of Item 2, a supply of a thing that is made to a non-resident who is not in Australia when the thing supplied is done is GST-free if the supply is neither a supply of work physically performed on goods situated in Australia nor directly connected with real property situated in Australia when the work is done. Paragraph 44 of Goods and Services Tax Ruling GSTR 2003/7 covers when supplies of things are not directly connected with goods or real property, because we consider that a direct connection does not exist where the supply does not relate to particular goods or real property or only indirectly relates to such goods or real property. Supplies of this kind include marketing, advertising or similar intermediary services, and services of merely arranging supplies between two other parties. From the facts provided, you provide services (that is, sales and marketing services) to the overseas supplier in return for a commission. The services to the overseas supplier include contacting, taking orders from, liaising with, and providing information to, the Australian companies. Your services also include marketing the goods for, placing orders with, and co-ordinating supplies and orders with, the overseas supplier. The supply of the goods is delivered directly from the overseas supplier to the Australian company. On the basis of these facts, the supply of your services (sales and marketing) to the overseas supplier is neither a supply of work physically performed on goods situated in Australia nor a supply directly connected with real property situated in Australia. Accordingly, the supply of your (sales and marketing) services to the overseas supplier satisfies the requirement of paragraph (a) of Item 2. In addition, where the overseas supplier acquires your services in carrying on its enterprise (business), and is neither registered nor required to be registered for GST in Australia, the supply of your services to the overseas supplier will also satisfy paragraph (b) of Item 2. Please note that you are able to ascertain the GST registration status of an entity that you deal with by checking the Australian Business Register at www.abr.gov.au. Limitations Having met the requirements of Item 2, it is also necessary to consider subsection 38-190(3) of the GST Act. Subsection 38-190(3) of the GST Act states: Without limiting subsection (2), 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. From the facts provided, the supply of your services (sales and marketing) in return for the commission is not provided, and there is no agreement(s) with the overseas supplier to provide these services to another entity in Australia. Accordingly, subsection 38-190(3) of the GST Act does not exclude the supply of your services (sales and marketing) in return for the commission from being GST-free under Item 2. In summary, the supply of your services (sales and marketing) to the overseas supplier in return for the commission is GST-free under Item 2 and no GST payable on this supply. Reporting on the activity statement(s) Pages 17 and 18 of the activity statement booklet provide that you report on at label G1 your total sales, which includes all GST-free sales you make. Further page 22 of this booklet provides that you report at label G3 all the other GST-free sales that you have made. You are entitled to claim ITCs for any creditable acquisitions that you make if all the requirements in section 11-5 of the GST Act (as stated above) are satisfied. Based on the facts provided, you satisfy paragraphs 11-5(c) and 11-5(d) of the GST Act as you have/will pay consideration for the supplies made to you, and you are registered for GST. One of the requirements for a creditable acquisition under paragraph 11-5(a) of the GST Act is that you acquire the thing(s) for a creditable purpose. Under section 11-15 of the GST Act, you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise (for example, a business). You do not acquire the thing for a creditable purpose to the extent that the acquisition relates to making supplies that would be input taxed (such as, financial supplies and the sale and rental of residential properties), or the acquisition is of a private or domestic nature. You advise that you incurred expenses (such as accounting fees, stationary, and office equipments) for the business activities outlined in the facts. These expenses are all local expenses (incurred in Australia). These expenses are not incurred in making input taxed supplies or for private purposes. Accordingly, the requirement of paragraph 11-5(a) of the GST Act is satisfied. Another requirement for a creditable acquisition under paragraph 11-5(b) of the GST Act is that the supply of the thing to you is a taxable supply. That is, GST is included in the price of a supply made to you. Whether or not a supply is a taxable supply to you is determined by the supplier's circumstances. A supplier will make a taxable supply if all the requirements of section 9-5 of the GST Act are satisfied. As such, where the supply of the goods and services (such as accounting services, stationary and office equipments) to you is a taxable supply (that is, the supplier has charged you GST on your acquisitions), you will satisfy all the requirements under section 11-5 of the GST Act and will be entitled to claim ITCs on your creditable acquisitions. You must also have valid tax invoices for the creditable acquisitions when you lodge your activity statements in order to claim the ITCs. Reporting on the activity statement(s) Pages 24 to 26 of activity statement booklet provide that you report at label G10 all capital purchases, and at label G11 the non-capital purchases, but do not report purchases and importations that are not related to your business. Further, pages 28 and 29 of the activity statement booklet provide that you report at label G13 purchases for making input taxed sales, at label G14 purchases without GST in the price, and at label G15 purchases for private use.

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