Private and product binding rulings - to whom do they apply?
QB issued 1998 considers private and product rulings and who they apply to under ss 91EB and 91FB of the Tax Administration Act.
Sections 91EB and 91FB, Tax Administration Act 1994 - Application of a private ruling and product ruling, respectively
We have received a number of enquiries asking if taxpayers who know of the existence of a private or product binding ruling, and consider their circumstances are similar to those set out in the ruling, can:
- apply such a ruling to their circumstances;and
- rely on that ruling,
even though they are not a party to the original application or are not entering into the specific arrangement referred to in the ruling.
The law is very clear that the answer to these queries is "No". Because under section 91EB a private ruling will apply only to "a person in relation to an arrangement", it can apply only to a person expressly referred to in the binding ruling (the person who applied for the binding ruling under section 91EC). Similarly, section 91FB provides that a product ruling "applies to an arrangement", i.e. the specific "arrangement" referred to in the ruling (to which the product ruling applicant will be a party).
This means that, in the case of a private ruling, if other taxpayers become aware of the existence of the ruling, but were not a party to the application or named in it, they cannot rely on the ruling in relation to their own tax affairs, even though they consider their circumstances may be the same as those set out in the ruling.
In the case of a product ruling, even though other taxpayers may consider the arrangement they are contemplating is identical to the arrangement set out in the ruling, they cannot rely on the ruling if their arrangement is not covered by it, i.e. their arrangement is not the one referred to in the ruling. to which the ruling applicant is a party In these circumstances, taxpayers' options are either to apply to their local Inland Revenue office for a non-binding opinion as to the tax consequences of their arrangement, or to apply for their own private or product ruling.
In both situations, taxpayers should be aware that a binding private or product ruling is not to be taken as a notice of the Commissioner's policy in respect of any particular tax law. Rather it is the Commissioner's view at a particular time on a particular arrangement and a particular taxpayer.
When making an application for either a non-binding opinion, or their own binding ruling, taxpayers may choose to cite an earlier binding ruling that supports their application. However, each case will be considered on its own merits,and, however a previous ruling on a similar arrangement will not automatically mean that a similar conclusion will be reached in all future applications.
To make a general statement about a particular arrangement, the Commissioner may issue a public binding ruling or an interpretation statement. These may be relied upon by all taxpayers, provided their arrangement is the same as set out in the public ruling or is covered by the interpretation statement.