Private ruling: Payments made by an entity to a certain government authority (GA)
Date of advice: 9 February 2017
Published: July 2017

Ruling: Q1: Are the payments made by the entity consideration for a taxable supply? | A1: No, the payments are not consideration for a taxable supply.

Relevant facts and circumstances: The government authority (GA) wanted to encourage a type of industry to operate in its local area, and entered into certain agreements with the entity which provided encouragement to the entity to operate in that industry. In order to achieve this certain payments were guaranteed by the government authority if profitability did not reach certain agreed levels. These arrangements were backed by relevant legislation.

Relevant legislative provisions: A New Tax System (Goods and Services) Act 1999 Section 9-5 | A New Tax System (Goods and Services) Act 1999 Section 40-5

Reasons for decision: Summary: It was determined that in view of the legal effect of the legislation specifically enacted for this purpose and the arrangements in place between GA and the entity, payments flowing between the parties to give effect to the arrangements were not consideration for taxable supplies.