NO RULINGS LIST FOR PURPOSES OF ADVANCE TAX RULINGS
30 June 2011
Posted by: SAIT Technical
SARS Legal and policy
The Advance Tax Ruling System, provided for in Part IA of Chapter III of the Income Tax Act, No. 58 of 1962 (the Act), enables the Commissioner to issue rulings on proposed transactions. Section 76(G)(3) of the Act authorises the Commissioner to publish a list of issues for which applications for advance tax rulings may be rejected. This No Rulings List is supplementary to the exclusions, refusals and rejections contained in section 76G(1) and (2), and apply to the following issues:
1. Income Tax
1.1 The deductibility of expenditure relating to the taking over of liabilities and/or provisions upon the acquisition of a business.
1.2 The tax consequences pertaining to transactions that involve the transfer of life rights in exchange for loans or other compensation.
1.3 The issuing of shares as compensation for the acquisition of assets, services, trading stock, etc. (excluding the application of sections 42, 24B and 11(lA) of the Act). 1
.4 The Secondary Tax on Companies implications relating to the acquisition of shares in a holding company by a connected person in relation to that holding company, where the shares are subsequently cancelled by the holding company.
1.5 The tax consequences in respect of the transfer of assets from a company or a trust to another company or trust to dispose of those assets, that is, the so-called realisation companies or trusts.
1.6 The nature of share premium used to declare a dividend where the share premium was partly created by a capitalisation issue.
1.7 The qualifying allowance, contemplated in section 24C of the Act, in respect of future expenditure relating to warranties or guarantees.
1.8 The validity of amounts treated on a ‘salary sacrifice’ basis for remuneration purposes.
1.9 Where special mechanisms are in place which require the Commissioner to issue a directive. For example, this exclusion will apply to directives as provided for in paragraphs 11 and 11B of the Fourth Schedule and paragraph 3 of the Seventh Schedule to the Act.
1.10 The interpretation and application of the exemption under section 10(1)(c)(v) of the Act in relation to any agreement entered into before 1 January 1990.
1.11 The tax deductibility of any amounts incurred by an employer in order to transfer or extinguish, in whole or in part, its post-retirement medical aid obligations towards past and present employees, specifically including, but not limited to – (a) lump sum contributions to pension, provident or benefit funds; (b) lump sum settlement payments made directly to employees; and (c) premiums paid by the employer to acquire annuity policies. 1
.12 The deductibility, in terms of sections 11(a) or 24J(2) of the Act, of interest incurred by a company on debt used to finance the acquisition of shares in another company for the purpose of acquiring the underlying assets or business.
2. Value-Added Tax
2.1 The entitlement to notional input tax as contemplated in the Value-Added Tax Act, No. 89 of 1991 (the VAT Act) in respect of goods that are still to be imported.
2.2 Whether the receipt of imported services could be subject to VAT at the rate of 0%.
2.3 Whether section 7(1)(c) of the VAT Act is applicable to services received by a branch from its non-resident head office.
2.4 Whether the supply of shares and debentures, which confers a right of accommodation in property, constitutes the supply of fixed property as contemplated in the VAT Act.
2.5 Whether an amount received as compensation or damages for early termination of a distribution agreement constitutes consideration for a supply as contemplated in the VAT Act.
2.6 Where the supplier of goods or services is not the applicant or a co-applicant in respect of a ruling application pertaining to the VAT liability of a supply of goods or services.
3.1 The attribution, allocation or apportionment of expenditure or input tax (from an income tax and a VAT perspective).
3.2 Where SARS is requested to rule on the substance of a transaction and disregard the form.
3.3 Pertaining to the tax consequences of transactions in respect of agreements which have already been concluded.
3.4 Relating to or involving transactions which, in the opinion of the Commissioner, could be subject to any specific or general anti-avoidance provisions in the various Acts administered by SARS. Should the applicant be uncertain whether this item will apply to his/her application, then he/she can submit a draft application before registering it on e-Filing and paying the application fee. This application should clearly indicate ‘No Rulings List’ in the subject line and be sent to Atrinfo@sars.gov.za.