Advance tax rulings are a common feature of mature tax systems. The tax systems of the United States, the United Kingdom, the Netherlands, Germany, Australia, and South Africa all have established ruling practices. Taxpayers can obtain an advance tax ruling in nearly all OECD member countries. Increasingly, many non-OECD countries are also offering advance tax rulings. An advance tax ruling regime seeks to promote clarity and consistency regarding the application of the tax law for both taxpayers and the tax authority. However, there are also inherent risks associated with the proliferation of granting confidential advance tax rulings which are not published or otherwise reported. This Tax Law IMF Technical Note focuses on designing an advance tax ruling regime in the nature of private tax rulings.
Advance tax rulings are a common feature of mature tax systems . The tax systems of the United States, the United Kingdom, the Netherlands, Germany, Australia, and South Africa all have established ruling practices. Taxpayers can obtain an advance tax ruling in nearly all OECD member countries. 1 Increasingly, many non-OECD countries are also offering advance tax rulings.
An advance tax rulingregime seeks to promote clarity and consistency regarding the application of the tax law for both taxpayers and the tax authority . However, there are
Emerging Economies, OECD Publishing, Paris.
Appendix B Sample Legislative Provisions for an Advance RulingRegime
Set out below is a sample set of provisions establishing an advance tax rulingsregime. The provisions are general in nature and in the form of simplified sample provisions. Importantly, they do not take into account the individual circumstances of any particular tax system. The ultimate legal framework for the introduction or codification of an advance rulingregime in any given country would need to take into account the specific legal tradition
International Monetary Fund. Western Hemisphere Dept.
Manpower Planning for Tax Administration Reform
Strengthening post clearance audit capacity
TA in Risk Management to Customs
Developing a Strategic Management Framework
Develop an Advanced RulingsRegime
Developing a Large Taxpayer Program
Risk management and post clearance audit
Strengthening audit capacity (training)
of an advance tax rulingregime, see Waerzeggers, Christophe and Cory Hillier, 2016, “Introducing an advance tax ruling (ATR) regime—Design considerations for achieving certainty and transparency,” Tax Law IMF Technical Note Volume 1, 2/2016, IMF Legal Department.
10 Except as an outcome of bankruptcy procedure or liquidation of a business entity.
11 Koukpaizan 2018, op. cit.
12 See Appendix 2 for details on the different types of ML.
13 See Appendix 3 on potential uses of prediction modeling in tax administration, and Appendix 4 on
International Monetary Fund. Asia and Pacific Dept
providing TA to help improve taxpayer services; build audit capability; introduce a public and private tax rulingsregime; improve the management of tax arrears and outstanding returns; and introduce a High Net Worth Individual Strategy. A compliance improvement strategy, first introduced in 2016, has been updated annually and is fast becoming the tool driving organizational performance. A review of progress resulting from the TADAT diagnostic assessment in 2015 has shown strong commitment to addressing priority issues including the creation of a new unit to deal with tax
. Simple laws and regulations facilitate self-assessment, while minimizing taxpayer effort and compliance costs. This can be achieved by rewriting the tax law to reduce the volume of information and in clear language that helps ensure that taxpayers know and understand their rights and obligations under the tax laws. Simplified and harmonized administrative procedures can also help lower cost of compliance. Simplified rules (including record keeping requirements) should be in place for small taxpayers. A rulingsregime that is binding can also help clarify the law and
Modern tax administrations seek to optimize tax collections while minimizing administration costs and taxpayer compliance costs. Experience shows that voluntary compliance is best achieved through a system of self-assessment. Many tax administrations have introduced self-assessment principles in the income tax law but the legal authority is not being consistently applied. They continue to rely heavily on “desk” auditing a majority of tax returns, while risk management practices remain largely underdeveloped and/or underutilized. There is also plenty of opportunity in many countries to enhance the design and delivery of client-focused taxpayer service programs, and better engage with the private sector and other stakeholders.
classified as ‘in the process of being eliminated’ reflecting the Swiss commitment to abolish these regimes. The tax proposal 17 aims at abolishing the holding company, the auxiliary company, the mixed company and the commissionaire rulingregimes.
Preventing tax treaty abuse :
On June 7, 2017, Switzerland signed the Multilateral Convention to Implement Tax Treaty Related Measures (MLI). Alternatively, Switzerland also stands ready to implement this minimum standard through a bilateral revision of its Double tax agreement (DTAs) (e.g., Switzerland included this