Private ruling

A private ruling is a formal decision issued by tax authorities to an individual taxpayer regarding the tax treatment of a specific transaction or a series of transactions. It provides clarity to the taxpayer on how the tax laws will be applied to their particular situation. Key Features of a Private Ruling Individual Application Applicable only to the taxpayer who requested it. Does not create precedent or bind other taxpayers. Scope Typically issued for: Complex transactions Interpretation of tax provisions Planned corporate reorganizations Cross-border or unusual arrangements Binding on Tax Authorities The ruling is binding on the tax authority, provided: All relevant facts have been accurately disclosed The circumstances remain unchanged Non-Binding on Others Other taxpayers cannot rely on the ruling for their own transactions. Ensures individualized guidance without affecting general tax policy. Importance of Private Rulings Provides certainty and predictability to taxpayers regarding their tax obligations. Helps avoid disputes with tax authorities. Encourages compliance by clarifying complex or ambiguous areas of tax law. Assists businesses and individuals in tax planning and risk management. Example A company planning to transfer intellectual property to a subsidiary requests a private ruling to confirm the tax implications. The tax authority issues a ruling stating that, under the disclosed facts, the transaction will be taxed in a specific manner.