Any system that is intended to promote clarity, consistency and certainty in the interpretation and application of tax laws can only be applauded. The Advance Tax Ruling System sets out to do just that and came into effect on Monday, 2 October.From now on, taxpayers may formally request the Commissioner to rule on the interpretation and application of the tax laws, as they apply to a specific proposed transaction.
According to a statement on the SARS website, the system authorises the Commissioner to issue two new types of rulings: binding private rulings and binding general rulings. Provided that the taxpayer fully discloses all material facts pertinent to the matter, the commissioner’s rulings will,in general, be binding. How will other taxpayers learn about the rulings? The commissioner will publish all binding private rulings in an edited form to protect confidentiality. The aim of publishing the rulings is to inform and guide other taxpayers and to ensure that all taxpayers operate on a level playing field. The rule is, however, only binding on the applicant who requested the ruling. Other taxpayers may not cite private rulings as being a precedent.
These rulings, however, come at a price.Normal taxpayers will pay R10 000 for a ruling, but SMMEs get their rulings at a discounted R2 500.Taxpayers will also be charged a cost recovery fee, based on the complexity of the proposed transaction.According to Mark Korten of the firm Korten Hiepner Faber Goërtz Inc, this ruling is a first tax administration process of its kind in South Africa and as such tax practitioners cannot predict how helpful it will be.The system was, however, based on tax ruling systems used internationally, in countries such as the United Kingdom, Australia and New Zealand.
"We can, however, predict some of the impact associated with the introduction of this tax administration process.Firstly, it should be noted that the advance ruling process is not law, but merely the opinion of SARS.Furthermore, although the publication provisions allow for transparency and a fair idea of SARS policy,it will not constitute legal precedence which can be relied upon in a court of law such as previous case authority,” Korten said.Daniel Erasmus of Daniel Erasmus Attorneys,however, advises that the doctrine of legitimate expectations will apply in favour of the taxpayer who has been granted the ruling.
The Advance Tax Ruling System does not replace the current system of non-binding written opinions.The commissioner will continue issuing non-binding written opinions in response to taxpayer queries in connection with current or proposed transactions.These non-binding private opinions will remain free of charge and can be requested at a taxpayer’s branch office.
All advance tax ruling applications must be submitted electronically through the ATR Service Portal on the SARS eFiling site (www.sarsefiling.co.za) and may not be submitted manually.The Commissioner will begin to accept applications for binding private rulings on 16 October 2006.Daniel Eramus advises taxpayers to seek professional guidance in the preparation of any Advance Tax Rulings.
Source: By TaxTALK