Issue
Is the Australian branch of a non-resident company making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to the non-resident company, when: • it carries out marketing services to the non-resident company, and • the Australian branch is not a separate legal entity or a GST branch?
Decision
No, the Australian branch is not making a taxable supply under section 9-5 of the GST Act to the non-resident company. The Australian branch is not making a supply to the non-resident company as both are the same legal entity.
Facts
The Australian branch of a non-resident company was established to carry out marketing services for the non-resident company. The Australian branch is neither a separate legal entity to the non-resident company nor a GST branch of the non-resident company.
The non-resident company is registered for goods and services tax (GST) and operates in a number of countries throughout the world.
Reasons for Decision
Section 9-5 of the GST Act sets out the requirements that must be met for an entity to make a taxable supply.
The term 'supply' is a broad concept for GST purposes and is defined in subsection 9-10(1) of the GST Act as 'any form of supply whatsoever'. The meaning of the term 'supply' is discussed in Goods and Services Tax Ruling GSTR 2001/4 and paragraph 22 provides that a supply is essentially 'something which passes from one entity to another'.
The Australian branch of a non-resident company carries out marketing services for and to the non-resident company. Therefore, it needs to be determined whether 'something passes from one entity to another' for the purposes of the GST Act, when these marketing services are carried out.
An entity may conduct more than one distinct activity or operate in a number of different locations. Such an entity may be managed on a branch or divisional basis with each branch accounting separately. Provided that they are part of the same legal entity, transactions between the branches or between the branch and parent, are not supplies for GST purposes. The recipient and the supplier would be the same entity, and a supply cannot be made to oneself.
The Australian branch is not a separate legal entity to the non-resident company. In addition, the Australian branch is not a GST branch of the non-resident company. As such, the Australian branch and the non-resident company are the same legal entity and something does not pass from one entity to another when the marketing services are carried out and no supply is made.
Therefore, the Australian branch is not making a taxable supply under section 9-5 of the GST Act when it carries out marketing services to the non-resident company. Note. An entity that is registered for GST can separately register a branch for GST purposes where the provisions of section 54-5 of the GST Act are met. The effect of registering a GST branch is that the branch will act as if it is a separate entity. Therefore, transactions that occur between a separately registered branch and the parent or other branches of the parent, will be supplies for GST purposes.