Promulgation and system activation of Binding Class Rulings

Dear All,

The Advance Tax Ruling Unit wishes to announce the promulgation and system activation of a new product - Binding Class Rulings (BCR). 

Binding Class Rulings was promulgated on 1 October 2007 and the (eFiling) ATR system have been updated accordingly.

A Binding Class Ruling is in essence similar to a Binding Private Ruling but is applicable to a class of persons as defined in the Income Tax Act.  A BCR is intended to promote clarity, consistency, and certainty in respect of the interpretation and application of the tax laws to a specific class of persons.  A class member is a member of the Class to which the Binding Class Ruling applies such as legal entities or a shareholder in a company or an employee participant in a share investment scheme. 

Situations where a class ruling may be given include those in which:

•  an employer seeks advice about the tax consequences of retention bonuses for a class of employees
•  an employer seeks advice about the tax consequences of a bona fide redundancy plan for a class of employees
•  an employer seeks advice about the tax consequences of an employee share acquisition plan for individual employees
•  a company seeks advice about the tax consequences for its shareholders of a restructure of the company, a split or consolidation of its shares, or any other proposed transaction of the company affecting the tax affairs of its shareholders
•  a trustee on a discretionary trust seeks advice on tax consequences of capital distribution to capital beneficiaries

A partnership may now also apply for a Binding Class Ruling on behalf of the individual partners to whom the proposed transaction relates.

Similar to BPR a BCR only has binding effect upon the Commissioner in respect of the specific class of persons identified in the ruling.  In addition, a BCR has this “binding effect” upon the Commissioner only to the extent that the ruling is actually “applicable” to that specific class of persons.  Both of these terms are specifically defined by statute and are discussed more fully in the Guide to Binding Class Rulings that will be published during 2008.  Please find below a brief description of S76R of the ITA (link).

Please note further that, according to Section 76R(8) of the ITA, it is the sole and exclusive responsibility of the applicant to communicate with the affected class of persons regarding the application for the BCR, the issuance, withdrawal or modification of such ruling or any other information or matters pertaining to such ruling.  A member of the specific class may also apply on behalf of that class.

The application fee for a Binding Class Ruling is R10 000 whether an application is made on behalf of a class of SMME’s or individuals or legal entities.  The following table will provide guidelines as to the fee structure of a Binding Class or Binding Private ruling application.

Category	Estimated Fee	Hourly rate	Estimated Work days to Complete
Standard	R5 000 – R25 000	R400	20
Involved	R25 000 – R50 000	R450	45
Complex	R50 000 – R75 000	R500	60
Extra ordinary	Case –by-case	R500	Case-by-case

 The Example of a Binding Ruling application on the SARS ATR webpage can be utilised for Binding Class Ruling applications as well, with the addition of a description of the class. 

Please contact the ATR office should you require additional information.  A Quick Guide to Advance Tax Rulings is also available on the ATR webpage or on the SARS homepage - All Publications.

Links:
• Income Tax Act, 1962 (Act 58 of 1962) Chapter III: General Provisions Part IA: Advance Tax Rulings 76R. Binding Class Rulings (S76R of ITA.pdf)
• Government Gazette No. 30338

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