Definition & Purpose
A tax ruling (also called an advance ruling) is a binding tax statement issued by the tax authority, requested before implementing or executing a business decision. By submitting a ruling request, the taxpayer aims to obtain a binding opinion from the competent tax authority to achieve legal certainty regarding the tax consequences and to clarify matters in advance. Ruling requests typically concern economically significant or complex matters.
Binding Nature of the Ruling
The binding effect of a ruling derives from the principle of good faith under Articles 5(3) and 9 of the Federal Constitution, as well as the related protection of legitimate expectations. In order for the taxpayer to rely on such a ruling, the following conditions must be cumulatively met:
- The underlying facts were presented fully, accurately, and precisely. If it later emerges that the facts actually implemented differ from those presented, or were incomplete or incorrect in the ruling request, the ruling is not binding.
- The statement was issued by the competent authority, or could, in good faith, be considered to have been issued by the competent authority.
- Any inaccuracy in the ruling was not readily apparent to the applicant.
- Decisions were made in reliance on the correctness of the ruling that cannot be undone, or can only be undone at significant disadvantage.
- No relevant changes in law have occurred since the ruling was issued.
- The tax authority did not attach reservations to the ruling.
If all conditions are met, the tax authority is bound by the information provided and taxation must be carried out accordingly.
If you have any questions regarding tax law, the attorneys-at-law at Pilatushof AG will be happy to assist you.