- Sars (South African Revenue Services) will not allow a tax deduction relating to the use of "Tainted IP" if the corresponding receipt or accrual does not make up "income" for SA tax purposes
- where a taxpayer concludes on licence in respect of various items of IP, the royalty payable for the bundle of IP must be apportioned between the relevant items of IP for separate analysis by Sars.
tainted intellectual property' means intellectual property—
a) which was the property of the end user or a person that is or was a connected person, as defined in section 31(1A), in relation to the end user;
b) which is the property of a taxable person;
c) a material part of which was used by a taxable person in carrying on a business while that property was the property of a taxable person and the end user of that property acquired that business or a material part thereof as a going concern; or
d) which was discovered, devised, developed, created or produced by the end user of that property, or by a taxable person that is a connected person, as defined in section 31(1A), in relation to the end user, if that end user, together with any taxable person that is a connected person in relation to that end user, holds at least 20 per cent of the participation rights, as defined in section 9D, in a person by or to whom an amount is received or accrues—
i) by virtue of the grant of use, right of use or permission to use that property; or