1. What is an Advance Tax Ruling?

An Advance Tax Ruling (ATR) is a written statement issued by the Commissioner General of the Zimbabwe Revenue Authority (ZIMRA) regarding the interpretation or application of any of the Taxes Acts which include Income Tax Act, Capital Gains Tax Act, Customs and Excise Act and Value Added Tax Act to mention a few.

The Commissioner General of ZIMRA is empowered in terms of Section 34D of the Revenue Authority Act [23:11] to issue an Advance Tax Ruling to an application by any person in respect of a proposed transaction that may or may not be liable to tax. The Commissioner General can also issue a ruling to clarify challenges in interpretation of tax laws. 

  1. Types of Advance Tax Ruling
  1. Binding General Ruling –This is an advance tax ruling that affects all taxpayers at any time and issued at the CG discretion.
  2. Binding Private Ruling– This is an advance tax ruling issued in response to an application by a person regarding the application or interpretation of the provisions of any of the Revenue Acts in respect of a proposed transaction as it affects the applicant alone.
  3. Binding Class Ruling - This is an Advance Tax Ruling issued in response to an application by a person regarding the application or interpretation of the provisions of any of the Revenue Acts in respect of a proposed transaction asit affects a specific class of persons.
  4. Non-binding Private Opinion – this is a statementissued by the CG in response to an inquiry by a person in order to provide the person with informal guidance in respect of the tax treatment of a particular set of facts and circumstances or transaction, but which does not have any binding effect.

 

  1. Purpose/Benefits of an Advance Tax Ruling

It promotes 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 the tax laws. Advance tax rulings are also beneficial in contract negotiation as they enable each negotiating party to understand tax obligations and concessions applicable to them to avoid confusion or conflict between the contracting parties relating to the tax implications of their transactions.

  1. How to Apply for an Advance Tax Ruling?

A client who requires an Advance tax ruling in respect of a proposed transaction should apply  to the Commissioner General of ZIMRA on the prescribed form ATR1 which can be downloaded from the ZIMRA website www.zimra.co.zw. Applicant should ensure that all required details and the full facts of the proposed transaction are disclosed on the form. It should be noted that while application should be submitted to the Commissioner General’s attention, they can be submitted through any ZIMRA office for ease of access. In processing the application, the Commissioner General of ZIMRA may request any additional information from the applicant at any time which is required to assist in the issuance of a ruling.

 

  1. Cases Where Application for Advance Tax Ruling May Be Rejected

The Commissioner General of ZIMRA may reject application for Advance Tax Ruling 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 connected persons
  • Requires the determination of the constitutionality of any tax law
  • Entails a proposed transaction that is hypothetical or not seriously contemplated
  • Relates to determining whether a person is a casual, part time or fulltime employee, or an independent contractor
  • Is submitted for academic purposes
  • Relates to a matter that is under audit, investigations or examination
  • Is with respect to 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

 

  1. 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.

  

  1. 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.

 

  1. Withdrawal or Modification of an Advance Tax Ruling

The Commissioner General of ZIMRA may withdraw or modify an Advance Tax Ruling at any time and notify the persons affected accordingly.

 

Taxpayers are urged to take cognizance of this facility to avoid getting into transactions without due regards to their tax implications to ensure compliance as there are penalties for default.

My Taxes, My Duties: Building my Zimbabwe!!

 

Disclaimer

This article was compiled by the Zimbabwe Revenue Authority (ZIMRA) for information purposes only. ZIMRA shall not accept responsibility for loss or damage arising from use of material in this article and no liability will attach to the Zimbabwe Revenue Authority. 

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