GST issues registers

Financial services - questions and answers

Foreign banks

(a) added, (u) updated, (w) withdrawn

10.1. Is an Australian representative office of a foreign bank entitled to an ABN under section 8 of the A New Tax System (Australian Business Number) Act 1999 (ABN Act)?

For source of ATO view, refer to paragraphs 26 to 43 of MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number.

No, an Australian representative office of a foreign bank is not entitled to have an ABN.

Entities that satisfy the requirements of section 8 of the ABN Act are entitled to an ABN. Paragraphs 44 to 67 of MT 2006/1 indicate that a broad range of associations and bodies are intended to be included as entities under the category of 'any other unincorporated association or body'. However, we consider that a representative office of a foreign bank is not an entity in its own right, but is merely a part of a larger entity, being the foreign bank. This view is supported by the decisions in Anglo Australian Foods Ltd v Credit Suisse (1989) 1 ACSR 69 and South India Shipping Corp Lt v Export-Import Bank of Korea (1985) 2 All ER 219.

Under subsection 8(2) of the ABN Act, a Corporations Act company is also entitled to an ABN. However, representative offices of foreign banks have Australian Registered Body Numbers (ARBNs) and, according to paragraph 22 of MT 2006/1, bodies with ARBNs are not Corporations Act companies.

An Australian representative office of a foreign bank is, therefore, not entitled to have an ABN because it is not an entity for ABN purposes and it is not a Corporations Act company.

10.2. Can an Australian representative office of a foreign bank register for GST?

For source of ATO view, refer to paragraphs 26 to 43 of MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number

No, an Australian representative office of a foreign bank cannot register for GST under section 23-10 of the GST Act because it is not an entity in its own right and is not carrying on an enterprise in its own right.

10.3. Is a foreign bank with a representative office in Australia entitled to an ABN under section 8 of the ABN Act?

For source of ATO view, refer to paragraph 233 of MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number

Yes, a foreign bank with a representative office in Australia is entitled to an ABN under section 8 of the ABN Act.

Paragraph 170 of MT 2006/1 provides that an enterprise includes an activity, or series of activities, done in the form of a business. The phrase 'in the form of a business' is broad and has as its foundation the longstanding concept of a business. The definition clearly includes a business and the use of the phrase 'in the form of' indicates a wider meaning than the word 'business' on its own. We consider that the liaison activities carried on by a foreign bank at its representative office in Australia have the character of such activities and therefore constitute an enterprise. The decisions in Anglo Australian Foods Ltd v Credit Suisse (1989) 1 ACSR 69 and South India Shipping Corp Lt v Export-Import Bank of Korea (1985) 2 All ER 219 support this view. A foreign bank with a representative office in Australia is therefore entitled to an ABN under paragraph 8(1)(a) of the ABN Act.

A foreign bank with a representative office in Australia will also be entitled to an ABN under paragraph 8(1)(b) of the ABN Act if, in the course or furtherance of carrying on its enterprise, it makes supplies that are connected with the indirect tax zone.

A foreign bank with a representative office in Australia makes supplies that are connected with the indirect tax zone if it supplies services that are performed in the indirect tax zone or if it provides advice or information that is prepared, produced or created in the indirect tax zone. If the services are performed outside the indirect tax zone - or if the advice or information is prepared, produced or created outside the indirect tax zone - then the supply of the service, advice or information is not connected with the indirect tax zone. This is so even if the end product is delivered to a recipient in the indirect tax zone.

A foreign bank with a representative office in Australia also makes supplies that are connected with the indirect tax zone if it makes supplies of things other than goods or real property through an enterprise which it carries on through a permanent establishment (as defined) in Australia.

10.4. Can a foreign bank with a representative office in Australia register for GST?

For source of ATO view, refer to MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number

Yes. A foreign bank with a representative office in Australia can register for GST as it is carrying on an enterprise, even if that enterprise is carried on overseas and not in Australia.

The requirements to obtain an ABN are different to the requirements to obtain GST registration. Section 8 of the ABN Act requires that an applicant must be carrying on an enterprise in Australia or making supplies that are connected with the indirect tax zone - whereas Division 25 of the GST Act allows for GST registration where the Commissioner is satisfied that the applicant is carrying on, or intends to carry on, an enterprise and there is no requirement that the enterprise be carried on in Australia.

10.5. Is the customer service provided by a foreign bank at its representative office in Australia subject to GST?

Non-interpretative - straight application of the law

This will depend on the facts of the case.

The customer service provided by a representative office of a foreign bank will be subject to GST if the requirements of section 9-5 of the GST Act are satisfied.

Section 9-5 provides that you make a taxable supply if:

•

you make the supply for consideration

•

the supply is made in the course or furtherance of an enterprise that you carry on

•

the supply is connected with the indirect tax zone

•

you are registered or required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

10.6. Is a foreign bank with its representative office in Australia entitled to claim the full amount of GST on the goods and services it purchases and utilises, if it is not generating any income in Australia?

Non-interpretative - straight application of the law

If a foreign bank with a representative office in Australia chooses to register for GST, it is entitled to input tax credits for any creditable acquisitions made by its representative office in Australia. The Australian representative office of a foreign bank is not entitled to input tax credits in its own right because it cannot register for GST.

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).