Did you know that with effect from the 1st of January 2007, the Commissioner General of the Zimbabwe Revenue Authority (ZIMRA) was empowered in terms of the Revenue Authority Act to issue Advance Tax Rulings? This development is in line with trends in other countries worldwide.

 

What is an Advance Tax Ruling?

Advance Tax Ruling (ATR) is a written statement in the form of a binding general ruling, binding private ruling or binding class ruling’ issued by the Commissioner General of ZIMRA regarding the interpretation or application of the Income Tax Act.

Types of ATRs

  • Binding General Ruling- 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.
  • Binding Private Ruling – is an advance tax ruling issued in response to an application by a person   regarding the application or interpretation of the Income Tax Act in respect of a proposed transaction as it affects the applicant alone.
  • Binding Class Ruling - is an advance tax ruling issued in response to an application by a person regarding the application or interpretation of the Income Tax Act as it affects a specific class of persons

It should be highlighted that any other decisions, communications issued by the Commissioner General of ZIMRA to clients in response to enquiries made by clients, who do not fall within the above categories are classified as non-binding private opinions

Purpose/Benefits of an ATR

An ATR 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.

 

Effect of an ATR

  • The Commissioner General of ZIMRA may interpret or apply the Act in favour of the applicant or otherwise in conformity with the advance ruling given.
  • 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 the courts.
  • 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.
  • 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.
  • 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 do you apply for an ATR?

A client is supposed to make an application to the Commissioner General of ZIMRA through a prescribed form and ensure that all the details are included as required.  The client should ensure that all the full facts of the proposed transaction are disclosed and the form should be submitted at the head office of the Zimbabwe Revenue Authority. This form can be downloaded from the ZIMRA website www.zimra.co.zw. The Commissioner General of ZIMRA may however request for any additional information from the applicant at any time in order to assist in the issuance of an ATR.

 

Cases where applications for Advance Tax Ruling may be rejected

The Commissioner General of ZIMRA may not accept 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 a 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
  • The matter is under audit , investigations or examination
  • 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.

 

Conditions for the applicability of advance tax rulings

The advance tax ruling applies to a person only if the following conditions are satisfied the:

 

  • Provisions of the Act at issue are the subject of the advance tax ruling
  • Facts presented are the same as the set of facts and circumstances governed by the advance tax ruling
  • Facts of the transaction fall  within the effective period of the advance tax ruling
  • Conditions imposed by the Commissioner General of ZIMRA have been satisfied or carried out

 

Effect of fraud and misrepresentation

  • A Binding Private Ruling or a Binding Class Ruling is nullified if the proposed transactions are materially different from the transactions actually carried or constitute fraud or misrepresentation or wilful non-disclosure of a material fact.

 

Withdrawal or modification of an ATR

The Commissioner General of ZIMRA may withdraw or modify an Advance Tax Ruling at any time and persons affected will be notified.

If the advance tax ruling is either a Binding Private Ruling or a Binding Class Ruling, the Commissioner General of ZIMRA first provides the applicant with notice of the proposed withdrawal or modification

Reminder for payment of tax

Our valued clients are reminded that the VAT for the month of July 2013 is due on or before the 25th of August 2013.