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Customs Duty: Advanced Binding Rulings

Publishing Date : 07 October, 2019

TUMELO RANNAU

One of the principles of taxation as opined by Adam Smith is certainty, and one of the ways of having certainty is through the use of rulings. The world over, tax administrations are adopting the use of advanced binding rulings (“ABR”) to ease the burden of compliance for taxpayers.

Most companies in the country especially in the manufacturing industry import raw materials from outside and depending on where they were bought may be subject to Customs Duty. There may be some goods with debatable classifications where the taxpayer and Customs administrator have different views on how it should be classified and consequently valued. To solve these kind of problems, the 2018 Customs Duty Act (the Act) introduced the concept of ABR and taxpayers can now request for an ABR from BURS.


The Act defines an ABR as “a written decision provided by Commissioner General to an applicant prior to importation of goods covered by the applicant that sets forth the treatment that shall be provided to the goods at the time of importation, based upon the facts presented by the applicant”. Even though the definition of ABR seems to limit ABRs to importation only, the Act states that an importer, exporter or any interested person may apply to the Commissioner General and be issued with an ABR.


The Act provides for various aspects to be included in the ABR; these are tariff classification of goods, origin of goods, customs valuation, duty exemption, drawback, quotas or fees and any other matters that may be prescribed by the ruling. Apart from providing the taxpayer with certainty, ABRs are time saving as they expedite the process of customs clearance since other steps such as goods classification and valuation would have been dealt with through the agreement.


The OECD lists ABR systems among the most impactful single trade facilitation measures with potential average cost reduction of 6%. This was therefore a good introduction and contributes to ease of doing business in the country. The ABR entered into by the taxpayer and BURS can be valid for up to 3 years depending on the agreed validity period between the 2 parties and shall be binding to both parties.


No ABR may be issued in relation to current or completed customs transactions, that is, ABRs only apply to customs transactions occurring after the ruling has been issued. ABRs also do not cover appealed decisions on matters before the courts of law. Where there are material changes to local or international laws regarding the contents of the ruling, the ruling shall cease to be valid and the taxpayer may seek a new one. Taxpayers who are affected by a lot of customs procedures and face uncertainties in terms of goods classification and valuation are encouraged to take advantage of this provision for business efficiency.

Written by Tumelo Rannau
A Tax Practitioner, writes on his personal capacity

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