Private ruling: GST and supply of services to a non-resident
Date of advice: 2 March 2018
Published: June 2018

Ruling: Q1: Will you be making a GST-free supply of services to the overseas company under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: You will be making a GST-free supply of services to the overseas company under item 2 in the table in subsection 38-190(1) of the GST Act to the extent that the supply is not negated by subsection 38-190(3) of the GST Act when you provide your assistance to Specialist Managers, various staff and Sites.


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: 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 or furtherance of an enterprise that the supplier carries on; and c. the supply is connected with Australia; and d. the supplier is 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. All of the above must be satisfied for your supply of services to be a taxable supply. From the information given, your supply of services satisfies paragraphs (a) to (d) of section 9-5 of the GST Act as: a) you make your supply for consideration; and b) the supply is made in the course of a business that you carry on; and c) your supply is connected with Australia as it is made through a business that you carry on in Australia; and d) you are registered for GST. However, your supply of 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 services input taxed. GST-free supply Relevant to your supply of services is item 2 in the table in subsection 38-190(1) of 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 that 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. Precondition of item 2 – non-resident is 'not in Australia' Goods and Services Tax Ruling GSTR 2004/7 (available at ato.gov.au) provides guidance on when a non-resident is 'not in Australia' for the purposes of item 2. We consider that a non-resident company is in Australia for the purposes of item 2 if that company carries on its business (or in the case of a company that does not carry on its business, carries on its activities) in Australia: ● at or through a fixed and definite place of its own for a sufficiently substantial period of time; or ● through an agent at a fixed and definite place for a sufficiently substantial period of time. A non-resident company is in Australia in relation to a supply if: ● the supply is for the purposes of the Australian presence of the company; or ● the presence of the company in Australia is involved in the supply unless the only involvement is minor. From the facts given your supply satisfy the precondition for item 2 as your supply is made to a non-resident company that is not in Australia in relation to your supply. The next step is to consider the paragraphs in item 2. Only one of the paragraphs in item 2 needs to be satisfied. Paragraph (a) of item 2 From the fact given, your supply of services satisfy paragraph (a) of item 2 as 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 services is GST-free under paragraph (a) of item 2 to the extent that it is not negated by subsection 38-190(3) of the GST Act. As paragraph (a) is satisfied there is no need to consider paragraph (b) of item 2. Subsection 38-190(3) of the GST Act 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. Paragraph 38-190(3)(b)) of the GST Act Goods and Services Tax Ruling GSTR 2005/6 provides guidance on the application of paragraph (b) in subsection 38-190(3) of the GST Act. Paragraphs 59 and 61 in GSTR 2005/6 state: 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 something), 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. From the facts given, paragraph 38-190(3)(b) of the GST Act will be satisfied as you will be required to provide your services to the Specialist Manager, and Sites since you advised that under the arrangement your role would be to assist the and the sites and you will be managed daily by one of the Specialist Managers. Paragraph 38-190(3)(c) of the GST Act Requirement (i) The term ‘Australian based business recipient’ describes the relationship that a recipient has with a particular supply. An entity is an ‘Australian-based business recipient’ of a supply that is made to it if: a) the entity is registered for GST; b) an enterprise of an entity is carried on in Australia; and c) the acquisition of the thing supplied is not solely of a private or domestic nature. Where the Specialist Manager, and Sites are all GST registered entities carrying on their business activities in Australia and the acquisition of your services is for business purpose requirement (i) applies to your supply of services to the overseas company. Accordingly, subsection 38-190(3) will not negate the GST-free status of your supply of services under paragraph (a) of item 2. You must be satisfied, on reasonable grounds that that the Specialist Manager, and Sites are ‘‘Australian based business recipient’ before you treat your supply as GST-free. Where you are not in a position to be aware of these circumstances, enquiries should be made with the overseas company or Specialist Manager, and Sites. For example you can obtain the ABN of these entities and a declaration that they are registered for GST. Where requirement (i) will not apply to all entities to whom you will provide assistance, your supply of services will be GST-free only for the entity to whom requirement (i) applies. The next step for you will be to consider whether the other requirements in paragraphs 38-190(3) of the GST Act apply for these entities. Requirement (ii) An employee or officer is provided with a supply in their capacity as an employee or officer if the supply was provided to them in the performance of their duties or as part of their remuneration. Where you will be required under the contract with the overseas company to provide your supply of services to an employee of a GST registered business that carries on its business activity in Australia and it acquires the supply for business purposes, requirement (ii) applies to the supply and subsection 38-190(3) of the GST Act will not negate the GST-free status of the supply. The supply is GST-free under item 2 . Requirement (iii) Requirement (iii) requires that the acquisition is solely for a creditable purpose and is not a non-deductible expense. An acquisition is solely for a creditable purpose where the thing is acquired solely for business purposes and the acquisition does not relate to making supplies that would be input taxed. Division 69 of the GST Act is about non-deductible expenses and lists supplies that are generally not creditable acquisitions for non-resident employers. These expenses include entertainment expenses that could be paid to the employees of a non-resident as part of their remuneration package. Where you will be required under the contract with the overseas company to provide your supply to an employee or officer of the overseas company and the acquisition of the non-resident recipient is solely for business purposes requirement (iii) applies and the supply will be GST-free . Your supply of services to the overseas company is GST-free under paragraph (a) of item 2 to the extent that subsection 38-190(3) does not negate the GST-free status of your supply when providing assistance to the Specialist Manager, various staff and Sites.

Relevant facts: You are an Australian company and registered for GST. | You are looking at undertaking some work with a company based outside Australia. The overseas company does not have any direct employees in Australia. The overseas company does not have a legally registered entity in Australia and are not registered for GST. | The overseas is currently undertaking some projects in Australia and you have been asked to monitor the conduct of these projects. The agreement would be for you to provide a headcount resource who would be employed by you to assist with the oversight of these projects. | You will interact with the various Managers and staff engaged by the overseas company at the project’s sites when performing your services. You do not know if the Specialist Managers and staff are registered for GST. | Interaction with staff and Sites | The day to day monitoring is completed by the staff which would have a direct contract with the overseas company. Your role would be to assist with both the oversight of the staff and the sites where required to satisfy the legal and regulatory requirements in the conduct of the project. | This is done through completing and compiling essential documents, telephone and discussion and limited face to face meetings. This interaction will be with a variety of staff. In addition, some interaction will occur with individuals in a variety of institutions around the country who are undertaking the projects but by far the most common communication will be with the relevant staff. | Interaction with Specialist Managers | The overseas company has engaged directly a number of Specialist Managers (small consulting companies or sole traders) to oversee the projects for quality, regulatory and legal purposes. | The operational management will be by the Specialist Manager. You will be managed on a daily basis by one of these Managers including receiving instructions and reporting your work via e-mail, telephone and face to face meetings. | Your interaction with the Managers contracted by the overseas company is to oversee the staff running the trial.