administration regarding particular situations aimed at
providing certainty. Once issued, these rulings should
bind the tax authorities with the treatment prescribed.
This means that they cannot be revised during a tax
audit, or, if the tax administration changes its view, it
would not lead to penalties.
The questions would usually be about matters that lack
an obvious answer in the law. Thus, taxpayers get predictability and the chance to suggest a treatment. Tax
administrations would gain from having a view on business matters of which they were not yet aware. They
would also increase the predictability of expected revenue. When the ruling is aligned with previous similar
cases, they should reduce disputes and relieve courts
from highly complex cases. This is especially valuable in
jurisdictions where there are no specialized tax courts.
How is it done?
Having seen this as a powerful tool for supporting business, many countries have implemented various forms
of binding rulings. In 2012, only 4 EU Member states
did not have this instrument. Even more, within the
EU customs area, a binding tariff or origin information
is regulated on an EU level and can be relied upon in
another Member state.
ANALYSIS
Being a matter of national discretion, different States
have adopted their own approaches for handling binding
tax rulings, which can be summarized in three groups.
Most countries would appoint units within their tax
administrations to issue binding rulings. Some would
delegate it to a specialized unit at a higher level within
Ministry of Finance. A few countries have independent
bodies of experts dealing with this. Most countries issue
binding opinions free of charge for taxpayers, but there
are some that provide binding rulings for an administrative fee. Even in such cases, practice shows that businesses prefer binding rulings.
Some countries even agree with foreign investors on
the amount of taxable profits they would expect to
collect from them. Such acts would not be rulings, but
“advance pricing agreements”. These agreements give
the country predictable revenue, but may also be seen
as a tool for unfair tax competition with other States.
Therefore, some cases of multinational companies with
such agreements are now under EU scrutiny.
Thus, binding tax rulings should not be seen to jeopardize fair taxation. On the contrary, they are useful to
both taxpayers and tax authorities. Ideally, rulings with
a binding effect could help businesses in other regulatory areas, too.
NEW MEMBER HIGHLIGHT
Experts is a company for industrial compressors and industrial pneumatics. After
27 years of experience on the market, our company enjoys the reputation of a
leader in this business in Macedonia. With a team of 11 employees, the
organizational set, the work plan, the constant investment capacities’ development
and application of modern computer technology, Experts meets the most rigorous
criteria for efficient, effective and economical operations.
Spring 2016 Issue 49 15