Intellectual Property Tax and Exchange Control Reform – the Details Revealed
One of the main surprises in the 2017 South African Budget Review was the announcement of what appeared to be a real shift in policy in respect of the tax and exchange control treatment of certain intellectual property (“IP”) arrangements.
Licensing of IP by South African residents to non-resident related and unrelated persons
Although this was previously dealt with in the IP guidelines issued by the SARB, the Manual now explicitly provides that authorised dealers may approve the licensing of IP by South African residents to non-resident parties. Based on the wording, it seems that this would apply to both related and non-related parties. This does not give rise to a substantive change in the approval process or documentation requirements in respect of licensing arrangements, apart from the fact that authorised dealers now have the authority to approve outbound licensing arrangements to related non-resident parties. Again, it is expected that the main benefit of not having to approach SARB will be reduced timeframes within which the required approval may be secured.
Based on our interpretation of the Circulars, it appears that although the SARB has shifted control of certain IP related transactions to the authorised dealers, which should avoid time delays and facilitate administrative ease of securing such approvals, this does not represent the expected significant relaxation of the current IP exchange control restrictions. In particular, the prohibition against the sale of IP by South African residents to related offshore parties remains very much in place.
tax executive jbrodbeck@ENSafrica.com cell: +27 83 442 7401
tax principal associate ldaya@ENSafrica.com cell: +27 83 254 8532
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