5. Effect of an ATR
5.1 General
One of the purposes of the ATR system is to provide greater certainty to taxpayers in connection with the application and interpretation of the tax laws. The TA Act provides that a BPR and BCR may, as the names imply, have a ‘binding effect’ upon SARS, subject to certain very important requirements and limitations.
The most important limitation is that an ATR only has binding effect upon SARS in respect of the applicant or co-applicant for the ruling in question. In addition, an ATR has this ‘binding effect’ upon SARS only to the extent that the ruling is actually ‘applicable’ to that applicant or co-applicant or class of persons. These terms are specifically defined by statute and are discussed in more detail below.
A BCR has binding effect upon SARS in respect of the affected class members identified in the ruling. In addition, a BCR has this ‘binding effect’ upon SARS only to the extent that the ruling is actually ‘applicable’ to that affected class of persons.
A third party may not rely upon a binding ruling under any circumstances. In addition, a third party may not cite a BPR or BCR in any proceeding, including court proceedings.
Note: There are certain circumstances in which an ATR may be rendered void or lose its binding effect, even with respect to the applicant or co-applicants to which it applies. These situations are discussed in more detail in 5.2 and 5.3.
5.1.1 Binding effect – section 82(1)
An ATR may have a ‘binding effect’ upon SARS, subject to certain very important
requirements and limitations. In particular, if an ATR ‘applies’ to you, SARS must interpret and apply the tax laws in question in accordance with the ruling that was given in connection with your application. The term ‘applies’ has a very precise meaning and is discussed in 5.1.2.
By definition a BPR or BCR must be in writing. Thus, an oral statement can never have binding effect under section 82. In addition, a written statement can only qualify as a BPR or BCR if it contains a statement identifying it as such in accordance with section 78(5)(a).
Thus, any correspondence from SARS without containing a section 78(5) statement can never have a binding effect under section 82.
5.1.2 The applicability of a binding ruling – section 83
A binding ruling only applies to a person or class of persons if –
(i) the person or class member must be an applicant or an affected class member
identified in a binding ruling;
(ii) the provision or provisions of the tax Act at issue are the subject of the binding ruling;
(iii) the set of facts and circumstances or the transaction presented by the applicant are the same as the particular set of facts and circumstances or the particular transaction specified in the binding ruling;
(iv) the applicants’ set of facts and circumstances or transaction falls entirely within the effective period for the effective period of the binding ruling; and
(v) any assumptions made or conditions imposed by SARS in connection with the
validity of the binding ruling have been satisfied or carried out.
The binding ruling will not apply to you and will not have any binding effect upon SARS with respect to you, if you fail to satisfy any one of these requirements. This will apply if you are an applicant or an affected class member in connection with that ruling.
5.1.3 No third party reliance – section 82(2)
A binding ruling does not have any binding effect upon SARS unless that binding ruling applies to a person (the applicant) or class member (affected class member) in accordance with section 83. In addition, under section 82(4), a BPR and a BCR may not be cited in any proceeding before SARS or the courts other than a proceeding involving the applicant or affected class member for that ruling. Thus, you cannot rely upon a binding ruling that has been issued to someone else, even if the facts of your proposed transaction are similar to those described in the published ruling.
There are two very important reasons for this limitation. First, many binding ruling
applications involve time sensitive transactions. As a result, it is critical that these rulings be issued timeously. Unfortunately, these time pressures inevitably increase the risk of error. If every ruling was to have general force and effect, the potential damage caused by an erroneous ruling would increase exponentially and would necessitate a more lengthy review and quality control process. By restricting the binding effect and precedent value of binding rulings, Parliament has struck a balance between the need to protect the fiscus and the need to provide timely guidance to applicants.
Secondly, binding rulings by their very nature are extremely fact-specific. While a published ruling provides a summary of the proposed transaction at issue, it generally does not and cannot include all of the relevant facts in every case. Something that you may view as a ‘minor’ difference in your proposed transaction may in fact be a critical difference.
5.2 Circumstances in which a binding ruling may be rendered void or lose
its binding effect
The most valuable aspect of a binding ruling is its binding effect. Because of this binding effect, your binding ruling generally provides both guidance and certainty in respect of how SARS will interpret and apply the tax laws to your proposed transaction.
This binding effect is subject to several important requirements, conditions and limitations.
Accordingly, there are a number of situations in which your binding ruling may be rendered void or lose its binding effect. In some instances, this may happen due to some action (or inaction) on your part. In other instances, it may be due to a change in law or, in some cases, to the subsequent withdrawal or modification of your binding ruling by SARS.
5.2.1 Circumstances rendering a BPR or BCR void – section 84(1)
A BPR or BCR may be rendered void ab initio (from the outset) if –
 the facts stated in your application regarding the proposed transaction are materially different from those of the transaction actually carried out;
 there is fraud, misrepresentation or non-disclosure of a material fact; or
 any condition or assumption stipulated by SARS is not satisfied or carried out.
A fact is considered ‘material’ if it would have resulted in a different ruling had SARS been aware of it when the original ruling was made. If your BPR or BCR is rendered void ab initio, it is treated as if it had never been issued at all. Thus, there would be absolutely no binding effect upon SARS whatsoever.
5.2.2 Subsequent changes in the tax laws – section 85
Your ATR may cease to be effective if there is a subsequent change in the tax laws.
In general, such changes include the repeal or amendment of the tax laws in question or a subsequent court decision that rejects or modifies the interpretation of the principles upon which your ruling was based. In these cases, the effect is automatic and immediate – no notice from SARS is required.
(a) Amendment or repeal of the relevant tax laws – section 85(1)(a)
Your ATR will cease to be effective if the provisions of the tax laws that were the subject of your ruling are repealed or amended. The impact is prospective only and applies from the effective date of the new legislation.
In the case of an amendment, this rule only applies to the extent that the amendment makes a material change to the specific provisions at the time of issuing your ruling. In this context, a material change would be one that would have resulted in a different ruling if the new provision had been in effect when SARS made the original ruling.
The following examples are intended solely to illustrate the application of this rule:
Example 23: In 2012 SARS issues a ruling that a company will qualify for an allowance under ection 12B(h)(ii) of the Income Tax Act for solar energy units used by the taxpayer in the generation of electricity from sunlight. In 2013, the reference to sunlight in section 12B(h)(ii) is changed to solar energy. The change is not material and the ruling will not cease to be effective.
Example 24: Section 2 of the Securities Transfer Tax Act, 2007 is amended in 2013 to levy securities transfer tax on any reallocation of securities from a member’s bank restricted stock account or a member’s unrestricted and security restricted stock account to a member’s general restricted stock account. This is a material change and any rulings issued in respect of securities transfer tax may be affected by this change.
These examples are given for informational purposes only and are intended solely to illustrate the types of situations in which this rule may apply. Due to the nature of this rule, any determination must be made exclusively on a case-by-case basis after a careful review of the facts and circumstances.
If you are unsure of the impact of a subsequent court decision upon your binding ruling, you may request a status ruling from SARS. Status rulings are discussed in 5.2.3.
(b) Subsequent judicial decisions – section 85(2)
Your ATR will cease to be effective if a court subsequently overturns or modifies an
interpretation of the tax laws upon which your ATR was based. If this rule applies, your binding ruling will generally cease to be effective from the date of the decision in question, unless –
 the decision is on appeal;
 the decision is fact-specific and the general interpretation upon which your binding ruling was based was unaffected; or
 the reference to the interpretation upon which your binding ruling was based was obiter. The term ‘obiter dicta’ generally refers to opinions which judges express in the course of their judgments, but which are not essential to the decision of the matters at issue.
In addition, the rule generally does not apply to a decision, unless that decision is published and has a precedent effect.
Note: The exceptions to this rule only apply to its ‘automatic’ aspect. Depending upon the facts and circumstances, a subsequent judicial decision may prompt SARS to withdraw or modify your binding ruling in accordance with the provisions of the TA Act. These provisions are discussed in more detail in 5.3.
(c) No notice by the Commissioner – section 85(2)
Your binding ruling ceases to be effective immediately upon the occurrence of the
circumstances described in (a) or (b) above whether or not SARS publishes a notice of the withdrawal or modification. It follows that –
 if the provision of the tax Act that was the subject of the binding ruling is repealed or amended, the binding ruling will cease to be effective from the date that such repeal or amendment is effective; or
 if a court overturns or modifies an interpretation of the tax Act on which the binding ruling is based, it will cease to be effective from the date of judgement.
SARS is not required to give notice of the above events.
5.2.3 Status rulings
If you are not sure about the impact of a subsequent change in the tax laws upon your binding ruling, you may request a status ruling from SARS. A status ruling gives SARS’s view as to whether or not those changes affect your binding ruling (and if so, the extent to which they do so).
The status ruling request must be sent to [email protected].
5.3 Withdrawal or modification by SARS – section 86
SARS may withdraw or modify your binding ruling. A withdrawal or modification is generally prospective in effect. However, there are certain very limited circumstances in which it may be retrospective.
5.3.1 Prior notice
SARS may withdraw or modify your binding ruling at any time. Before such possible
withdrawal or modification however, you will be given notice thereof and provided with a reasonable opportunity to state any proposition of law or fact relevant against the proposed withdrawal or modification.
5.3.2 Situations in which an ATR may be withdrawn or modified with retrospective
effect
There are certain very limited situations in which SARS may withdraw or modify your binding ruling with retrospective effect. In particular, SARS may do so only if your binding ruling was made in error and any of the following three circumstances apply:
 You have not yet commenced the proposed transaction, or have not yet incurred
significant cost in respect of the arrangement.
 There is any person other than you who will suffer a significant tax disadvantage if your binding ruling is not withdrawn or amended retrospectively while you will suffer comparatively less if it is withdrawn or amended.
 The effect of your binding ruling will materially erode the South African tax base and it is in the public’s interest to withdraw or amend the binding ruling retrospectively.
As with any other withdrawal or amendment, SARS will give you notice thereof and provide a reasonable opportunity to state any opposing proposition of law or fact relevant to that decision. Due to the importance and urgency of these situations, you are requested to respond within five business days from the date of such notice.
5.3.3 Manner and form of the withdrawal or modification
If your binding ruling is withdrawn or modified SARS will issue a notice of that withdrawal or modification to you. This notice will specify the effective date of the withdrawal or modification, which date will not be earlier than the date the decision is delivered to the applicant, unless the circumstances mentioned in section 86(4) and indicated below apply:
1) The ruling was made in error.
2) a) The transaction has not yet commenced or significant costs have not yet been
incurred in respect of the arrangement.
b) A person other than the applicant or class member will suffer significant tax
disadvantage if the ruling is not withdrawn or modified retrospectively and the
applicant will suffer comparatively less if the ruling is withdrawn or modified
retrospectively.
c) The effect of the ruling will materially erode the South African tax base and it is in the public interest to withdraw or modify the ruling retrospectively.
5.3.4 Published rulings – section 87(9)
SARS must publish a notice of withdrawal or modification in the manner and media as the Commissioner may deem appropriate.
In the case of a BPR or a BCR the notice must also be published in such form as does not reveal any confidential information.

6.
6.1 Miscellaneous
Questions and additional information
If you have any questions in connection with the ATR system and its process flows or would like additional information, you may contact the ATR Unit. Contact details may be found on the SARS website www.sars.gov.za or you may e-mail [email protected] or phone 012 422 8589.