Advance Tax Rulings

05 Aug, 2016 - 00:08 0 Views

The ManicaPost

An Advance Tax Ruling is a written statement issued by the commissioner general of ZIMRA regarding the interpretation or application of any of the Acts specified in the 1st Schedule of the Revenue Authority Act which include the Income Tax Act the Capital Gains Tax Act the Customs and Excise Act and the Value Added Tax Act

Types of Advance Tax Ruling

  1. Binding General Ruling – This is an Advance Tax Ruling that affects all taxpayers. The Commissioner General of ZIMRA can issue such ruling at any time and at his discretion.
  2. Binding Private Ruling – This is an Advance Tax Ruling issued in response to an application by a person regarding the application or interpretation of the provisions of any of the aforementioned Acts in respect of a proposed transaction as it affects the applicant alone.
  3. Binding Class Ruling – This is an Advance Tax Ruling issued in response to an application by a person regarding the application or interpretation of the provisions of any of the aforementioned Acts as it affects a specific class of persons.
  4. Non-binding Private Opinion – This is a statement issued by the Commissioner General in response to an enquiry by a person in order to provide the person with informal guidance in respect of the tax treatment of a particular set of facts and circumstances or transaction, but which does not have any binding effect.

It should be noted that any decisions or communication issued by the Commissioner General of ZIMRA to clients in response to enquiries made by the clients, which do not fall within the categories 1 to 3 above, are classified as non-binding private opinions.

 Benefits of an Advance Tax Ruling

An Advance Tax Ruling is meant to promote consistency, clarity and certainty in the interpretation and application of the tax law.

It also assists clients in confirming the tax consequences of proposed transactions and promotes voluntary compliance by assisting them to comply with tax laws.

Advance Tax Rulings are also beneficial in contract negotiation as they enable each negotiating party to understand tax obligations and concessions applicable to them to avoid confusion or conflict between the contracting parties relating to the tax implications of their transactions.

Effects of an Advance Tax Ruling

  1. The Commissioner General of ZIMRA may interpret or apply the relevant Act in favour of the applicant or otherwise in conformity with an Advance Tax Ruling issued.
  2. A Binding General Ruling may be cited by the Commissioner General of ZIMRA or any person in any proceedings before the Commissioner General of ZIMRA or in a court of law.
  3. A Binding Private Ruling or a Binding Class Ruling may not be cited in any proceeding before the Commissioner General of ZIMRA or the courts other than a proceeding involving the applicant for that ruling or an affected class member identified in the ruling respectively.
  4. A publication or other written statement issued by the Commissioner General of ZIMRA does not have any binding effect unless it is an Advance Tax Ruling.
  5. An Advance Tax Ruling ceases to be effective upon the occurrence of a repeal or amendment to the Act which affects the ruling, or if the courts give a different interpretation which affects the ruling.

How to apply for an Advance Tax Ruling

A client who requires a ruling should submit an application to the Commissioner General of ZIMRA on the prescribed form ATR1 which can be downloaded from the ZIMRA website www.zimra.co.zw <http://www.zimra.co.zw/undefined/>. Applicants should ensure that all required details and the full facts of the proposed transaction are disclosed on the form. It should be noted that while applications should be submitted for the Commissioner General’s attention, they can be submitted through any of ZIMRA’s offices for our client’s ease of access. In processing the application, the Commissioner General may request any additional information from the applicant at any time which is required to assist in the issuance of a ruling.

 Cases where applications for Advance Tax Ruling may be rejected

The Commissioner General of ZIMRA may reject applications for Advance Tax Rulings in circumstances where the application:

  • Requires the rendering of an opinion, conclusion or determination regarding the market value of an asset
  • Relates to interpretation of the laws of a foreign country
  • Requests the interpretation or determination of pricing of goods or services supplied by or rendered to connected persons
  • Requires the determination of the constitutionality of any tax law
  • Entails a proposed transaction that is hypothetical or not seriously contemplated
  • The application relates to determining whether a person is a casual, part time or full time employee, or an independent contractor
  • Is submitted for academic purposes
  • Relates to a matter that is under audit, investigations or examination
  • Is with respect to the application or interpretation of any general or specific anti-avoidance provisions
  • Results in failure or refusal by the applicant to give additional information requested.

It should be noted that the above list is not exhaustive and our valued clients are encouraged to make an enquiry with ZIMRA if they require clarity on this issue.

Reminder: Payment of Tax

Our valued clients are reminded that the PAYE and VAT for the month of July 2016 are due on or before the 10th and 25th of August 2016 respectively.

 Disclaimer

This article was compiled by the Zimbabwe Revenue Authority for information purposes only. ZIMRA shall not accept responsibility for loss or damage arising from use of material in this article and no liability will attach to the Zimbabwe Revenue Authority.

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