Private ruling: GST and supply of consultancy services to non-resident entities
Date of advice: 4 July 2017
Published: November 2017

Ruling: Q2: Are you liable for GST when you supply your consultancy services to the non-resident company, Company B under the GST Act? Advice No, you are not liable for GST when you supply your consultancy services to the non-resident company, Company B as your supply is GST-free under items 2 and 3 in the table in subsection 38-190(1) of the GST Act.


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. | Detailed Reasoning - Taxable supply: GST is payable on a taxable supply under section 9-5 of the GST Act. Under section 9-5 of the GST Act, an entity makes a taxable supply if: a) the supply is made for consideration; and b) the supply is made in the course or furtherance of an enterprise that the entity carries on; and c) the supply is connected with Australia; and d) the entity is registered for GST. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. From the facts provided, you satisfy the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act as: (a) you make the supply of consultancy services for consideration; and (b) the supply is made in the course or furtherance of an enterprise (business) that you carry on; and (c) the supply is connected with Australia under paragraph 9-25(5)(b) of the GST Act as the supply of consultancy services that is done in and outside Australia is made through a business that you carry on in Australia; and (d) you are registered for GST. However, your supply of consultancy services is not a taxable supply to the extent that it is GST-free or input taxed. The supply of your consultancy services is not input taxed. We need to determine whether your supply of consultancy services satisfies the GST-free provisions in the GST Act. | Detailed Reasoning - GST-free: Section 38-190 of the GST Act specifies the circumstances where the supply of things other than goods or real property for consumption outside Australia is GST-free. Relevant to your supply of consultancy services are items 2 and 3 in the table in subsection 38-190(1) of the GST Act (item 2 and item 3). | Detailed Reasoning - 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. However, item 2 is limited by 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. From the facts given your supply of consultancy services made to Company A and Company B satisfy paragraph (a) of item 2 as: ● your supply of consultancy services are made to non-residents who are not in Australia in relation to your supply at the time of your supply; and ● your supply of consultancy 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. Further subsection 38-190(3) of the GST Act does not negate the GST-free status of the supply covered by item 2 as from the facts given you are not providing your consultancy services to the Australian subsidiaries listed. The fact that the Australian subsidiaries may later benefit from the outcome of your supplies does not alter the fact that your supply of consultancy services is made to Company A and Company B and provided to Company A and Company C. This is because what is being supplied is consulting services and not the benefits arising from the consulting services and therefore there is not enough link for your supply to apply to the Australian subsidiaries under subsection 38-190(3) of the GST Act. In the event you are required to provide your consultancy services to the Australian subsidiaries while making your supply, subsection 38-190(3) of the GST Act will not apply to your supply where the Australian entities are registered for GST and acquire your services for business purposes. Accordingly, your supply of consultancy services to Company A and Company B is GST-free under item 2. More information on item 2 and subsection 38-190(3) of the GST Act is available in Goods and Services Tax Rulings GSTR 2004/7 and 2005/6. | Detailed Reasoning - Item 3: Under item 3 a supply is GST-free where the supply: a) 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 3 is applicable irrespective of the residency of the recipients. For your supply of consultancy services to be GST-free under item 3 there is a condition that the recipient must not be in Australia in relation to the supply when it is done. From the facts given Company A and Company B are not in Australia in relation to your supply of consultancy services. Paragraph (a) of item 3 is satisfied when you supply your consultancy services to Company A and Company B. Your supply of consultancy services also satisfies paragraph (b) of item 3 as the use or enjoyment of your legal services takes place outside Australia since the providees, Company A and Company C, to whom you are required to provide your services are not in Australia in relation to your supply. The fact that the Australian subsidiaries may later benefit from the outcome of your supplies does not alter the fact that the consulting services are provided to Company A and Company C and thus effective use or enjoyment of the consulting services takes place outside Australia. This is because the nature of your supply is the provision of consulting services to Company A and Company C and not the benefits that the Australian subsidiaries may receive from the outcome of your supply of consulting services. Your supply of consultancy services is neither a supply of work physically performed on goods nor directly connected with real property in Australia. Accordingly your supply of consultancy services to Company A and Company B is GST-free under item 3. | Summary: Your supply of consultancy services to Company A and Company B is GST-free under items 2 and 3.

Question 1: Are you liable for GST when you supply your consultancy services to the non-resident company, Company A under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | No, you are not liable for GST when you supply your consultancy services to the non-resident company, Company A as your supply is GST-free under items 2 and 3 in the table in subsection 38-190(1) of the GST Act. | Relevant facts: You are registered for GST and carry on your business activity in Australia. | You have a contract with Company A, a company located outside Australia to provide consultancy services to it. The services involve your employee representing Company A in meetings and conferences which are held overseas. While there is some preparatory work conducted at home in Australia, the majority of the work is conducted abroad. You have provided us with a copy of the contracts. Company A has a subsidiary in Australia and you have no contact with the Australian subsidiary when performing your services. The Australian subsidiary may benefit in later years from the outcome of your supply. | You have a contract with Company B, a company incorporated outside Australia to provide consultancy services to a third party, Company C a non-resident company. The services involve your employee representing Company C in overseas meetings and conferences. You have provided us with a copy of the contract. | Company C has a subsidiary in Australia and you have no contact with the Australian subsidiary when performing your services. The Australian subsidiary may benefit in later years from the outcome of your supply.