Advance Tax Ruling (ATR) was introduced during the 2007 Budget speech (1/9/2006) by Datuk Abdullah Badawi.
So what is difference between an Advance Tax Ruling compared to the Public Ruling?
Append below the contrast:
Advance Tax Ruling:

• Advance Tax Ruling is the Director-General of Inland Revenue’s written interpretation on how any provision of the Income Tax Act, 1967
• It applies to a person in relation to a proposed arrangement and
• It will only apply to the specific applicant.

Whereas Public Ruling:

• Is issued for the purpose of providing guidance for the public and officers of the Inland Revenue Board.
• It sets out the Director General’s interpretation of the particular tax law and the policy and procedure that are to be applied .
• If a taxpayer disagrees or is unclear on any aspect of a Public Ruling, he may seek a Private Ruling from the IRB.

Recently, the IRB has released the draft Income Tax ( Advance Ruling) Rules 2007 which prescribe the scope, application procedures and fees imposed.
Salient points include:
General:

• It is effective 1 January 2007
• Any ATR issued is binding on both the DGIR and the applicant.
• As ATR is a private and confidential document, it is not been released to the public

Scope:

• An ATR will only be issued for an arrangement which is been contemplated by an applicant
• The following scenarios are outside the scope: where the Act authorizes or requires the Finance Minister or DGIR to:

· Impose or remit a penalty
· Remit tax due and payable
· Approve any application under the Act
· Inquire into the correctness of any return or other information
· Prosecute any person or
· Recover any debt owing by any person.
In circumstances where the DGIR declines to issue an ATR the applicant will be notified in writing of his decision and the reason.
Application for An ATR:

• Shall be made in a prescribed form and shall contain:

· the identity of the applicant/authorized person ( eg tax agent)
· a complete description of all relevant facts and documents
· a statement identifying the relevant provisions of the Act
· the proposition of law relevant to the issues, eg case laws
· a statement whether previous application has been made and
· any other particulars required by the DGIR
An application may be withdrawn at any time before an ATR is issued by notification in writing to the DGIR.
Format of ATR:
An ATR issued by the DGIR will state:

• it is made under section 138B of the Act
• the identity of the person, provision of the Act and the arrangement
• how the provision of the Act applies to the arrangement and to the person
• period or year of assessment applicable
• material assumptions (if any) made by DGIR and
• condition ( if any) stipulated by DGIR

An ATR may be withdrawn by the DGIR in specific circumstances eg where the interpretation of law is changed due to court decision.
Disclosure in tax return

• In submitting his return, the taxpayer is required to indicate where an ATR has been obtained, he has relied on the ruling in completing his return.

Fees for An ATR
The following fees are payable:

• An initial non-refundable application fee of Rm500
• Additional fee of Rm150 per hour ( or part hour ) after the first 4 hours
• Reimbursable fees for any costs and reasonable disbursement incurred by the IRB in obtaining external advice (prior consent will be sought from applicant)

The fees are payable even if application is withdrawn by applicant.
Processing time

• An ATR will be issued within 60 days from the date of submission of a complete application.

Conclusion:
With the implementation of the ATR system, taxpayers can now plan their tax affairs in advance and have greater certainty in terms of their tax exposure.

If you found this post useful, keep updated with future posts by subscribing to FMAccounting (for free) through RSS or email.

Related Entries

• Franchising: Initial Set Up Costs and Recurring Costs
• Fringe Benefit Tax In India: Extra Tax Burden On The Employers