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Foreigners get 'advance ruling' facility: CBR forms panel to process appeals

ISLAMABAD (January 11 2004): The Central Board of Revenue (CBR) has devised new procedure for foreign investors/ non-resident companies to obtain 'advance ruling' on income tax matters for avoiding tax disputes in future.

In this connection, the CBR has proposed amendment in the Income Tax Rules 2002 through an SRO(I)/2004 issued here on Saturday.

Official sources said that Finance Minister Shaukat Aziz in budget 2003-04 speech had announced that non-residents would be given the facility of 'advance ruling' for promoting foreign direct investment in the country and to resolve all uncertainty regarding tax matters.

Endorsing the decision, the CBR has constituted a committee for finalising applications filed by non-resident companies.

The committee will be headed by CBR Chairman, and Member Direct Taxes and Additional Secretary, Law, Justice and Human Rights Division will be its members.

According to the procedure, a non-resident person desiring an advance ruling under section 206A of the Ordinance, 2001 will make an application to the CBR in the form set out in the Schedule of the draft notification.

The committee will have the authority to examine the application filed by a non-resident company.

However, CBR is bound to finalise application on 'advance-ruling' within 90 days of its filing.

The committee may obtain comments of Commissioner of Income Tax concerned and, if it considers necessary, advice of a legal expert on the application, and decide the issue in a joint sitting or through circulation among its members.

Elaborating definition of 'advance ruling', the CBR clarified that it means determination by the committee in relation to the transaction, which has been undertaken or is proposed to be undertaken by a non-resident person the question of law specified in the application.

The 'advance ruling' will be binding on the Commissioner only in respect of the specific transaction on which such advance ruling is issued.

The advance ruling shall continue to remain in force unless there is a change in facts or in the law on the basis of which the advance ruling was pronounced.

The copy of the advance ruling pronounced by the CBR will be provided to the applicant and to the Commissioner of Income Tax having jurisdiction over the case.

Notwithstanding anything contained in this rule, the advance ruling will cease to be binding on the Commissioner if it is subsequently found to have been obtained by fraud or misrepresentation of facts about the nature of the transaction on which advance ruling was issued.

Moreover, the applicant may withdraw the application made under rule 231A at any time before the advance ruling is issued.

The CBR has specified that non-resident companies can not obtain 'advance ruling' in cases pending before any Income Tax Authority, Appellate Tribunal or Adjudication Authority.

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