Every business contains, or has the potential to develop, Intellectual Property! Be it in the form of a brand, logo, catch phrase, design, formula, code, unique activity or the like.

It is vital to identify, value, protect and develop your IP as soon as it’s feasible. Protection not only involves registration, but it also involves savvy structuring to separate IP as an asset from operational creditors as well as the South African Revenue Services.

As IP is not a physical asset, it is capable of being valued, registered and owned anywhere on the planet. It is sage to value, register, or own IP in a jurisdiction that offers the optimal benefits. The Paris Convention is the primary convention protecting Trademarks with over 90 member states including: the USA, most of the EU and Australia. It offers reciprocal protection opportunities for member states. South Africa is not a member and, to boot, it provides precious little if any fiscal benefits in the form of grants, funding or tax incentives for research and development of IP.

As disadvantageous as it may be to value, register, and own IP in South Africa. IP cannot merely be exported without real commercial purpose as SARS will demand its part of the action. Tax legitimate hedging of your IP in a preferential jurisdiction requires real benefit, beyond mere tax avoidance e.g. Funding, better access and/or proximity to markets, skills, time zone parity, common language etc. IP is the best opportunity for any business to hedge in hard currency and, in the context of South Africa, Ireland cannot be beaten as a home for IP. It is a member of Paris Convention as well as the European Union Intellectual Property Office (EUIPO) and provides ample R&D funding for markets, access to EU markets, a common language, skills and time zone parity. Almost every global brand you can think of houses its IP and European HQ in Ireland, including 4 of the world’s top 5 brands: Apple, Microsoft, Google & Facebook.

Ireland is not a “NO” but a “LOW-TAX” haven, with a corporate tax rate of 12.5% and zero tax on specified Global IP royalties Double Taxation Agreements with South Africa and most other G20 countries. The recent media hype surrounding the case of Apple and the EU is not be interpreted as a means to cast aspersions on the many other compliant multinationals in Ireland. Apple paid far less tax than the already low rates that are required, and it was rightly fined by the EU. Ironically, it is ultimately neither Apple nor Ireland that will suffer, but rather the US.

As a dual South African/Irish national, our founder is only too familiar with clients’ ecstasy with reciprocal fiscal benefits and the disappointment with by the lack thereof. With more funding and support from EU than ever in the wake of Brexit, the timing could not be better. While IP externalisation can be expensive, we provide a platform for smaller brands to minimise costs and improve access to funding, towards building a global brand.

The sooner one values and externalises IP the better as the greater its value, the greater the penalties and limitations are in terms of transfer pricing. This is illustrated by the following example: a local brand expanding globally waited for global profits (mainly from the EU, US and Australia) to reach the R10m mark before it became disgruntled after having to pay over R3m in tax thereon. Had the owner of the brand registered its IP in Ireland, it would not only have had access to millions of Euros in grant funding but it would also have been liable for ZERO tax on royalties earned.

Once global revenue is earned and taxable in South Africa, it then becomes a challenging exercise to unravel the IP revenue from the SARS net. Hedging IP does not mean one is unable to register or trade in South Africa. However, as South Africa is not a Paris Conventions member, one will have to re-file with the CIPC and ensure that transfer pricing guidelines are observed. For more information on how to protect, hedge and expand your brand, contact us now for a complimentary consultation. Every business contains, or has the potential to develop, Intellectual Property! Be it in the form of a brand, logo, catch phrase, design, formula, code, unique activity or the like.