Private ruling: GST and sales and marketing services in Australia for a non-resident
Date of advice: 7 October 2016
Published: December 2016

Ruling: Q1: Is your supply of sales and marketing services in Australia to the overseas company, under a contractor agreement, subject to goods and services tax (GST)? | A1: No, your supply of sales and marketing services in Australia to the overseas company, under a contractor agreement is not subject to GST. It is a GST-free supply under item 2 in the table in subsection 38-190 (1) of A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Relevant facts and circumstances: You are registered for GST. The overseas company carries on a business of manufacturing products. It does not have any office, registered business or other business presence in Australia. It is not registered and not required to be registered for GST in Australia. The overseas company's products are wholly manufactured overseas and are sold worldwide via alternative methods. Under a written agreement with the overseas company you are engaged as a contractor to provide sales and marketing service to fully promote the overseas company's products and services in Australia in order to facilitate a sale between the customer and the overseas company. Under the terms of the agreement you do not have the authority to conclude orders on behalf of the overseas company for any of their products. Once you have been successful in obtaining a sale, order documents are compiled and either email/faxed directly from the supplier overseas to customer located in Australia. All communication is then channelled between the customer and the supplier. All products, shipments thereof and invoicing is then managed and controlled by the overseas company. At no stage do you handle, distribute or take possession of any goods. No storage of products is maintained in Australia. You are only then re-addressed by customers in a consultation role in the event of warranty issue or product installation procedures. At this point, only simply matters are addressed by you. More complex issues or product re-calls, etc. are dealt with directly by the overseas manufacturer. You are obliged to remit on a monthly basis, a service invoice to the overseas company which is duly paid to a business account in Australia. Under the terms of the agreement, the sales and marketing services is to be provided to the overseas company and there is no requirement to provide this to anyone else in Australia.

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(1) item 2 | A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-190(3)

Reasons for decision: Summary: Your supply of services under the agreement will be subject to GST if it is a taxable supply. Section 9-5 of the GST Act specifies you will be making a taxable supply if certain requirements are met provided your supply is not GST-free or input taxed. Your supply is connected with Australia as it is performed in Australia, it is made for consideration, in the course and furtherance of an enterprise you carry on in Australia and you are registered for GST. Therefore, the requirements in section 9-5 will be met provided your supply is not GST-free or input taxed. For more details see Goods and Services Tax Ruling GSTR 2000/31. You are not considered to be an agent for GST purposes. For more details see GSTR 2000/37 on agency relationships. Your supply is not considered to be input taxed. We need to consider if your supply is GST-free. Section 38-190 of the GST Act provides that if certain requirements are met, then certain supplies of services or things other than goods or real property, that are for consumption outside Australia are GST-free. Although your supply is performed in Australia it is provided to a non-resident under an agreement so it is relevant to look at item 2 in the table in subsection 38-190(1) of the GST Act ( item 2) to see if your supply is GST free and to consider subsection 38-190(3) of the GST Act. The requirements in item 2 have been met as: • your supply of services under the agreement is made to an overseas company that is a non-resident and does not carry on business in Australia either on its own or through an agent so is not in Australia in relation to the supply when the thing supplied is done- For more details see GST 2004/7 and • your supply of services under the agreement is neither a supply of work physically performed on goods situated in Australia nor a supply directly connected with real property situated in Australia (paragraph (a)) or • the overseas company has acquired your services in carrying on its enterprise, and is not registered or required to be registered (paragraph (b)). Either paragraph (a) or (b) needs to be met but in your case both paragraphs in Item 2 have been met. If you enter into an agreement with the non-resident to provide your services to another entity in Australia, subsection 38-190(3) of the GST Act will apply to negate the GST-free status under Item 2, and the supply will be a taxable supply. Under the terms of the agreement this provides that there is no agreement with the overseas company for you to provide your supply to another entity in Australia. Furthermore, the nature of the sales and marketing services supplied by you to the overseas company is the promotion and marketing of the overseas company's products to customers in Australia. While knowledge and information about the products flow to the customers this is only a by-product of the supply of the sales and marketing services and it does not alter the true nature of the service that is the promotion and marketing of the overseas company's products. GSTR 2005/6 expresses our view on this at paragraphs 534 to 536. Therefore, the supply is both made and provided to the non-resident company even though the customer may benefit from the supply. Therefore, the supply of the sales and marketing service is made and provided to the overseas company, the non-resident who is not in Australia. As the supply is not provided to another entity in Australia, subsection 38-190(3) of the GST Act has no application and does not negate the GST-free status of the supply of sales and marketing services covered by item 2. In conclusion, the sales and marketing services you supply to the overseas company are GST-free under item 2.