One of the main surprises in the 2017 South African Budget Review was the announcement of what appeared to be a real shift in policy in respect of the tax and exchange control treatment of certain intellectual property (IP) arrangements. Taxand South Africa reveals the details.
Following the announcements in the Budget Review on 22 February 2017, the South African Reserve Bank (SARB) has issued Circulars 7/2017 and 8/2017 (the Circulars) to give effect to these exchange control proposals that represent amendments to the Exchange Control Manual (the Manual). However, contrary to the expectations created by the phrasing of the Budget proposals, the amendments in these Circulars do not appear to result in significant relaxation of the exchange controls restrictions pertaining to IP.
Based on our interpretation of the Circulars, it appears that although the SARB has shifted control of certain IP related transactions to the authorised dealers, which should avoid time delays and facilitate administrative ease of securing such approvals, this does not represent the expected significant relaxation of the current IP exchange control restrictions. In particular, the prohibition against the sale of IP by South African residents to related offshore parties remains very much in place.