SA Treasury - Request for submissions on IP tax / exchange control issues

A recent letter sent to all members of SAIPPL has called for comments (by 4 June and 29 August) on IP tax and exchange control legislation in SA to streamline legitimate IP transactions and clarify “grey areas”. The letter reads substantially as follows:

The SA Treasury has embarked on a project to:

- ensure legitimate IP transactions are not unnecessarily complicated by tax
- ensure that tax consequences flowing from common IP transactions are logical and expected
- gauge the impact of our Exchange Control Regulations on IP transactions
- identify “negative” IP tax practices and existing / potential loopholes

The Treasury would appreciate reader's input by providing examples of:

Submission deadline: 4 June 2008

- legitimate transactions that will be caught by our new tax anti-avoidance provisions s23I and s31 (the IP proviso to the connected person definition)

Submission deadline 29 August 2008

- “common transactions” concluded within your field for (i) monopolistic purposes (i.e. to protect IP), (ii) tax / financing purposes, (iii) balance sheet purposes, or (iv) Exchange Control purposes
- legitimate / common IP ownership structures
“artificial steps” that you have previously inserted into legitimate transactions to ensure “fair tax treatment” (e.g. converting upfront payments into interest-free loans to balance the tax effect)
- legitimate transactions that have been hindered by our Exchange Control Regulations
- unexpected / illogical / unfair tax consequences triggered by legitimate transactions
“grey areas” that require clarification
- areas of overlap between our Exchange Control Regulations and our Income Tax Act (e.g. transfer pricing and transfer payments)
- legitimate transactions that are caught by our tax anti-avoidance provisions (e.g. s11(f)(dd), s23J, s23D, s23G, etc)
- “negative practices” and loopholes (e.g. tax loopholes that may be exposed by relaxation of our Exchange Control Regulations)

All information will be kept confidential.

Please send your comments to either:

Anthony van Zantwijk (Sibanda & Zantwijik) at anthony@zaiplaw.co.za, or
Greg Smith (Treasury) at Greg.Smith@Treasury.gov.za

A workshop on s23I and s31 will be held in the Johannesburg area during the first week of June and in August.

Afro-IP has sent a note to anthony@zaiplaw.co.za asking to be included on the IP tax mailing list.