Private ruling: GST and supply to a non-resident but provided to an Australian entity
Published: July 2014

Ruling: Q1: Is goods and services tax (GST) payable on the supply of your services to a non-resident entity that is provided to another entity in Australia? | A1: Yes, GST is payable on the supply of your services to the non-resident entity that is provided to another entity in Australia as the supply is a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Relevant facts and circumstances: You are registered for goods and services tax (GST). You entered into an agreement with a non-resident entity. The non-resident entity does not have a branch office in Australia. Under the agreement, you will provide services to an entity in Australia. The services that you will provide are not work performed on goods situated in Australia nor are directly connected with a real property situated in Australia. You will invoice the non-resident entity for your services.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 and | A New Tax System (Goods and Services Tax) Act 1999 section 38-190.

Reasons for decision: Summary: GST is payable on a taxable supply. Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states: You make a taxable supply if: (a) you make the supply for *consideration; and (b) the supply is made in the course or furtherance of an *enterprise that you *carry on: and (c) the supply is *connected with Australia; and (d) you are *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. You make the supply of services for consideration and in the course of carrying on your enterprise. The supply is connected with Australia as your services are done in Australia and/or you make the supply through an enterprise that you carry on in Australia. You are registered for GST. The requirements in paragraphs 9-5(a) to 9-5(d) of the GST Act are satisfied. Therefore, the supply of your services is a taxable supply unless the supply is GST-free or input taxed. There is no provision in the GST Act under which the supply of your services would be input taxed. Supplies of things, other than goods or real property, are GST-free if they are covered by any of the items in the table in subsection 38-190(1) of the GST Act. Under item 2 in the table in subsection 38-190(1) of the GST Act (item 2), a supply 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 (b) the non-resident acquires the thing in carrying on the non-resident's enterprise, but is not registered or required to be registered. Under item 3 in the table in subsection 38-190(1) of the GST Act (item 3), a supply is GST-free if it is a supply: (a) that is made to a recipient who is not in Australia when the thing supplied is done; and (b) the effective use or enjoyment of which takes place outside Australia; other than a supply of work physically performed on goods situated in Australia when the thing supplied is done, or a supply directly connected with real property situated in Australia. Item 2 in the table in subsection 38-190(1) of the GST Act For the purpose of item 2, a non-resident company is in Australia if it carries on business (or 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 sufficiently substantial period of time. If the non-resident entity is in Australia on the basis of the criteria above, it is necessary to determine whether the company is in Australia in relation to the supply. You advised that the non-resident entity does not have a branch office in Australia. As such, we consider that the non-resident entity is not in Australia. Moreover, the non-resident entity is not in Australia in relation to the supply of your services. The supply of your services is neither a supply of work performed goods situated in Australia nor a supply directly connected with real property situated in Australia. The requirement in paragraph (a) of item 2 is satisfied. Therefore, the supply of your services is covered by item 2. You advised that you will provide your services to another entity in Australia. Subsection 38-190(3) of the GST Act provides that a supply covered by item 2 is not GST-free if: • it is a supply under an agreement entered into, whether directly or indirectly, with a non-resident; and • the supply is provided, or the agreement requires it to be provided, to another entity in Australia. As you will provide your services to another entity in Australia under your agreement with the non-resident entity, the supply of your services, although covered by item 2, is not GST-free because of subsection 38-190(3) of the GST Act. Item 3 in the table in subsection 38-190(1) of the GST Act As stated above, we consider that the non-resident entity is not in Australia when you make the supply of your services. Thus, the requirement in paragraph (a) of item 3 is satisfied. For the purpose of paragraph (b) of item 3, it is necessary to determine which entity has the actual use or enjoyment of the supply. The recipient of a supply is the entity to which the supply is made. A supply that is made to a recipient may be provided to another entity. In such case, the entity that actually uses or enjoys the supply is that other entity (the providee). You make the supply of your services to the non-resident entity; however, you will provide such services to another entity in Australia. Therefore, entity in Australia, being the providee entity has the actual use or enjoyment of your supply. As you provide the supply of your services to another entity in Australia, the effective use or enjoyment of the supply does not take place outside Australia. The requirement in paragraph (b) of item 3 is not satisfied. Accordingly, the supply of your services is not covered by item 3 and is not GST-free. Conclusion The supply of your services meets all the conditions in section 9-5 of the GST Act. The supply is neither GST-free nor input taxed. Therefore, the supply is a taxable supply.