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Get a tax ruling? · Tax Break: South African tax for professionals

• 0:11
  Welcome and thank you for joining me for Tax Break.
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  This is a podcast about South African tax for South African
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  tax professionals and practitioners.
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  My name is Peter Pan Asian and in each episode I discussed
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  aspect over recent development in South African tax.
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  And I'll try to keep the episode short enough that you can listen
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  to them whenever you've got a few minutes in your calendar.
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  Before I start the episode, I would like to ask you to
• 0:35
  consider sending the link to this episode to one other person
• 0:40
  if you believe that they would also be interested in listening
• 0:43
  to the podcast. And by doing that, you would
• 0:47
  help me a lot to grow the listener base of the podcast
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  even further. Now our topic for today is
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  something that I think anyone who works in tax would, would be
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  aware of that the tax law is often open for interpretation
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  and that there could be some uncertainty.
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  And once you start discussing some of these uncertainties or
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  different interpretations with clients, they the responses
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  often. But then we must get a tax
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  ruling or let's get some sort of ruling to, to, to clarify that.
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  Now, this is just my perception, but I would sort of put that
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  comment into 3 categories. It would be these instances
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  where the law is really unclear and you, you need definite
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  guidance to, to get to, to know what the right interpretation
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  would be. Would they at least know what's
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  Archer's interpretation would be?
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  Within that there's probably a subcategory where you've got
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  interpretations that are quite aggressive, um, at you want to
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  perhaps know whether that interpretation would, would be
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  accepted or not. And then there's another
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  category of of taxpayers who may Dave this idea about getting a
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  tax ruling once they've realised, but something that
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  they've done is perhaps more risky than than than they
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  initially thought from an interpretation perspective.
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  Now in the Tax Administration Act, the law clearly caters for
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  for advanced tax rulings. We find that in Chapter 7 of the
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  Tax Administration Act. And over the years I've helped
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  quite a few clients to to to get these rulings.
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  I think it's a very useful process to get certainty.
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  It is not a, it's not a quick process, it's a very thorough
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  process. And throughout the process you,
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  you learn as to what influences such interpretations about
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  certain matters. I think the reality is also that
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  you, if you go into this process, you, you must prepare
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  to perhaps not get the answer that you like.
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  But if you look at it from the, the, the bigger picture
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  perspective, that's really what you are after in the 1st place.
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  To then have certainty, even if it is certainty that such
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  follows the interpretation that that's not your preferred
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  interpretation, but that is a, a, a viable interpretation on
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  the lease. Now I think we can talk about
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  the process and strategy and all those kind of things when when
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  dealing with these rulings and where they fit in.
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  What I would like to share with you today though, is a few
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  pointers as to where some of these suggestions to get the
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  ruling good fall flat. So the first one I would like to
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  talk about relates to the fact that do do do apply for a ruling
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  or or do for SAGE to be able to do to issue a ruling, the ruling
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  must relate to a proposed transaction or the application
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  must relate to a proposed transaction.
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  So that term is defined in the law.
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  It's a transaction that an applicant proposes to undertake
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  but has not agreed to to undertake.
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  So it's really something that you must not yet be committed to
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  other than by way of an agreement that still subject to
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  a suspensive condition or otherwise not binding.
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  So as soon as you bound to do a transaction or you've already
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  implemented the transaction, then you can't request an
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  advanced tax ruling for that transaction because it's no
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  longer a proposed transaction. They might be either mechanisms
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  where you can still get Sasha's view, but it's not the advance
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  tax rulings mechanism. Then the second aspect that you
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  need to be aware of is that there are some areas that's not
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  suitable for rulings. So Section 80 of the Tax
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  Administration Act, specifically when it comes to interpretation
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  of the law, states that such may reject drillings if their
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  application involves the application of or the principal
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  or the interpretation of a general anti avoidance
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  provisions. So in other words, the GAR or a
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  specific anti avoidance provision.
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  So that might already sort of lead you in the direction to
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  say, but if you're looking at these very aggressive
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  structures, there could be a basis if if you're if your issue
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  is really on, on the application of some of these anti avoidance
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  rules, that may be a basis for such to to to not or to reject
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  the, the, the the application SAT may also reject an
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  application that requests them to rule on the substance of a
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  transaction and completely disregard its form.
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  In In addition to this, there is also a no rulings list that's
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  artist published with some more aspects where they may reject
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  rulings. Would like to maybe just dial
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  out a few key ones that where there's often uncertainty, but
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  they also appear on the new readings list.
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  So if you look at it from an income tax perspective, we've
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  got Section 24C allowances on there, your place of effective
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  management, whether a CFC conducts business through a
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  foreign business establishment, whether you P/E, a permanent
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  establishment exists or not and they non donations tax and
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  whether deemed donation arises or not.
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  Those are few of the income tax aspects on this list.
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  From a VAT perspective, there is also a few that questions that
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  often arise that's on the rulings list.
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  The one is whether someone is acting as an agent or a
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  principal. The other one that's quite
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  common is whether a supply is a single supply, it consists of
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  multiple supplies or it's some sort of a composite supply.
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  So on that side, may also not or may may reject your, your, your,
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  your request. So I think it is worthwhile
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  before you go down the route of applying for ruling, preparing
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  all the documentation to make sure that whatever you're asking
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  the ruling about is not on this list.
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  And if it is to understand, is it something where the law or
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  such is that they may reject it or is it something that would
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  definitely be rejected? Then the last one I would like
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  to highlight it's, it's not in the rules.
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  And I think it's because it's not necessary for the rules to
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  cater for that. But it is often a perception of,
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  of, of taxpayers who raised the, the, the, the idea.
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  And that's that if you get to a point where you apply the law,
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  you get to an answer that you don't like or that you believe
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  is unfair to then say, but let's apply for a ruling for a
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  specific tax treatment. So actually essentially A ruling
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  that would deviate from the law or grant you some, some law of
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  your own. Now, unfortunately, that's not
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  how this process works. So Sarah rules on the law as it
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  stands and the interpretation of the law.
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  So if you apply for a ruling, you must also provide an
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  interpretation of the rules as it stands now to force to
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  confirm or give a view on in the ruling, right.
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  So a ruling is not a private ruling that sort of gives you a
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  tax treatment outside of what the law says.
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  I think we can probably have a, as I said, an episode on process
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  etcetera. But today we only spoke about
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  the potential obstacles. So to summarise a few of them
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  that you need to be aware of, the transaction needs to be a
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  proposed transaction. There are some aspects that's
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  not suitable for rulings without may reject your application and
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  you should go in with the correct expectation.
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  You're not asking for a deviation from the law, you are
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  asking about an interpretation of of the law.
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  That's it for today's episode. If you've got any questions or
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  comments, please send me an e-mail.
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  My e-mail address is in the show notes.
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  And just a reminder, as always, that nothing in this podcast is
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  intended to be advice or tax advice.
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  Until next time, goodbye.