The Advanced Tax Ruling System
28 March 2013
Posted by: Author: Charl Geldenhuys
Source: Charl Geldenhuys
The advanced tax ruling system was created to promote clarity, consistency and certainty regarding the interpretation and application of the tax Acts.The South African Revenue Service (SARS) may make an advanced tax ruling on any provisions of the tax Acts.
An advanced tax ruling will either consist of a binding general ruling (BGR), binding private ruling (BPR) or a binding class ruling (BCR). A Senior SARS Official may issue a written ruling stating the facts and circumstances which will be effective for either a specified period or an indefinite period. A BCR is a written statement issued by SARS regarding the application by a specific class of persons in respect of a proposed transaction. Class of persons refers to shareholders, members or beneficiaries of companies, associations or trusts. This will also include a group of related or unrelated persons. A BPR is a written statement also issued by SARS regarding the application by one or more parties to a proposed transaction.
The Application Process
The application for an advanced ruling by a person should comply with the necessary criteria as prescribed. An application may be made by a person on behalf of himself or a class of persons. Where there is more than one applicant to a proposed transaction, the applicants must designate a lead applicant who will be their representative.
An application must contain the following minimum requirements:
The applicant’s name, applicable identification or a tax reference number, postal address, e-mail address and telephone number;
In the instance where there is a representative, one must provide his name, postal address, e-mail address and telephone number;
A complete description of the proposed transaction in respect of which the ruling is required, including its financial implications;
A complete description of the proposed transaction’s impact upon the applicant’s tax liability;
A complete description of any transactions entered into by the applicant prior to submitting the application or any transaction that may be undertaken after completion of the proposed transaction which may have a bearing effect on the tax consequences of the proposed transaction;
The proposed ruling being required, including a draft of the ruling;
The relevant statutory provisions or legal issues;
Reasons why the applicant believes that the proposed ruling should be granted;
A statement of the applicants interpretation of the relevant statutory provisions or legal issues, as well as an analysis of the relevant authorities as to whether they support or are opposing to the proposed ruling being pursued;
A statement, to the best of the applicants knowledge as to whether the ruling requested refers to a rejection;
A description of the information that the applicant believes should be deleted from the final ruling before publication in order to protect the confidentiality of the applicant(s) or class members;
The applicant’s consent to the publication of the ruling and
In the case of an application for a BCR, a description of the class members and the impact the proposed transaction may have on their tax liabilities.
The Applicable Fees for an Advanced Ruling
So what are the applicable fees for applying for an advanced tax ruling? Small, medium and micro enterprises will pay an application fee of R2 500 for the issuing of a BPR or BCR. Any other taxpayer will have to pay a R14 000 application fee. With regards to recovery fees, a rate of R650 per hour will apply to non-urgent applications and a rate of R1 000 per hour for urgent applications. Urgent applications are defined as those cases filed within 20 business days before the proposed transaction commences but no more than 40 business days in total are left before such date. Any indirect costs that are incurred in connection with the application will also be recovered. These indirect costs will include any travelling costs incurred or to pay for the services provided by consultants and/or experts.
Receiving the Feedback
When a BPR or BCR is issued, it is signed by a Senior SARS Official and must contain the following:
- A statement identifying it is a binding private ruling or binding class ruling;
- The name, tax reference number and postal address of the applicant;
- In the case of a BCR, a list or description of the affected class members;
- The relevant statutory provisions or legal issues;
- A description of the proposed transaction;
- Any assumptions made or conditions imposed by SARS in connection with the validity of the ruling;
- Whether a specific ruling is made and
- The period for which the ruling is made.
Rulings Rendered Void or Withdrawn
A BPR or BCR will be rendered void if the proposed transaction, as described in the ruling, is materially different from the transaction actually carried out or if there were any fraud, misrepresentations or non-disclosure of a material fact. The ruling will also be void if an assumption made or condition imposed by SARS is not satisfied or carried out.
SARS may at any time withdraw or modify an advanced ruling, but they must first provide the applicant with a notice of the proposed withdrawal or modification and provide the applicant with a reasonable opportunity to object to the decision. SARS must also specify the date on which the decision to withdraw or modify the ruling will become effective. This will be allowed if the applicant or class member has not yet commenced with the proposed transaction or incurred significant costs in respect of the arrangement. They will also be allowed to withdraw or modify the ruling if a person, other than the applicant or class member, will suffer significant tax disadvantages in terms of the advanced ruling or if the effect of the ruling will materially erode the South African tax base.
Publication of Advanced Ruling
A person applying for an advanced ruling must provide their consent to the publication of the ruling. A BPR or BCR must be published by SARS for general information in the correct form and manner as that the Commissioner may prescribe, but without revealing the identity of an applicant, class members or other persons identified or referred to in the ruling. SARS must provide the applicant with a draft copy of the edited ruling for review and comment before publishing it. They should consider any comments, proposed edits and deletions submitted by the applicant, but are not required to accept them. An applicant for a BCR may provide his consent in writing to the inclusion of information identifying it or the proposed arrangement, to facilitate communication with the class members. If an advanced ruling has been published, notice of a withdrawal of modification thereof must be published in the correct form and media as the Commissioner may deem appropriate.
Therefore, careful consideration and care should be taken when it comes to applying for an advanced tax ruling as it can become a complex and tedious process to start and follow through.
List of references
Anon. 2013. Advanced Tax Ruling Fees Published. [Online] Available from: http://www.sabinetlaw.co.za/finances/articles/advance-tax-ruling-fees-published [Accessed: 2013-03-26].
Anon. 2013. Apply for an Advanced Tax Ruling (ATR). [Online] Available from: http://www.sars.gov.za/home.asp?pid=4109 [Accessed: 2013-03-26].
South Africa. 2012. Tax Administration Act, No.289 of 2011. Government Gazette, 17-21.