What could this mean for me?
While Intellectual Property, eg patents and trademarks, has always been valued, increasing recognition for this aspect has become well established, especially for asset registers in company balance sheets. Realisation has gained ground amongst accountants and corporate executives that IP can form a significant proportion of the assets in some businesses. For example, it is believed that the value of the Coca-Cola trademark, although an intangible asset, probably exceeds the capital value of all plant producing and bottling Coca-Cola worldwide. Placing IP value on the balance sheet can improve the leverage of a company and justify increased loan finance.
So don’t underrate the value of a portfolio of protection for your design, the portfolio may include a patent, design registration, copyright and trademarks. Professionals are developing specialist practices in the skills of IP valuation.
Should you generate or derive income from patents and similar property, you may, over a period, deduct from taxable income your expenditure on:
- devising and developing an invention;
- generating or making a design, trademark, copyright or similar asset;
- registering or obtaining a patent, design registration or trademark; and
- acquiring from someone a copyright, design, patent, trademark or similar property.
Since South African tax law is based on the residence principle and no longer the source principle, income in a South African resident’s hands, from foreign sources is taxable. The international structuring of IP ownership and revenue flows is an advanced and complex subject and will require advice from specialists in this field.
Value added tax (VAT) is assessed on intellectual property transactions, unless they relate to foreign rights or foreign residents, when the tax is zero rated.
Consult a tax expert about exceptions to this ruling, eg how it affects South African residents, companies in neighbouring states or exporters.
The costs of extending or renewing the term of a patent, design registration or trademark can be deducted in full, provided that you product or derive income from these assets.