Let's assume, you will you be buying an asset which you'll write off in two years time, but the tax Act says you can only write it off in five years time. In cases like this, it's useful to know how to apply to SARS for an advanced tax ruling (ATR) so you can write the asset off sooner.
This is just one way you can use an ATR to save your company money.
In what follows, we'll look at another six common situations where you could use an ATR to save you money.
So let's see when you can apply for an ATR
You should know that you can apply for an ATR if there's no tax law in place for the process/transaction you have in mind. Or if you're not sure about how SARS will treat a transaction for tax purposes. It will give you clarity on how you can proceed. In some cases, you could use an ATR to save you money.
For example, you buy an asset from overseas you'll bring into the country. But it's in bits and pieces and is similar to the type of stock you manufacture. You have to assemble it on arrival.
Will SARS treat this as a capital asset? Or, will it treat it as trading stock, as it arrived in a similar fashion?
The only way to know beforehand is to apply to SARS for an ATR before you even enter into the transaction to find out how it will tax this transaction in future.
Six situations when you can apply for an ATR
1. You introduce an employee benefit scheme. The company needs a ruling if the benefit forms part of the gross income for your employees.
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2. A landlord wants to know if the value of improvements on a leasehold property, if affected by the tenant, will form part of the gross income in his hands.
3. You can apply for a ruling for the treatment of certain aspects of a proposed black economic empowerment (BEE) transaction.
4. You need a ruling on whether an amount you'll receive will be revenue or capital when SARS taxes the transaction.
5. You request a ruling about whether or not the ring-fencing provisions of Section 20A of the Act will apply to assessed losses from a proposed new trade.
6. You request a ruling on a newly introduced section of the Income Tax Act, coming into effect soon, and you don't know how this will end up affecting tax on your future transactions this new section deals with.
For detailed rulings that SARS has passed, visit www.sars.gov.za.