ATRs are generally governed by the procedural provisions set out in Chapter 7 of the Tax Administration Act 28 of 2011 (TAA). The Value Added Tax Act 89 of 1991 (VAT Act) provides for an ATR system specific to value added tax. It provides for two categories of rulings:
- Section 41B VAT Rulings and VAT Class Rulings (VAT Rulings), which mirror the Binding Private Rulings (BPR) and Binding Class Rulings (BCR) available regarding the other tax Acts administered by the Commissioner; and
- Section 72 which allows VAT Vendors or classes of VAT Vendors to approach SARS for a ruling to alleviate the difficulties, anomalies or incongruities which would be caused by the application of the provisions in the VAT Act to their business model.
Recently the Commissioner of SARS signed Public Notice 299 under section 81 of the TAA setting the fees to be charged for ATRs (PN 299). This Public Notice has not altered the cost scale charged by SARS but has rather provided clarity on the costs for determinations under section 72 of the VAT Act.
Section 41B allows a taxpayer or representative of a class of taxpayers to approach SARS for a determination of the application of the provisions of the VAT Act to such taxpayer or class. It further provides that the provisions of Chapter 7 of the TAA apply to rulings under section 41B. Meaning the procedure for applying for a VAT Ruling, and the bases for rejection of an application, are the same as for a BPR and BCR.
However, under section 41B(1)(a), certain provisions of Chapter 7 of the TAA do not apply to VAT Rulings. Notably, in the application process for a VAT Ruling a proposed ruling does not have to be submitted, nor does a statement that the ruling does not fall within section 80 of the TAA. Section 81(1)(b) of the TAA, which provides for the payment of cost recovery fees for VAT Rulings, also does not apply to VAT Rulings.
Where satisfied that as a consequence of the way in which a VAT vendor conducts their income earning activity the application of the provisions of the VAT Act has or may result in difficulties, anomalies or incongruities, section 72 empowers the Commissioner of SARS to make a ruling to overcome such difficulties, anomalies or incongruities. The ruling is to alleviate the concerns by determining:
- how the provisions of the VAT Act will apply to that particular VAT vendor or class of VAT vendors, or
- the calculation or payment of VAT by that VAT vendor, class of VAT Vendors, or persons transacting with the VAT Vendor or class.
Section 72(2) makes the procedural provisions regarding ATRs in the TAA applicable to VAT rulings. Specifically, it provides sections 75, 81, 83, 84, 85, 86, 87, 89 and 90 of the TAA are applicable (with the necessary changes) to section 72 rulings.
Notable provisions of Chapter 7 of the TAA which are not applicable to section 72 rulings include:
- section 76: which sets out the policy purpose underlying ATRs;
- section 79: setting out the requirements for an application for an ATR;
- section 80: on the prescribed grounds upon which SARS may reject an application for an ATR; and
- section 82: dealing with the binding effect of ATRs.
The details about how a VAT Vendor applies for a section 72 determination are contained in the VAT404 Guide for Vendors, published by SARS.
Public Notice 299
PN 299 was promulgated on 1 April 2021 and as stated above, states the fees to be paid in respect of ATRs, including applications under section 72 of the VAT Act. PN 299 replaces Public Notice 102 of 8 February 2013 which previously set the applicable fees for ATRs.
The application fees provided for under section 81(1)(a) of the TAA for BPRs and BCRs, under the recently promulgated PN 299, remain differentiated between small, medium and micro enterprises (SMMEs), and any other taxpayer. The application fee for SMMEs to obtain a BCR or BPR is R2,500, while other taxpayers must pay a fee of R14,000.
The cost recovery fees under section 81(1)(b) of the TAA similarly remain differentiated between urgent applications and non-urgent applications, Non-urgent applications will carry a cost of R650 per hour and urgent applications will carry a cost of R1,000 per hour.
The most notable aspect covered by PN 299 is the introduction of provisions dealing with the costs for applications for a ruling under section 72 of the VAT Act. For such applications the application fee is capped at R2,500, regardless of the type of taxpayer. Following the track of VAT Rulings, no cost recovery fees are payable for a section 72 ruling.
As noted in our recent alerts dealing with ATRs published as part of our special budget day alert and alert on 28 January 2021, SARS has embarked on a process to improve the ATR system. Ensuring that taxpayers can easily determine the costs of an ATR is key to the good functioning of the system.
With the promulgation of PN 299, VAT Vendors who find themselves facing difficulties, anomalies or incongruities are now able to more easily understand a critical requirement for making an application under section 72 – the expected cost.