Tax and Taxation Law
July 19th, 2009 at 01:24pm
Under Tax and Taxation Law
The Commissioner of Taxation does have the power to change a Private Ruling in four situations as follows:
1 Where the taxpayer gives consent to the Ruling being changed;
2 Without the taxpayer’s consent, if the Private Ruling is about an arrangement which has not yet been carried out. This means that if the Private Ruling covered an arrangement which the taxpayer repeatedly carried out over time (for example buying and selling a particular item), the Private Ruling could be changed for any of the arrangements which occurred after the date of the change;
3 Without the taxpayer’s consent where the arrangement had commenced. This is limited, however, to those circumstances where the Private Ruling was causing another taxpayer to be disadvantaged and his or her disadvantage was greater than the disadvantage that the Rulee would suffer if the Ruling were to be changed; and
4 By issuing a Public Ruling which is inconsistent with the Private Ruling. However, this could only occur if the taxpayer’s arrangement has not begun to be carried out or if it has commenced and another taxpayer would be disadvantaged to a much greater extent than the Rulee.
If the taxpayer received the Private Ruling before he or she lodged the return for the year in which the arrangement took place, and then the taxpayer did not follow that Ruling, then the taxpayer may be liable for the extra tax that he or she would have paid under the Ruling. If the taxpayer had received the Private Ruling after he or she lodged the relevant return, then the Commissioner has the power to amend the assessment to take the Private Ruling into account. This may decrease the taxation liability but may also increase that liability.
The way in which a taxpayer can have a Private Ruling reviewed is determined by whether or not an assessment in respect of an income tax return has issued which deals with the arrangement covered by the Private Ruling.
If the assessment has already issued, then the taxpayer should have the assessment reviewed. If no assessment is issued, then the taxpayer should have the Ruling reviewed.
To have an assessment reviewed, the taxpayer needs to lodge an objection. That objection must be in writing in which the taxpayer informs the Commissioner which assessment is to be reviewed and provides details of the years and the relevant tax file number. The objection must also state which matter dealt with within the assessment is disputed and why the taxpayer believes that the assessment should be amended. For most short period of return taxpayers, the objection must be lodged within two years of the date upon which the taxpayer received the original assessment. There are no fees for lodging objections.
To have a Private Ruling reviewed, the taxpayer must also need to lodge an objection. Again, the objection must be in writing. The taxpayer must provide the Authorisation number of the Private Ruling. The taxpayer must also inform the Commissioner which part of the Private Ruling is disputed and why the taxpayer believes the Ruling should be changed.
This objection to the Ruling must be lodged within 60 days of the date of service of the Private Ruling upon the taxpayer or, for short period of return taxpayers, within two years of the last day allowed for lodging the tax return for the particular year that the Private Ruling is about, whichever is the latest. Again, there are no fees for lodging objections to Private Rulings.
By Law Article
July 19th, 2009 at 07:24am
Under Tax and Taxation Law
This article sets out the procedures to be followed by taxpayers who wish to challenge Private Rulings for taxation assessments made by the Commissioner of Taxation.
Private Rulings are issued by the Commissioner of Taxation under the Taxation Administration Act (Cth.) 1953. A Private Ruling states the Commissioner’s opinion on the way that the tax law applies to a taxpayer’s arrangement for the particular years that are described in the application for the Private Ruling. Private Rulings are an effective way of determining whether a taxpayer’s arrangements will be successful in legitimately minimising liability to income taxation, capital gains taxation, or goods and services taxation. The taxpayer can assess in advance what the potential taxation liability may be if the arrangement were to proceed. If the Ruling is unfavourable to the taxpayer, then the taxpayer has an opportunity of adopting alternative taxation arrangements without necessarily attracting taxation liabilities.
A Private Ruling should be distinguished from an assessment made by the Commissioner of Taxation pursuant to an income tax return. An assessment of a taxpayer’s taxation liability is made by the Commissioner of Taxation after a review of the information provided by the taxpayer in the taxation return for the particular financial year together with any additional information obtained by the Australian Taxation Office pursuant to an audit or investigation of the taxpayer’s affairs pursuant to the Income Tax Assessment Act (Cth.) 1936.
In layman’s terms, a Private Ruling enables a “dry-run” without necessarily attracting a taxation liability in the form of an assessment.
A taxpayer may, however, apply for a Private Ruling either before or after the taxpayer lodges the return for the year in which the taxpayer’s arrangement took place. It is preferable to apply for the Private Ruling prior to the lodgment of the return for the year in which the arrangement is to take place in order to obtain the full benefit of the process. However, Private Ruling applications are still possible after a return is lodged, provided they are issued before the Commissioner determines an assessment based on the relevant return. A Private Ruling cannot be obtained after this time. The relevant arrangements disclosed in the return are binding on the taxpayer as and from the date of the assessment.
A Private Ruling is binding on the Commissioner of Taxation so that even if the tax law is ultimately found to apply to the arrangement in a different way to that set out in the Ruling, the taxpayer will not be liable for any more tax than that which would have been payable under the Private Ruling. However, Private Rulings are not binding on the Commissioner of Taxation if the law is changed or if the arrangement actually carried out by the taxpayer was materially different from that which was described in the application. Furthermore, the Private Ruling is only binding on the Commissioner in respect of the particular taxpayer (the Rulee) as named in the Private Ruling.
By Law Article
July 19th, 2009 at 01:24am
Under Tax and Taxation Law
Where a taxpayer is dissatisfied with the decision made on objection to the original assessment or the Private Ruling, then the taxpayer may:
- Request the Administrative Appeals Tribunal (AAT), which incorporates the Small Taxation Claims Tribunal (STCT), to review the decision; or
- Appeal to the Federal Court of Australia.
If a taxpayer does decide to seek review or to appeal, the request for review to the AAT or appeal to the Federal Court has to be lodged directly with the AAT or Federal Court respectively. The review or appeal should not be forwarded to the Australian Taxation Office.
The taxpayers’ objections and appeal rights are found in Part IV C of the Taxation Administration Act (Cth.) 1953.
Review by the AAT of the Commissioner’s decision is a less formal and generally less expensive option than a formal appeal to the Federal Court. The Federal Court is a superior court of record and usually operates with formal pleadings and pre-hearing procedures like discovery of documents. It conducts proceedings in accordance with the strict rules of evidence. The AAT, on the other hand, conducts more informal hearings with a minimum of formal documents. The AAT places emphasis upon informal conferences and mediation at which the issues in dispute are discussed and clarified in private. The STCT is less formal again than other AAT proceedings. There is an emphasis on mediation and resolving disputes without the need for a formal hearing. However, a taxpayer may only request that a decision be reviewed by the STCT if:
- The amount of tax in dispute is less than $5,000.00; or
- The disputed decision is one that refuses an extension of time within which to make an objection.
An application to the STCT must be accompanied by the prescribed fee of $61.00 for each assessment under review. This amount is not refundable. Other applications to the AAT must be accompanied by the prescribed fee of $606.00 for each decision under review. This fee will be refunded if the AAT certifies that proceedings have terminated in a manner favourable to the taxpayer whether by mediation or by formal hearing.
Whether proceeding either to the STCT or the AAT, the taxpayer’s application must be in writing and must set out the reasons for the taxpayer’s application.
Once the AAT sends to the Australian Taxation Office a copy of the taxpayer’s application to the AAT (or STCT), the Commissioner of Taxation will provide the taxpayer and the AAT with a copy of the relevant documents which the Commissioner considers are necessary for the review, together with a statement of the reasons for the Commissioner’s decision.
It is advisable for the taxpayer to also make an application under the Freedom of Information Act (Cth.) 1982 in order to access all documents relating to the relevant decision held by the Australian Taxation Office. This may well provide additional helpful documents beyond those which the Commissioner is obliged to discover to the AAT.
The AAT then calls a compulsory conference. At this conference, the issues in dispute are discussed. The conference may result in a resolution of the issues or a clarification of the issues for a hearing. The AAT also has provision for mediation of the dispute with the consent of the parties.
The AAT is independent of the Australian Taxation Office and is able to reconsider the matter in dispute and make a fresh decision, including the exercise of any discretion the Commissioner of Taxation may exercise.
One advantage of the AAT is that the taxpayer will bear his own costs. In the Federal Court, for instance, a taxpayer may well face the prospect of having to pay a proportion of the Commissioner of Taxation’s costs if the appeal is unsuccessful.
The STCT conducts its hearings in public unless the taxpayer can satisfy the tribunal that the hearing should be in private. The AAT conducts hearings in private only if the taxpayer requests it. Otherwise, the hearing would be in public.
By Law Article
July 18th, 2009 at 07:24pm
Under Tax and Taxation Law
From 1st of January 2008 the taxation of the natural persons has been amended in accordance with the EU regulations and the tax rate for the incomes was fixed to 10%.
The tax legislation in Bulgaria recognizes two types of Taxable Persons-local natural persons and foreign natural persons.
By law a foreign natural person is any person who has no permanent residence in Bulgaria and whose centre of vital interests is not situated in Bulgaria as well as a person who is not present within the territory of Bulgaria for a period exceeding 183 days in any twelve-month period.
Any foreign natural person shall be liable to pay tax in respect of any income acquired from sources inside the Republic of Bulgaria, including any income from rent or other provision for use of movable or immovable property.
However, there are some categories of income which are not subject to taxation. These are explicitly listed in the Income Taxes on Natural Persons Act. For example, taxation shall not apply to any income acquired during the tax year from the sale or exchange of:
• one residential immovable property, regardless of the date of acquisition of the said property;
• up to two immovable properties, as well as any number of agricultural and forest properties, provided that more than five years have elapsed between the date of acquisition and the date of sale or exchange
So, if a foreign natural person sales one immovable property during one financial year, the foreign natural person shall not be liable to pay tax for the received income regardless of the date of acquisition of the said property.
In relation to the above the taxation shall apply to the income which is not included in the list of Non-Taxable Incomes. The taxable incomes are for example the incomes from rent and from the sale or exchange of immovable property. For the purpose of determination of the annual amount of tax, first the received annual income from rent shall be reduced with 10 % fixed amount of expenses and the rest of the amount shall be multiplied with 10 % tax rate. The taxable income acquired from the sale or exchange of immovable property shall be determined by debiting the positive difference between the selling price and the cost of acquisition of any such property with 10 per cent expenses as the rest of the amount shall be multiplied with 10 % tax rate.
The non-resident natural persons (foreign persons) shall submit an annual tax return, completed in a standard form in respect of the income subject to levy of tax on the aggregate annual taxable amount.
The annual tax return shall be submitted on or before the 30th day of April of the year next succeeding the year of acquisition of the income.
When the income subject to levy of tax originates from rent and is paid by the management company, then the annual tax return shall be submitted by the management company not by the foreign person. Respectively, when the income from rent is paid by local natural person, then the foreign person who has received the income shall be liable to submit the annual tax return.
After the new amendments in the tax legislation the rate of final tax for the income of the natural persons and of the legal entities is 10 %.
However, the advantage of establishing of legal entity is that the expenses which have been made during the financial year are deducted from the annual income and the received amount is treated as a taxable profit. For example, if a foreign person is renting hisher property through a local company then all the expenses, which have been made for utilities, staff, etc. shall be deducted from the received income and the difference shall be taxed with 10 % rate.
When a foreign person receives an income as a natural person, then all the expenses which have been paid for utilities, staff, etc. shall not be deducted from the received income.
Having said the above, we hope that this article will be in assistance for any foreign person, who intends to invest in Bulgaria.
NYD-Law is a modern Sofia based law firm specialising in Property, Commercial, Corporate, Civil Contract and Intellectual Property law.
By Law Article
July 18th, 2009 at 01:25pm
Under Tax and Taxation Law
Appeals to the Federal Court require a written application which sets out brief details of the objection decision and must be filed with the relevant Federal Court Registry.
The application must also be accompanied by the prescribed fee applicable to all applications to the Federal Court. This is currently $606.00 for individuals and $1,453.00 for corporations for each objection decision.
The taxpayer must also serve a sealed copy of the application on the Commissioner, as Respondent, at the Office of the Australian Government Solicitor in the state or territory in which the application was filed.
Within 28 days of serving a sealed copy of the application on the Commissioner, the Australian Taxation Office will provide the taxpayer with a Notice of Appearance, a copy of the documents filed with the Federal Court, and a statement of the facts, issues and contentions regarded by the Commissioner as relevant to the appeal.
The Federal Court will then call a Directions Hearing which must be called at least five weeks after the taxpayer’s application was filed.
Once the Federal Court is satisfied that the Commissioner has provided all relevant documents, appeals are then set down for hearing. The taxpayer must pay a setting down fee of $1,211.00 for individuals and $2,422.00 for corporations when a date is fixed for the hearing of the appeal. There is also a daily hearing fee of $483.00 for individuals and $969.00 for corporations.
The Federal Court is able to overturn a decision of the Commissioner of Taxation. However, the Federal Court cannot interfere with any discretion exercised by the Commissioner. It can only refer the matter back to the Commissioner for further assessment.
The Federal Court is able to award costs either against the Commissioner of Taxation if the taxpayer is successful, or against the taxpayer if the Commissioner is successful. In either case, the proportion of costs awarded will generally be between 50% and 60% of the actual costs incurred by the successful party. However, if the Federal Court were to conclude that the behaviour of either the taxpayer or the Commissioner warranted sanction because of the way in which the case had been brought or conducted, a higher proportion of costs (known as solicitor/client costs) may be awarded.
A taxpayer should seek legal advice as to the choice of whether to seek review in the AAT or appeal in the Federal Court may involve taxpayers seeking legal advice. Whilst the Federal Court is the more appropriate forum for objections which are highly technical or which involve complex propositions of taxation law, the court costs are high. Taxpayers generally retain barristers and solicitors to conduct their appeals. The AAT, on the other hand, is cheaper to commence and pursue reviews and places an emphasis upon consensual resolution of disputes. However, AAT members may be less experienced than Federal Court judges in hearing highly complex disputes which involve difficult propositions of taxation law or in managing pre-trial processes to ensure a speedy hearing.
Taxpayers do have further appeals both from the AAT or from the Federal Court.
Whether disputing Private Rulings or taxation assessments, taxpayers maximise their chance of success by utilizing the services of lawyers who are familiar with taxation law and the arguing of objections.
Finally, taxpayers should remember that the Australian Taxation Office will impose a General Interest Charge (GIC) which is currently 13.19% on all outstanding taxation assessments from the date that the assessment was made. The lodging of a review at the AAT or appeal to the Federal Court does not stop this GIC from accumulating. Taxpayers should seek legal advice as to whether to pay either the whole or a part of the disputed taxation notwithstanding commencing the review or appeal. While this will have financial consequences on the taxpayer, the payment will prevent further GIC from accruing. The cost of funding the payment will be less than the GIC. If the taxpayer is successful in the review or appeal, and the amount of the assessment has already been paid, the Commissioner of Taxation is not obliged to refund interest on the refunded taxation payments.
By Law Article
July 18th, 2009 at 01:25am
Under Tax and Taxation Law
Taxation Law in Michigan
There are more than 52 taxes from both the state and local entities in Michigan, but they all fall into one of the five main types of taxes levied against individuals or businesses. These are
Through these, the state of Michigan and the local governments earn enough money to support the public programs and services offered.
The most well known tax is the state and local sales tax. Since every individual and business makes purchases, all residents and nonresidents of Michigan pay this tax. The income taxes are those placed upon earnings. Closely resembling the federal income tax, these are the most well known next to the sales tax.
The business and privilege taxes are those paid by businesses and for gambling. These also include various service taxes for statewide services. Since business taxes can be very complicated, many businesses have in house accountants or they seek outside assistance in the filing.
Transportation taxes are included in the price of gasoline, vehicle registration, other types of transportation, and fuel. Income from these is used in the building and maintenance of roadways.
The last category of Michigan taxes includes some of the most hotly contested taxes. Property taxes include those levied on property for the state and local education funds, utilities, real estate transfers, and estate taxes. Many also call estate taxes death taxes as they are levied on an estate after a death.
To learn more about Michigan Taxation Law please contact Demorest Law Firm.
By Law Article