Private ruling: GST and supply of services made to a non-resident entity
Date of advice: 17 February 2016
Published: April 2016

Ruling: Q1: Are you making a GST-free supply to the non-resident entity in accordance with item 2 and/or item 3 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? Advice Yes, you are making a GST-free supply to the non-resident entity under item 2 and item 3 in the table in subsection 38-190(1) of the GST Act. Relevant fact You are an Australian company and registered for the goods and services tax (GST). You have been contracted by a non-resident company for the services of identification and engagement of various Australian personnel (which may be either a sole trader or companies) who individually possess or which can supply individuals with the necessary expertise to work overseas. You advise that after identifying the relevant Australian personnel you enter into a contract with them asking them to provide their services overseas. In return you are paid a fee for supplying the Australian personnel from the non-resident entity The non-resident entity is a non-resident of Australia. It does not have a presence or a permanent establishment in Australia and is not registered for the Australian GST.


Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 38-190 Detailed reasoning | Note : Where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. Summary | Your supply of services to the non-resident entity is GST-free under item 2 and item 3 in the table in subsection 38-190(1) of the GST Act. Reasoning: | A supply is a taxable supply under section 9-5 of the GST Act if: (a) you make the supply for consideration; | (b) the supply is made in the course of an enterprise that you carry on; | (c) the supply is connected with the indirect tax zone (Australia), and | (d) you are 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. | Your supply of services to the non-resident entity satisfies paragraphs 9-5(a) to 9-5(d) of the GST Act as: (a) you make the supply for consideration; and | (b) your supply is made in the course of an enterprise that you carry on in Australia; and | (c) your supply is connected with Australia as the supply is done through an enterprise 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 a GST-free or input taxed supply. | There is no provision under the GST Act that makes your supply of services an input taxed supply. GST-free supply | Relevant to your supply of services that you make to the non-resident entity is item 2 and item 3 in the table in subsection 38-190(1) of the GST Act (item 2 and item 3). 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 | (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 provides guidance on when a non-resident is 'not in Australia' for the purposes of item 2. | Under paragraph 37 of 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. | 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, when the services are performed). | The non-resident company does not have any presence in Australia in relation to your supply of services. In this case the non-resident company is 'not in Australia' in relation to your supply of services. The precondition of item 2 is therefore satisfied. | Paragraph (a) of item 2 | From the information provided, when you supply your services to the non-resident company the requirements in paragraph (a) of item 2 are satisfied as: | • the supply of services is made to a non-resident who is not in Australia when the thing supplied is done; and | • 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. | As the requirement of paragraph (a) of item 2 is satisfied, there is no need to consider if the requirement of paragraph (b) of item 2 is met. | However, item 2 is limited by subsection 38-190(3) of the GST Act. | Limitations 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. | Under your contract with the non-resident entity, you supply Australian personnel to work overseas. In this instance, subsection 38-190(3) of the GST Act is not applicable as you are not required to provide the services to another entity in Australia. Summary | Your supply of services to the non-resident entity is therefore GST-free under item 2. | Item 3 | Item 3 applies to a supply of a thing, other than a supply of goods or real property, which is made to a recipient who is not in Australia when the thing supplied is done. | Under item 3 a supply, other than a supply of work physically performed on goods situated in Australia where the thing supplied is done, or a supply directly connected with real property situated in Australia, is GST-free where it is: | a) a supply 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. | Paragraph (a) of item 3 | Item 3 may apply irrespective of whether the recipient is a resident or non-resident of Australia. | 'Recipient' is defined in section 195-1 of the GST Act and means in relation to a supply, the entity to which the supply was made This paragraph is satisfied as the supply is made to the non-resident entity who is not in Australia when the thing supplied is done | Paragraph (b) of item 3 | In determining where a supply is used or enjoyed it is first necessary to establish the entity to which the supply is provided (the providee entity). | A supply may be made and provided to the same entity, or may be made to one entity but be provided to another entity. A supply is provided to another entity if, in the performance of a service, the actual flow of that supply is to an entity that is not the recipient. The contractual flow is to the recipient and the actual flow of the supply is to another entity and thus the other entity is the providee. | Having determined the providee entity it is then necessary to consider whether use or enjoyment of the supply by that providee entity takes place outside Australia. Effective use or enjoyment of the supply only takes place outside of Australia, if there is provision of the supply to the providee entity outside Australia. | If a company does not have a presence in Australia, the supply is provided to that entity outside Australia and effective use or enjoyment of the supply takes place outside Australia. | You are providing Australian personnel to work overseas at the request of the non-resident entity. In this instance paragraph (b) of item 3 is satisfied as the use and enjoyment of your supply of services takes place outside Australia. | For more information on paragraph (b) of item 3 refer to Goods and Services Tax Ruling GSTR 2007/2. | Summary | Your supply of services to the non-resident entity is also GST-free under item 3.