Big changes in tax law on the horizon

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 digital service offering / intellectual property (IP) holding for tax purposes. Not only will these changes impact existing companies considering tax structuring in future. They extend to groups that previously implemented a tax‐efficient structure.

Historically, many groups placed their patents, trademarks, copyright, know‐how and design registrations in an IP holding company registered in a low‐tax jurisdiction. Alternatively, intellectual property has been licensed to a company in a low‐tax jurisdiction, which company in turn offered a digital service to users worldwide.

The OECD intends to tackle these tax arrangements from all angles:

Once these changes have been incorporated into the South African tax law, restructuring companies to yield a significant tax benefit will be extremely difficult. And, existing groups will need to revisit their structures to ensure that the tax benefit continue to justify the cost.

(Updated 2007)

Articles: Taxation