What is an Advance Tax Ruling?
What are the differences between a Binding Private Ruling, Binding Class Ruling and a Binding General Ruling?
What does the term "ruling" actually mean?
Which tax laws are covered by Advance Tax Rulings?
What is a Binding Private Ruling?
What is a Binding Class Ruling?
Who may apply for a Binding Private Ruling?
Who may apply for a Binding Class Ruling?
What is the difference between a Binding Private Ruling and a Binding Class Ruling?
Are there any excluded issues or topics?
How do I apply for a Binding Private Ruling or a Binding Class Ruling?
What is the pre-screening checklist?
When should I file my application?
May I apply for a Binding Private Ruling or a Binding Class Ruling in respect or more than one issue or tax type?
Are there any fees payable?
What happens after the application is filed?
What happens after my application is accepted?
What information do I have to provide?
Will the information I submit be kept confidential?
How long will it take for my ruling letter to be issued?
How can I check on the status of my application?
Will I be notified if the Commissioner intends to issue a negative specific ruling?
What information will be included in the ruling letter?
What is the effect of a Binding Private Ruling or a Binding Class Ruling?
Can my Binding Private Ruling or Binding Class Ruling lose its binding effect?
Are Binding Private Rulings and Binding Class Rulings published by the Commissioner?
May I rely upon a Binding Private Ruling or Binding Class Ruling issued to another taxpayer?
What is classified as a 'proposed transaction'?
All the agreements have been signed but we have not yet implemented the transaction or submitted a return, is it still proposed?
Can I apply for a Binding Private Ruling or a Binding Class Ruling in respect of a proposed transaction although it will not be proposed at the time of issuing the ruling?
Can I object to a Binding Private Ruling or a Binding Class Ruling?
Is a Binding Private Ruling or a Binding Class Ruling an administrative action?
Does Binding Private Rulings and Binding Class Rulings provide certainty to taxpayers regarding the interpretation and application of tax laws to their proposed transactions?
Is the Advance Tax Ruling System cost effective?
Are the mandatory and discretionary exclusions clearly defined?
An Advance Tax Ruling is a written statement issued by the Commissioner in which it is stated how the Commissioner will interpret and apply specific provisions of the tax laws. At present, there are three types of Advance Tax Rulings - Binding Private Rulings, Binding Class Rulings and Binding General Rulings.
A Binding Private Ruling is an Advance Tax Ruling, issued in response to an application by a taxpayer (the applicant), regarding the application or interpretation of a provision (or provisions) of the tax laws to a specific proposed transaction.
A Binding Class Ruling is an Advance Tax Ruling issued in response to an application by a class of persons, regarding the application or interpretation of a provision (or provisions) of the tax laws to a specific proposed transaction. A Binding General Ruling is an Advance Tax Ruling that is issued by the Commissioner, in his/her discretion, in respect of the application or interpretation of a provision (or provisions) of the tax law in connection with issues of general interest or importance.
The term "ruling" is also sometimes used to refer to the complete written statement that is issued by the Commissioner. This complete written statement typically includes additional information, such as a statement of the relevant facts and statutory provisions, the effective date and period for which it is valid, as well as conditions and assumptions that may affect the validity and applicability of the specific ruling(s) contained in it. In order to help avoid confusion, this complete written statement is generally referred to as the "ruling letter".
· Income Tax Act, No.
· Value Added Tax Act, No.
· Stamp Duty Act, No.
· Transfer Duty Act, No.
Securities Transfer Tax Act, No. 25 of 2007.
An Advance Tax Ruling may, for example, not be issued in respect of duties leviable in terms of the Customs and Excise Act, No. 91 of 1964, or the Estate Duty Act, No. 45 of 1955.
A Binding Private Ruling is a written statement issued by the Commissioner in response to a request by a taxpayer (the applicant) that asks the Commissioner to state how a provision or provisions of the tax law would be interpreted and applied in respect of a specific proposed transaction.
A Binding Private Ruling may either agree (positive specific ruling) or disagree (negative specific ruling) with the answer or result you have requested.
to consult with the Commissioner regarding the proposed decision, or (2) to withdraw your application before the ruling letter is issued.
A Binding Class Ruling is a written statement issued by the Commissioner in response to a request by a class of persons, represented by the applicant that requests the Commissioner to state how a provision or provisions of the tax law would be interpreted and applied in respect of a specific proposed transaction applicable to that class of persons.
A class of persons or a member of a class to which the Binding Class Ruling applies, can, for example, be a class of legal entities or shareholders in a company or employee participants in a share investment scheme.
In general, any natural person, company, close corporation, trust or estate may apply for a Binding Private Ruling. An applicant does not have to be a South African resident. In addition, a foreign individual, company, close corporation or trust may also apply for a Binding Private Ruling in respect of a proposed transaction even if that individual or entity is not currently subject to tax here.
Special Rule for Partnerships: A partnership may not apply for a Binding Private Ruling in respect if income, but individual partners may do so in their own right. A partnership may apply for a ruling in respect of transactional taxes in connection with the partnership business, or Value Added Tax (VAT) to the extent that the partnership is or will be a registered vendor.
Any natural persons, companies, trusts or estates may apply for a Binding Class Ruling. A class does not have to be a South African resident. In addition, foreign individuals, companies or trusts may also apply for a Binding Class Ruling in respect of a proposed transaction even if the individuals or entities are not currently subject to tax here.
A partnership may now also apply for a Binding Class Ruling on behalf of the individual partners to whom the proposed transaction relates.
A Binding Private Ruling is issued to a single individual or entity while a Binding Class Ruling is issued to a class of persons.
· An employer seeks advice about the tax consequences of retention bonuses for a class of employees.
· An employer seeks advice about the tax consequences of an employee share acquisition plan for individual employees.
· A company seeks advice about the tax consequences for its shareholders of a restructure of a company, a split or consolidation of its shares, or any other proposed transaction of the company affecting the tax affairs for its shareholders.
· A trustee of a discretionary trust seeks advice on tax consequences of a capital distribution to capital beneficiaries.
Yes. There are two types of exclusions.
a. The first type is mandatory. An application that requests or requires a ruling in connection with such an issue or topic cannot be accepted.
identified in the Commissioner's "No Rulings" list.
b. The second type of exclusion is discretionary. In these cases, the law permits, but does not require, the Commissioner to reject applications in connection with certain issues or under certain circumstances. The situations in which the Commissioner may exercise this discretion go beyond, and are in addition to, the mandatory exclusions.
· The application or interpretation of any general or specific anti-avoidance provision, or any anti-avoidance doctrine, principle or mechanism.
· An issue of an inherently or distinctly factual nature.
· Material facts in connection with an issue that cannot be established at the time of the application.
· An issue that depends upon assumptions in respect of future events or other matters that cannot be reasonably determined at the time of the application.
· An issue that would be more appropriately dealt with by the competent authorities of the parties to an agreement for the avoidance of double taxation.
· An issue that is the same as or substantially similar to an issue upon which the applicant has already received a ruling.
· The tax treatment of the applicant is dependent upon the tax treatment of another party to the proposed transaction and that other party has not applied for a ruling.
· An issue in respect of a proposed transaction that is part of another transaction which has a bearing on that issue and the details of that other transaction have not been disclosed.
· A matter that would be unduly time-consuming or resource intensive.
· The applicant fails or refuses to provide additional information that has been requested by the Commissioner in connection with the application.
· The application or interpretation of a foreign law.
· Completed transactions.
You can find additional information about these exclusions in the SARS Guide to Advance Tax Rulings.
You must apply for a Binding Private Ruling or a Binding Class Ruling by registering as an Efiling user, selecting Advance Tax Rulings on 'Set up' and completing the online Advance Tax Ruling application form on the Advance Tax Ruling homepage. This application includes a pre-screening checklist, as well as forms for submitting your contact information and certain basic information in connection with your application. If you do not have access to the internet, you can access the process at any SARS branch.
The pre-screening checklist is a tool to help you to determine whether or not your application may be subject to a mandatory or discretionary exclusion. If your answer to a question indicates that an exclusion may apply, an information box will appear that identifies the potential problem and provides you with a link to a site where you can get additional information.
You must file your application sufficiently far in advance so as to ensure that the Commissioner has a sufficient amount of time to review your application and issue the ruling letter, taking into account the number and complexity of the issues raised and the complexity of the proposed transaction. It is your responsibility to file an application timely.
any other date or deadline requested or specified by you. In no event will an application be accepted if it is filed within 15 working days of the earlier of those dates.
Yes. However, your application must be limited to a single proposed transaction.
Applications for Binding Private Rulings and Binding Class Rulings are subject to both an application fee and a cost-recovery fee. The application fee is currently R10 000 (or R2 500 for SMME's applying for a Binding Private Ruling). Your fee must accompany your application. Provision is made for the application fee to be paid online through E-filing.
If your application is accepted by the Commissioner, you will be given an estimate of the anticipated cost-recovery fee which will be charged in connection with your application.
If your application passes the pre-screening process, it will be assigned to a staff member of the Advance Tax Ruling Unit. That staff member will review the application in order to ensure that it is not subject to a mandatory or discretionary exclusion.
The staff member will also verify that the application fee has been paid. An application cannot be accepted unless and until the application fee is paid in full. You will generally be notified as to whether or not your application has been accepted within ten (10) working days.
After reviewing your application which must be submitted in accordance with section 76E(2), you will be informed of the acceptance thereof or a request will be made for additional information that may be required in connection with your application before it can be accepted. If you refuse or are unable to provide this information, your application will be rejected. The application fee is not refundable.
The staff member will also provide you with an estimate of the anticipated cost-recovery fee that will be charged in connection with the application after all necessary information has been reviewed.
· the impact it may have upon your tax liability or the tax liability of any connected person in relation to you.
i. may have a bearing on the tax consequences of the proposed transaction; or ii.
e. a draft version of the ruling letter itself; and f. a description of the information that you believe should be deleted from the final ruling letter before it is published in order to protect your confidentiality.
· your consent to the publication of the final ruling letter by the Commissioner, after the deletion of any confidential information. Confidential information includes your name, address, and other identifying details, as well as any information the disclosure of which would constitute a clearly unwarranted invasion of personal privacy. It would also include such information in respect of any other person or class referred to or mentioned in the final ruling letter.
Yes. Any information that you submit is subject to the secrecy provisions of the tax laws and will be kept strictly confidential.
The time period required for the issuance of a ruling letter depends upon several factors, including the number and complexity of the issues that you raise, the complexity of the proposed transaction itself, staff availability, and the number of other applications that are pending when you file. You will receive an estimate of the anticipated time period required together with your fee estimate.
Applications are generally addressed on a "first come, first served" basis.
It is your responsibility to file your application timely. Unless you are able to demonstrate extraordinary circumstances in connection with the proposed transaction and sound reasons for the delay, an application will not be accepted unless it is filed at least 30 working days before the earlier of (1) the date of the proposed transaction or (2) any other date or deadline requested or specified by you. In no event will an application be accepted if it is filed within 15 working days of the earlier of those dates.
You can check on the status of your application by accessing your application on E-filing.
Yes. If the Commissioner intends to issue a negative specific ruling in response to your application, you will be notified and given reasonable opportunity either (1) to consult with the Commissioner regarding the proposed decision, or (2) to amend your application to request that no ruling letter be issued and that the Commissioner cease work on the application ("amendment to discontinue"). If you file an amendment to discontinue, you will remain liable for the work done on the application. In particular, any fees paid will not be refunded and any outstanding amounts for fees incurred up to the point that the amendment to discontinue is filed, must be paid.
Note: If a negative specific ruling is attributable to a problem or defect with a particular aspect of or step within a proposed transaction, and you intend to revise the proposed transaction to cure that problem or defect, you may request permission to amend your application to reflect the terms of the revised proposed transaction. If permission is granted, you must submit your amended application within the time period specified by the Commissioner. If you fail to do so, the Commissioner will proceed with issuance of the ruling letter unless you file an amendment to discontinue before the specified time period expires. If you subsequently decide to request a ruling in connection with the revised proposed transaction, you must do so in the form of a new application subject to the procedures and application fee described above.
· a statement identifying the document as a Binding Private Ruling or a Binding Class Ruling issued under section 76Q or section 76R of the Income Tax Act.
IMPORTANT NOTE: A Binding Private Ruling and a Binding Class Ruling must contain the section 76Q or section 76R statement respectively. Any correspondence or other document that does not contain this statement is not, and cannot be treated as, a Binding Private Ruling or Binding Class Ruling.
Subject to certain important requirements and limitations, the applicant for a Binding Private Ruling or Binding Class Ruling may rely upon the specific rulings that are given in respect of the proposed transaction in question. Accordingly, as a general rule, SARS must assess your liability in connection with that transaction in accordance with the specific rulings set forth in the ruling letter.
A Binding Private Ruling or Binding Class Ruling only has this effect if you have fully and accurately disclosed all material facts in connection with the proposed transaction and the transaction itself and the manner in which it is carried out are fully consistent with those facts. In addition, you must satisfy any conditions or assumptions that the Commissioner has stipulated in the ruling letter when you carry out the proposed transaction. If you fail to comply with any of these requirements, your ruling letter will be rendered void from the beginning.
Yes. There are several situations in which a Binding Private Ruling or Binding Class Ruling that has been issued to you can lose its binding effect.
· a condition or assumption stipulated by the Commissioner in the ruling letter has not been satisfied or carried out.
A fact is generally considered "material" if it would have resulted in a different specific ruling had the Commissioner been aware of it when the specific ruling was made.
The Commissioner may also withdraw or modify a Binding Private Ruling or Binding Class Ruling that has been issued to you. Before doing so, however, the Commissioner must first notify you of the proposed withdrawal or modification and provide you with a reasonable opportunity to state any proposition of law or fact relevant to the decision to withdraw or modify the ruling.
In certain very limited circumstances, the Commissioner is authorised to withdraw or modify a Binding Private Ruling or Binding Class Ruling with retrospective effect.
i. you have not yet commenced the proposed transaction; or ii there is someone other than you who will suffer a significant tax disadvantage if the ruling is not withdrawn or modified retrospectively, while you will suffer comparatively less if it is; or iii. the effect of the specific ruling will materially erode the South African tax base and it is in the public interest to withdraw or modify that specific ruling retrospectively.
Finally, your Binding Private Ruling or Binding Class Ruling may cease to be effective if underlying tax law is changed or repealed or there is a judicial decision that modifies or overturns an interpretation of the underlying tax laws upon which the specific ruling was based. If those circumstances apply to your situation, your Binding Private Ruling or Binding Class Ruling will cease to be effective immediately upon the occurrence of those events, whether or not you receive any notice from the Commissioner.
Yes. By law [section 76O(2)], the Commissioner is required to publish Binding Private Rulings and Binding Class Rulings for general information in such form as does not reveal the identity of the applicants or parties mentioned in the ruling letters. In connection with this requirement, by law [section 76O(1)] an applicant must consent in writing to the publication of the ruling letter by the Commissioner.
In rare instances, if unique circumstance would result in the potential disclosure of an applicant's identity or other confidential information, the Commissioner may consent to the publication of the Binding Private Ruling or Class Ruling in summary form.
No. By law [section 76H(2)], a Binding Private Ruling or Binding Class Ruling does not have any binding effect upon the Commissioner in connection with any person other than the applicant for that ruling. In addition, by law [section 76H(4)], a Binding Private Ruling or Binding Class Ruling may not be cited in any proceeding before the Commissioner or the courts by any person other than the applicant for that Binding Private Ruling or Binding Class Ruling.
Binding Private Rulings or Binding Class Rulings are published as a service to taxpayers solely for informational purposes. In addition, if Binding Private Rulings or Binding Class Rulings were not published, the ATR System might result in the development of a body of "private" law that would give some taxpayers and practitioners an advantage over others. It is critical that the tax laws provide a level playing field for all taxpayers.
The term "proposed transaction" means an event or transaction that is envisaged or suggested, intended or planned. Once a transaction is completed, it cannot be the subject of a ruling. Such transaction is open to ordinary assessment by SARS.
Stated differently, a ruling may only be issued in respect of a transaction, operation or scheme that has not been completed. A transaction is incomplete if the relevant tax implications can only attach to it in the future.
By way of example, if agreements have been concluded with no resolutive or suspensive conditions and the transaction has not yet been implemented, it is not a proposed transaction as envisaged and cannot be the subject of an advance tax ruling.
No, the term "proposed transaction" means an event or transaction that is envisaged or suggested, intended or planned. Once a transaction has been completed, it cannot be the subject of an advance tax ruling. 'Completed' does not refer to the fact that the transaction as envisaged whole is not complete, it refers to whether the proposed part is complete.
If agreements had been concluded with no resolutive or suspensive conditions but the transaction has not yet been implemented, it is not a proposed transaction as envisaged and cannot be the subject of an advance tax ruling.
No, the Commissioner may only issue a ruling to a proposed transaction [section 76Q(1) and section 76R(1)]. Therefore if SARS does not have the ability to issue a ruling before the proposed transaction is completed, the request for a Binding Private Ruling or a Binding Class Ruling cannot be accepted.
Even if SARS was not aware that the transaction is no longer proposed anymore and an advance tax ruling was issued, it will be of no value.
No, a Binding Private Ruling or a Binding Class Ruling is not an assessment as defined in section 1 and no provision is made for objection or appeal.
The view of SARS is that a Binding Private Ruling or a Binding Class Ruling does not adversely affect any right of a taxpayer. Since these rulings are dealing with proposed transactions, applicants still have the option to not continue with the transaction or to continue and deal with any issue that may arise when they are assessed.
Based on the results of a survey conducted by the Advance Tax Ruling Unit in 2008, the South African tax community indicated that it does provide certainty on the interpretation and practical application of the tax laws to the majority of companies applying for Binding Private Rulings and Binding Class Rulings through the Advance Tax Ruling System.
were uncertain equals 2.
stated 'not applicable' equals 2.5%.
Based on the results of the abovementioned survey, the survey participants indicated that the Advance Tax Ruling System is cost effective and user friendly with a total of 73% viewing the application and cost recovery fee structure as value for money.
Based on the results of the abovementioned survey, the mandatory and discretionary exclusions, including the No Ruling list, is clearly defined. Some participants would however welcome Binding Private Rulings or Binding Class Rulings on certain completed, high value transactions for tax planning purposes.