We recently received a Q&A from a member asking about GST and invoices from overseas suppliers.
Question:
Our Accounts section is querying whether an overseas invoice with GST can be processed with the GST included.
The invoice has an ARN (Australian Registration Number) and appears to be for the purchase of an online subscription. GST at 10% has been added to the cost. Obviously, there is no ABN and it is not a Tax Invoice. As I understand it, the Simplified GST provisions would not apply here as those particular provisions relate to purchases by Australian consumers.
What is the purpose of the ARN registration?
Answer:
The ATO website provides some general information for ‘Simplified GST Registration’ (or ‘limited registration entities’).
Non-resident entities that apply for Simplified GST Registration are issued with an ARN (and are not eligible to hold an Australian Business Number (ABN)). Such entities are generally liable for GST on taxable supplies they make but cannot claim GST credits for acquisitions they make. Also, as they do not have an ABN they cannot issue a Tax Invoice.
One of the requirements to claim a GST credit is that the entity making the acquisition holds a Tax Invoice. Without a valid Tax Invoice no GST credit can be claimed.
Generally, entities that choose the Simplified GST Registration are making supplies to end consumers (and so issuing Tax Invoices is not relevant, as end-consumers cannot claim GST credits).
If a non-resident is making a supply to an Australian business, and the business is making the acquisition for a creditable purpose, then such inbound-intangible supplies are not intended to be subject to GST under the design of the GST rules. However, many foreign suppliers may choose the Simplified GST registration so they can adopt an approach to apply a blanket rule to all customers in Australia on the assumption they are all end-consumers. Unfortunately in this case this means you cannot claim a credit of the GST included in the price. (There are possible alternatives for the supply not to be subject to GST but this would either require the foreign resident to have more sophisticated systems, or a mechanism where the Australian business customer contacted the foreign resident and asked them to remove the GST. However, both are counter-intuitive to the foreign resident choosing the Simplified GST Registration in the first place, instead of a normal GST registration.)
For more information on how GST applies to non-resident suppliers, we provide links to earlier TaxEd articles you might be interested in, May 2017 ‘GST non-resident suppliers or services’ and March 2016 ‘GST – when digital products and services are purchased from overseas supplies – changes to the GST regime‘.