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Inland Revenue

Tax Policy

Chapter 2 - The Binding Rulings System

2.1 In its review of 1989–90, the Tax Simplification Consultative Committee expressed concern that Inland Revenue could change its opinion without any formal procedure, leaving taxpayers unsure that their actions were based on decisions that would hold. The Committee also considered it unacceptable that taxpayers should be expected to file returns over a number of years with technical issues on those returns remaining unresolved. [1]

2.2 The committee recommended resolving these concerns through a binding rulings regime which, in addition to providing much needed certainty, would have the following advantages:

  • a reduction in disputes and litigation;
  • increased consistency between Inland Revenue offices;
  • increased awareness and knowledge for Inland Revenue staff; and
  • improved relations between Inland Revenue and taxpayers.

2.3 The 1994 organisational review, in recommending an impartial adjudication process for Inland Revenue, also stressed the importance of impartiality by Inland Revenue in providing binding rulings. [2] To better achieve this, it recommended a specialist adjudication and rulings unit within Inland Revenue which would provide top-flight technical expertise. [3] (The adjudication and rulings functions are now performed by Inland Revenue’s Office of the Chief Tax Counsel.)

2.4 In the same year, the release of a government discussion document, Binding Rulings on Taxation, proposed that Inland Revenue be able to issue rulings on the interpretation of tax law which would bind Inland Revenue but not the taxpayer. The discussion document outlined most of the content of the current rulings process, which was enacted with effect from 1 April 1995.

2.5 In 1999, a post-implementation review of the binding rulings regime resulted in a number of legislative refinements, covering matters such as the impact on a ruling of legislative change and the consequences of an assumption included in a binding ruling proving to be incorrect.

Outline of the current rules

2.6 A binding ruling sets out how Inland Revenue will apply tax laws to a particular arrangement. Taxpayers are not required to follow the ruling but, if they do so, Inland Revenue must apply the tax laws as set out in the ruling.

2.7 Inland Revenue can issue four types of binding ruling:

  • Public rulings: which give an interpretation on how a tax law applies to any type of taxpayer or type of arrangement.
  • Private rulings: which give an interpretation of the tax law as it applies to a specific taxpayer and a particular arrangement (either a one-off or recurring arrangement).
  • Product rulings: which set out Inland Revenue’s interpretation of the tax law as it applies to a particular “product”, which is an arrangement that is likely to be entered into by a number of people. A product ruling is only issued if:
    • Inland Revenue is satisfied that a private ruling cannot be made because it is not practicable to identify the taxpayers who may enter the arrangement; and
    • the characteristics of the taxpayers who may enter the arrangement would not affect the content of the ruling.
  • Status rulings: which set out Inland Revenue’s view of whether an amendment or repeal of a taxation law has changed the way that the law applies in a private or product ruling.

2.8 Inland Revenue can make private or product binding rulings on current and/or completed arrangements and on proposed arrangements that are “seriously contemplated” by the parties involved.

2.9 The legislation sets out the circumstances when Inland Revenue cannot rule – for example, if the application for the ruling would require Inland Revenue to determine questions of fact. It also sets out the circumstances in which Inland Revenue can decline to rule – for example, if the matter on which the ruling is sought is subject to an objection, challenge or appeal.

2.10 Private, product and status rulings are made upon application by the taxpayer. Inland Revenue is required to charge an hourly rate of $155 for considering these rulings as well as an application fee of $310.

2.11 Unlike other types of rulings, taxpayers cannot apply for public rulings. Instead, Inland Revenue issues public rulings on suitable topics, subject to available resources. Taxpayers can nominate issues that they consider should be the subject of a public ruling.

2.12 Public rulings, product rulings and status rulings on public and product rulings are published in the Gazette, in Inland Revenue’s Tax Information Bulletin and on Inland Revenue’s website. Private rulings are not published, as they are specific to the taxpayer and the facts of the arrangement.

Disclosure requirements

2.13 Applications for private or product binding rulings must comply with certain disclosure requirements. For private and product rulings, the application must:

  • identify the applicant;
  • disclose all relevant facts and documents relating to the arrangement for which the ruling is sought;
  • state the taxation laws in respect of which the ruling is sought;
  • state the propositions of law (if any) which are relevant to the issues raised in the application; and
  • provide a draft ruling. [4]

2.14 For product rulings, the application must also explain:

  • why it is not practicable to seek a private ruling; and
  • why the characteristics of the taxpayers who may enter into the arrangement are not relevant to the content of the ruling. [5]

2.15 Disclosure is required to ensure that Inland Revenue has all of the relevant information on which to make the ruling. It also provides a degree of protection to the applicant by ensuring that Inland Revenue is focused on the relevant issues as set out in the application. If the disclosure requirements are not complied with, the Commissioner can decline to rule.


2.16 Before private, product and status rulings are issued, Inland Revenue must consult with the applicant if the content of the proposed ruling differs from that requested. [6] This consultation gives the applicant an opportunity to comment on the interpretation adopted by Inland Revenue before the ruling is issued.


1 Tax simplification final report of the consultative committee, 1990, Chapter 3.

2 Organisational review of the Inland Revenue Department, 1994, paragraph 16.1.2.

3 Ibid paragraph 17.2.

4 Sections 91ED and 91FD of the Tax Administration Act 1994.

5 Ibid section 91FD(1)(c).

6 Ibid sections 91EG, 91FG and 91GE.