COMPREHENSIVE GUIDE TO ADVANCE TAX RULINGS

2.
2.1 General information
Tax Acts (tax laws) to which the ATR system applies SARS may issue an advance ruling on any provision of a ‘tax Act’ as defined in the TA Act, subject to the rejections contained in section 80 of the TA Act.
2.2 Application for an ATR
Any natural person, company, trust or estate who is, or intends to be, a party to a proposed transaction may apply for a binding ruling in connection with that transaction. An applicant does not have to be a ‘resident’ as defined in section 1(1) of the Income Tax Act, or subject to tax in South Africa at the time of application.
A representative, such as a lawyer or accountant, may file an application on behalf of a client. The representative applying on behalf of the applicant must submit a Power of Attorney or an equivalent written statement, signed by the applicant, authorising the representative to file the application and to represent the applicant in the ruling process.
An application may not be filed by a person who is not, or does not intend to be, a party to the proposed transaction in question, except in a representative capacity.
2.2.1 Special rule for partnerships
A partnership may not apply for a BPR for income tax purposes, as a partnership is not ‘person’ for income tax purposes, but the individual partners may do so. A partnership may apply for a BPR on behalf of the individual partners to whom the proposed transaction relates. A partnership may also apply for a BPR in respect of any other taxes referred to in 2.1. In the case of a BPR application for VAT purposes, the partnership is or may become a registered vendor and may thus apply for a BPR. Partnerships may apply on behalf of a class for a BCR relating to all taxes.
2.2.2 Special rules for certain applicants who are not resident
If the applicant is an individual or company that is not a resident that considers a business or investment venture in South Africa, they may not have a South African identification or tax registration number when the application is submitted. For this reason, the online application process includes a special form to be used in these instances. This form requires applicants to provide their taxpayer identification numbers from their country of residence in lieu of a South African identification or tax registration number.

In addition, the SARS eFiling system can only accept payment of the application fee from an account with one of four South African Banks: ABSA, First National Bank, Nedbank and Standard Bank. If your application is being filed by a local representative, the eFiling system can accept a payment made on your behalf through an account at one of those banks held by them. If applicants are filing the application on their own behalf, special procedures are available to make payment. Specific instructions are available on the SARS eFiling website.
2.2.3 Rules for BCR and BPR applications
More than one ‘applicant’ Section 81(4) provides that if there is more than one applicant in respect of a proposed transaction SARS may, upon request by the applicants, impose a single prescribed fee in respect of the application.
SARS will therefore accept an application with an applicant and co-applicant(s), for example in situations involving companies proposing to conclude a transaction which may qualify the parties for the intragroup relief provided for by section 45 of the Income Tax Act.
Section 79(2) provides that more than one applicant must designate a lead applicant to represent the co-applicants.
BPR or BCR
In order to clarify if application should be made for a BCR or a BPR, the following scenarios are provided:
Although two parties (for example, company A and an Special Purpose Vehicle (SPV) embodying a share investment scheme) are parties to the same transaction, a binding private ruling application must be filed by company A and a binding class ruling application must be filed by the share investment scheme as the representative of the investors. The interpretation and application of the tax laws are different for each of them. Where the two parties are thus parties to the same transaction one application on e-filing will not suffice as two rulings, that is, one BPR and one BCR, must be issued. Only one applicant in the form of a class can apply for a BCR so there are no co-applicants in a BCR.
By way of another example: Company A proposes to pay bursaries to employees, they request a ruling that the payment will be deductible for company A and that the bursaries will not be gross income for the employees. A BPR will be issued for company A and a BCR for the employees. The company also has the option to only apply for a ruling on the deduction to withhold employee’s tax. In such a case the company will have to apply for a BCR on behalf of the employees.
If different transactions take place, although they could be part of the same overall scheme, two different ruling applications will be required. For example, a company requires a ruling on whether tips received from customers by employees, that are held by the company for safekeeping and subsequently paid over to employees, subject to certain conditions, will constitute gross income for the company. In addition a ruling is requested as to whether the amount paid over to the employees will constitute ‘remuneration’ as defined in paragraph 1 of the Fourth Schedule to the Income Tax Act. The payment to the employees is a consequence of the initial tips received, but also arise from a separate transaction (payment to the employees), thus two applications are required.

2.2.4 Meaning of ‘transaction’ and the scope of advance rulings – section 77
A ‘transaction’ is defined to mean any transaction, deal, business, arrangement, operation or scheme and includes a series of transactions. This definition excludes, for example, a request for a ruling on the determination of the amount to be included or deducted in the determination of taxable income in the case of the allowance under section 11(j) of the Income Tax Act if the transaction, the acquisition of a loan, happened in the past.
Rulings will for example be issued to an applicant that requested a ruling on the period over which a specific asset, which will be acquired after the ruling has been issued, can be written off.
There is no express statutory requirement that the proposed transaction may not be entered into before the ruling is issued, but it is arguably the implication. Applicants are therefore strongly advised to discuss the possibility of implementation of the proposed transaction with the ATR Unit of SARS in an appropriate case before the ruling is issued.
2.3 Fees – section 81
An application for a binding ruling is subject to both an application fee and a cost recovery fee.
The maximum amount of the application fee may not be exceeded unless –
(a) the applicant amends the application; or
(b) a new issue arises or is identified during the ruling process.
In the event that a revised estimated fee is necessary in either of these situations, the applicant will be notified and given an opportunity to discuss the revised estimate. If an applicant fails or refuses to accept a revised estimated fee, the application may be rejected without any refund, waiver or abatement of any fees paid or incurred up to that point.
2.3.1 Application fee
In order to file an application for a binding ruling, you must pay an application fee. This fee must be paid when you file your application. Except in rare instances, with the prior approval of SARS, the application fee must be paid online through the SARS eFiling system. Special procedures are also available for applicants who do not have a South African bank account.
Specific instructions are available on the SARS eFiling website.
Categories of
Applications
Estimated Fee Range
Estimation
Deposit
Standard
R10 000 to R35 000
Hourly rate
Estimated Time
to Complete
R7 000
Involved
R35 000 to R70 000
R650
20 days
R14 000
Complex
R70 000 to R105 000
R650
45 days
R21 000
Extraordinary
Case-by-case
R650
60 days
Case-by-case
Urgent applications
Case-by-case
R650
Case-by-case
Case-by-case
R1 000
Case-by-case

The application fee for an SMME is currently R2 500 in respect of a BPR and a BCR.
The application fee for all other applicants is R14 000. The application fee is non-refundable, except in extraordinary circumstances.
Reconfirmation applications are subject to an application fee as well as a cost recovery fee based on the complexity levels of the specific reconfirmation required.
2.3.2 Cost recovery fee
Your application is also subject to a cost recovery fee, based upon the number of hours that it takes to consider the issues raised in your application, as well as any direct costs incurred in connection with the issuing of the ruling. These direct costs could include travel costs, for example, where a visit to your operations might be helpful. It could also include the costs incurred in obtaining the services of a consultant or expert, for example, an engineer or a scientist, when necessary to advise upon technical aspects of a proposed transaction.
The amount of the cost recovery fee depends upon several factors. These factors typically include the number and complexity of the issues raised, the complexity of the proposed transaction itself and the volume of agreements, documents and other information that must be reviewed in connection with the application.
A cost recovery fee will also be charged for a reconfirmation and an extension application. The fee would be based on the complexity of the reconfirmation required. The procedures and requirements in connection with the cost recovery fee are discussed in more detail in 4.4.