An amount falls into a taxpayer’s gross income and is subject to tax if it is either received by or accrues to that taxpayer. However, where a contract is reciprocal, i.e. each party intends its performance to be conditional upon performance by the other, accrual is suspended pending ...
A business is typically valued by discounting future earnings. Instead of acquiring the shares in the business, it is often more tax advantageous to acquire the business through a sale of assets. However, after attributing value to tangible assets (e.g. furniture, plant, vehicles, ...
Prior to January 2004, allowances for the acquisition of intellectual property (IP) was regulated by s11(gA). According to that section: 11(gA).- Expenditure actually incurred by the taxpayer in-…(iii) ...
Welcome to the concept of beneficial ownership – one of the most nebulous concepts in intellectual property tax law – which surely must echo the voice of Nietzsche’s in Why I Write Such Excellent Books: “When Doctor Heinrich von Stein once honestly complained that he understood ...
If you have intellectual property (“IP”) that is used by a connected person outside of South Africa, and that foreign connected person is not required to make market-related royalty payments to you for the use of the IP, you are most probably contravening the transfer pricing provisions ...
On 16 September 2014, the OECD published a slew of discussion documents giving a head’s up of anticipated changes in the global tax system. Although it will be a few years before the proposed changes become effective, they will significantly impact groups that have structured their ...
Generally, people understand s11(gC) of our Income Tax Act as follows: where a person (assignee) acquires ownership of intellectual property (excluding licensed rights, trademarks and bare know-how) that conferred an enforceable monopoly, the assignee is entitled to claim annual allowances ...
Typically, litigation expenses may only be deducted in terms of s11(a) of our Income Tax Act. However, this section specifically excludes expenditure that is capital in nature. Intellectual property (IP) is by its very nature a monopolistic right, granted by law. ...
Generally, deductions relating to royalty expenditure are claimed under “the general deductions section”, s11(a) of our Income Tax Act. However, despite the decision in ITC 1822 (which relates to fixed term licences), most up-front premium payments may only be deducted in terms ...
When an inventor and a financier team up to develop further and commercialise an invention, the parties can do so through either a joint ownership agreement or a joint venture vehicle – typically a new company. Joint ownership agreements are generally impractical ...
Below are a few common international licensing structures aimed at reducing the effective tax rate applied to royalty income: BVI / NLDIP owner: BVI CoIntermediary licensee: NLD Co NLD ...
A new tax provision came into force as from 1 January 2009, which will change the landscape of many international licensing arrangements. The provision aims to tackle licences that generate a tax arbitrage considered abusive by Treasury. The section received vociferous ...
The doctrine of substance over form empowers our courts to ignore the form of a transaction and give effect to its proper substance. Accordingly, when faced with a “sale”, despite any “licence” labels, our courts will apply the tax consequences that normally attach to a sale ...
It is common for companies to file PCT applications in the names of the inventors. The rationale being indirectly to qualify the company for the (up to) R36,000 rebate extended to natural persons making applications in certain designated countries. However, this is often done without ...
The 150% R&D tax incentive aims to attract multinationals’ R&D to our shores. According to s11D(7), a taxpayer may claim the 150% tax benefit where “that amount is not deductible by any other person in terms of this Act”. Let’s ...
It appears to have become common practice to combine a licence, provision of technical services agreement, and continued R&D services agreement into a single agreement and call the composite agreement a “licence”. In principle, this is not necessarily incorrect, but then ...
When South African IP is assigned offshore, few negative SA tax consequences follow: capital gains tax triggered by the disposal is at least 50% of the income tax rate and IP CGT base costs minimise this exposure. But, once transferred, potential future SA tax benefits thrive: royalty ...
Is the case of BP Southern Africa (Pty) Ltd v CSARS (SCA) the last word on the nature of royalty payments? In my opinion, it is not. The judgment merely applies long-standing principles of capital / revenue expenditure to the facts of that case, which facts were previously misconstrued ...
Think back to when you last purchased a software package, was the transaction categorised as a “sale” or a “licence”? Typically, in order to restrict on-sale, distributors prefer to categorise the transaction as a “licence”. However, the two types of transactions ...
Taxation of “outgoing licences” (i.e. where a South African licensor grants a licence to a foreign licensee) is regulated by the tax laws of the licensee country, our Income Tax Act and the applicable Double Tax Agreement (DTA). The tax laws of most countries ...