SummaryThe essentials of the GMC advance ruling regime:
- Section 108 of the Income Tax Act 2025 and its Seventh Schedule create a binding advance ruling system: on a proper application, the Comptroller "must make a ruling on how any provision of this Act applies, or would apply" to the applicant and a specified arrangement (Sch. 7, Pt 1, para. 1(1)).
- The application rules and fees are fixed in the Act, so an application can be prepared as soon as the arrangement is settled.
- A ruling can be sought by a person in their own right or on behalf of a company or other person "yet to come into legal existence" (para. 8), which is what makes it useful before incorporation or investment.
- The Comptroller may decline to rule on questions of fact or assumption-dependent matters (para. 2) and must not rule in nine listed situations, including where the applicant is not "seriously contemplating the arrangement", where foreign law must be interpreted, or where an audit is under way (para. 3).
- A ruling binds the Comptroller only if the taxpayer discloses reliance on it in the return (paras 5 and 17). It ceases to apply if the arrangement is materially different, facts were misrepresented, an assumption proves wrong or a condition is unmet (para. 7).
- Statutory fees (Sch. 7, Pt 2): a non-refundable application fee of $660, a further $165 per hour beyond the first 4 hours, an optional expedite fee of up to twice the aggregate, plus reimbursement of external advice and disbursements.
What an advance ruling is
An advance ruling is a written statement by the tax authority on how the law applies to a specific arrangement, given before the arrangement is carried out or before the return is filed. It converts a legal opinion into a position the authority is bound to follow.
In a new jurisdiction this matters more than usual. GMC's Income Tax Act 2025 re-enacts a mature statute with amendments, and the Comptroller of Income Tax (the officer appointed under s. 3) reads its provisions with the precedents of the common law world available. An investor deciding whether income qualifies for an exemption, whether a structure is resident in GMC, or how a specific deduction applies, wants that reading confirmed for its own arrangement. A ruling provides that certainty for the arrangement it covers.
Throughout this article, "$" means United States dollars (s. 2AA).
Who can apply and for what
The applicant
Paragraph 8 of Part 1 of the Seventh Schedule allows an application by:
- a person in their own right;
- a person "on behalf of a person who is yet to come into legal existence"; or
- two or more persons jointly, or a person on behalf of two or more prospective persons.
The second route is the one investors will use most. A parent company can seek a ruling on how the Act will apply to a GMC subsidiary it has not yet incorporated, for example on whether the subsidiary's proposed activity will qualify for a concessionary regime, before committing to the incorporation and the associated capital.
The subject matter
The Comptroller rules on "how any provision of this Act applies, or would apply, to the person and to the arrangement for which the ruling is sought" (para. 1(1)). The Comptroller may also rule on a provision that the applicant did not mention if it is relevant to the arrangement (para. 1(2)).
The Comptroller must not rule on provisions that authorise or require the Comptroller to impose or remit a penalty, inquire into the correctness of a return, prosecute a person, or recover a debt (para. 1(3)). Rulings are about the substantive application of the law, not about enforcement discretion.
When the Comptroller may decline (para. 2)
The Comptroller has a discretion to decline where:
- the application "would require the Comptroller to determine any question of fact";
- "the correctness of the ruling would depend on the making of assumptions", whether about a future event or anything else;
- the matter is already subject to an objection or appeal, by the applicant or anyone else;
- the applicant has "outstanding debts relating to earlier ruling applications"; or
- the matter is the subject of a return that has been or is due to be lodged.
The first two grounds shape how an application should be drafted. The application must present the facts as settled and complete, and frame the question as one of law. If the outcome turns on facts not yet known, the Comptroller may decline, or may make assumptions under para. 11 that then become conditions of the ruling.
When the Comptroller must not rule (para. 3)
Paragraph 3 lists mandatory bars. A ruling must not be made if:
- the Comptroller considers that the person "is not seriously contemplating the arrangement" (para. 3(a)), hypothetical or exploratory questions are excluded;
- the application is frivolous or vexatious (para. 3(b));
- the matter concerns tax that is already due and payable (unless the application was received before), "involves the interpretation of any foreign law", or is being dealt with (or should be) by competent authorities under a double taxation agreement (para. 3(c));
- a ruling already exists for the same person, arrangement and period (para. 3(d));
- an assessment for the relevant year has already been made, unless the application was received earlier (para. 3(e));
- the Comptroller is auditing or investigating how the Act applies to the applicant or a similar arrangement for the relevant period (para. 3(f));
- the applicant has not provided sufficient information after a request (para. 3(g));
- it would be unreasonable to rule given the Comptroller's resources (para. 3(h)); or
- the ruling would require an opinion on a generally accepted accounting principle or a commercially acceptable practice (para. 3(i)).
Timing is the recurring theme. An application lodged after the tax falls due, after an assessment, or after an audit starts, is too late. Rulings are for planning, not for defending a position already taken.
Where the Comptroller declines or is barred from ruling, the applicant must be notified in writing with reasons (para. 4).
What the application must contain (para. 9)
An application must:
- identify the applicant;
- "disclose all relevant facts (including the reasons for the arrangement, if applicable) and documents relating to the arrangement";
- state the provision of the Act on which the ruling is sought;
- state the proposition of law relevant to the issues;
- state whether a previous application has been made on the same or a similar arrangement, and its result; and
- "provide a draft ruling".
The Comptroller may waive the last four requirements where compliance would be unreasonable (para. 9(2)), but the identity and full disclosure requirements cannot be waived. Documents provided are retained by the Comptroller (para. 9(3)), and further information may be requested at any time (para. 10).
The draft ruling requirement is unusual and useful. The applicant writes the ruling it wants. A carefully drafted proposed ruling, with precise identification of the arrangement, the provision and the period, frames the Comptroller's consideration and reduces the risk of a ruling that is too narrow to be useful.
Assumptions
If the correctness of a ruling depends on assumptions about future events or other matters, the Comptroller may make "the assumptions that the Comptroller considers to be most appropriate" (para. 11(1)), but "may not make assumptions about information which the applicant can provide" (para. 11(2)). Applicants should therefore supply everything they can, so that assumptions are limited to matters outside their knowledge.
What the ruling looks like (para. 12)
A ruling must state that it is made under s. 108; identify the person, the provision and the arrangement; state how the provision applies; specify the period or year of assessment covered; set out the material assumptions; and list any conditions (para. 12(1)). A copy is sent to each applicant (para. 12(2)).
A ruling applies only to the provisions expressly referred to in it and only for the period stated (para. 6). Anything not covered is not ruled on.
When the ruling binds, and when it does not
Binding effect (para. 5)
Where a ruling applies to an arrangement during the period specified, and the person has disclosed in the return that it relied on the ruling, "the Comptroller must apply the provision in relation to the person and the arrangement ... in accordance with the ruling". The Comptroller cannot later assess on a different basis for that period.
The disclosure duty (para. 17)
The binding effect depends on disclosure. A person who has obtained a ruling and files a return that takes into account the way a provision applies to the ruled arrangement must disclose in the return the existence of the ruling, whether the person relied on it, and "any material changes to the arrangement identified in the ruling". Omitting this disclosure forfeits the protection of para. 5.
Loss of protection (para. 7)
A ruling does not apply if:
- the arrangement is "materially different from the arrangement identified in the ruling";
- there was "a material omission or misrepresentation in, or in connection with, the application";
- an assumption made by the Comptroller "subsequently proves to be incorrect"; or
- a stipulated condition is not satisfied.
This is why full disclosure at the application stage is a matter of self-interest. A ruling obtained on an incomplete picture protects nobody.
Withdrawal and change of law (paras 13–15)
The Comptroller may withdraw a ruling at any time by written notice with reasons (para. 13(1)). Withdrawal is prospective: it takes effect from a date not earlier than when the notice could reasonably be received, and the ruling "continues to apply in relation to any arrangement for the remainder of the period specified in the ruling if the arrangement has been entered into or effected before the date of withdrawal" (para. 13(4)). An arrangement already implemented in reliance on a ruling keeps its protection.
A ruling stops applying from the date the relevant provision is repealed or amended in a way that changes how it applies (para. 15). Minor typographical corrections do not require withdrawal and reissue (para. 14).
No suspension of obligations (para. 16)
Applying for a ruling does not affect the obligation to file returns, pay tax or do anything else, nor the Comptroller's power to assess. A pending application is not a reason to delay compliance.
Publication (para. 18)
The Comptroller may publish a summary of a ruling only with the applicant's express consent, in a form that does not identify the applicant, the arrangement or any party.
Fees (Seventh Schedule, Part 2)
The fees are fixed in the Act and are payable to and retained by the "Authority", meaning a body established under written law to act as the GMCA's agent in administering and collecting taxes (s. 108(3) and (5)). They are:
| Fee | Amount (Sch. 7, Pt 2, para. 1(1)) |
|---|---|
| Application fee | $660, non-refundable, with the application |
| Further fee | $165 per hour (or part hour) beyond the first 4 hours of the Comptroller's time, including consultation with the applicant |
| Expedite fee | Up to 2 times the aggregate of the application and further fees, for priority handling |
| Reimbursement | External advice fees (where the applicant agrees to the Comptroller seeking it) and the Comptroller's costs and reasonable disbursements |
Once the Comptroller agrees to make a ruling, the applicant must pay the estimated further and expedite fees, which the Comptroller may increase; the difference is settled or refunded when the ruling is made (para. 2(2)–(4)). If the application is withdrawn, fees incurred up to receipt of the withdrawal notice remain payable (para. 1(2)). The Authority may waive fees "in exceptional circumstances in its discretion" (s. 108(4)). Amounts are stated "net of taxes".
Practical checklist
- Apply early: before the tax is due, before any assessment, and before any audit begins.
- Settle the facts. Frame the question as one of law, and supply all information within your control so that the Comptroller need not assume it.
- Draft the ruling you want, identifying the arrangement, the provision, the period and the conclusion precisely.
- Disclose the reasons for the arrangement and every relevant document. A material omission voids the ruling.
- Consider a joint or prospective application where several group entities, or an entity yet to be incorporated, will be affected.
- Budget for the statutory fees and decide whether the expedite fee is worth paying.
- After the ruling: disclose reliance in every relevant return, and notify material changes to the arrangement.
Frequently asked questions
Can a ruling be obtained before my GMC company is incorporated?
Yes. Paragraph 8 allows an application "on behalf of a person who is yet to come into legal existence". The prospective company can be named in the ruling, which is what makes the regime useful at the investment decision stage.
Is the Comptroller bound by a ruling?
Yes, where the arrangement is carried out as described, the ruling period applies and the taxpayer discloses reliance in the return (para. 5). The ruling ceases to bind if the arrangement is materially different, there was a material omission or misrepresentation, an assumption proves wrong or a condition is unmet (para. 7).
What does a ruling cost?
A non-refundable application fee of $660, plus $165 per hour beyond the first 4 hours, plus up to double those amounts for expedited handling, plus reimbursement of external advice and disbursements (Sch. 7, Pt 2). The Authority may waive fees in exceptional circumstances (s. 108(4)).
Will the Comptroller rule on foreign tax questions?
No. A ruling must not be made where the matter "involves the interpretation of any foreign law" or should be dealt with by competent authorities under a double taxation agreement (para. 3(c)). Rulings are confined to how the GMC Income Tax Act applies.
Key takeaways
- GMC has a full statutory advance ruling regime in s. 108 and the Seventh Schedule.
- Applications can be made for entities yet to come into legal existence, which suits pre-investment planning.
- The Comptroller must rule on a proper application, subject to discretionary and mandatory exclusions that are mostly about timing and factual certainty.
- A ruling binds only where reliance is disclosed in the return and the facts match the application.
- Fees are fixed by statute and modest relative to the certainty a ruling provides.
This article is general information about the law of the Gelephu Mindfulness City Special Administrative Region as at the date above. It is not legal advice and does not create a lawyer–client relationship.
You may contact Basnet Law at basnet@basnetgmc.com or office@basnetgmc.com for any legal queries related to GMC.
References
- Income Tax Act 2025 (Law No. 6 of 2025), ss. 2AA, 3, 108; Seventh Schedule, Part 1 paras 1–18 and Part 2 paras 1–2
