Your SlideShare is downloading. ×
Your intellectual property portfolio: A vast source of cash savings
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×

Introducing the official SlideShare app

Stunning, full-screen experience for iPhone and Android

Text the download link to your phone

Standard text messaging rates apply

Your intellectual property portfolio: A vast source of cash savings

484
views

Published on

Your intellectual property portfolio: A vast source of cash savings …

Your intellectual property portfolio: A vast source of cash savings

South African Society for Railway Engineering (SASRE) hosted Darren Margo from Margo Intellectual Property.

Published in: Business

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
484
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
8
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. IP-Based Tax Incentives: A Source Of Savings 18 June 2009 © 2009 Margo™ (Intellectual Property) All Rights Reserved
  • 2. i. Agenda 1. General Overview & Objective 2. “Research & Development”: S11D 3. Other IP Deductions, Allowances 4. Legal Expenses 5. Limitations & Exclusions 6. Plan Of Attack © 2009 Margo™ (Intellectual Property) All Rights Reserved
  • 3. 1. Overview & Objectives Savings through tax deductions & allowances After-tax benefit: not budgeted for (bonus) Focus on the unusual, uncommon, little- known & technical Important, related aspect: risk mitigation Tax Neutral: Not Aggressive, No Structures & No Schemes NB: deductible in the hands of the taxpayer © 2009 Margo™ (Intellectual Property) All Rights Reserved
  • 4. 2. Section 11D: R&D Deduction Overview: Section 11D(1) – OpEx Supercharged deduction of 150% (Op Ex) Additional benefit of 14% after tax Volume based tax regime & No cap Activities must be performed in SA, but IP need not reside in SA © 2009 Margo™ (Intellectual Property) All Rights Reserved
  • 5. 2. Section 11D: R&D Deduction Allowable Qualifying Activities discovery of novel, practical, non-obvious information devising, developing or creation of any: patentable invention – Patents Act registerable design – Designs Act computer program – Copyright Act knowledge essential to the use of the same activities: scientific or technological in nature © 2009 Margo™ (Intellectual Property) All Rights Reserved
  • 6. 2. Section 11D: R&D Deduction Exclusions: Exploration/prospecting Management or internal business processes Trade marks Social sciences/humanities Market research, sales, marketing © 2009 Margo™ (Intellectual Property) All Rights Reserved
  • 7. 2. Section 11D: R&D Deduction Potentially Qualifying Activities development of RFID tag and/or transceiver device for use with the tag development of new or improved touch- screen for OBC (measurable improvement) devise improved steel-composite brake and/or braking system for articulated locomotive (better traction / longer-wearing) achieving integration of discreet software solutions to obtain a technical result new design load-bearing axle (heavier load) © 2009 Margo™ (Intellectual Property) All Rights Reserved
  • 8. 2. Section 11D: R&D Deduction Unlikely To Qualify assembling, carrying out routine activities; standard redundancy upgrades; implementing known technology in the usual fashion; pure maintenance, trouble-shooting MUST (aim to) resolve technological uncertainty MUST seek advance in (underlying) technology Risk Aspect: SARS Draft Guideline (Nov ’08) © 2009 Margo™ (Intellectual Property) All Rights Reserved
  • 9. 2. Section 11D: R&D Deduction Types Of Qualifying Expenditure Salaries & Wages total cost to company Overheads water, electricity, rent, etc Materials consumables, parts Third-party Payments contractors; leased equipment © 2009 Margo™ (Intellectual Property) All Rights Reserved
  • 10. 2. Section 11D: R&D Deduction Overview: Section 11D(2) – CapEx previous 40:20:20:20 depreciation allowance §11D(2) provides 50:30:20 accelerated allowance no prior use & apportion use of assets assets for use in conducting §11D(1) activities includes costs of erecting, installing, improving or adding to asset © 2009 Margo™ (Intellectual Property) All Rights Reserved
  • 11. 2. Section 11D: R&D Deduction Illustrative Example: S11D(2) v S11(e) Radio Communication Equipment – ZAR1m NPV Y0 Y1 Y2 Y3 Y4 at Y0 11D(2) 500,000 300,000 200,000 – – 929,549 11(e) 200,000 200,000 200,000 200,000 200,000 812,988 % Saving (NPV): 14.34 % © 2009 Margo™ (Intellectual Property) All Rights Reserved
  • 12. 2. Section 11D: R&D Deduction Three Important Issues 1. Rate Of Deduction Usually: Where R&D is funded – limit: 100% 2. Entitlement & Foreign Funding §11D(7): “double dip” – 150% Caution! “Tainted IP” 3. Reporting Requirements SARS (IT14), DST (Form) © 2009 Margo™ (Intellectual Property) All Rights Reserved
  • 13. 3. Other IP-Based Deductions License License Fees Fees Instruments • patents Creating Creating Acq’sition Acq’sition • designs IP IP Fees Fees • trade marks • © software Deduction Deduction • know how Allowed In Allowed In ZA ZA ZA & Abroad R&D R&D Regis’tion Regis’tion Spend Spend Fees Fees Renewal Renewal Fees Fees © 2009 Margo™ (Intellectual Property) All Rights Reserved
  • 14. 3. Other IP-Based Deductions Assess Risk, Identify Legal Req’ments Optimise © 2009 Margo™ (Intellectual Property) All Rights Reserved
  • 15. 3. Other IP-Based Deductions Significance Full picture: merely focusing on handful of deductions misses opportunities Often structured as alternatives (different requirements) Huge basket of benefits – reduces tax liability across full group (ZA & globally) Reduce provisional tax payments: immediate & substantial © 2009 Margo™ (Intellectual Property) All Rights Reserved
  • 16. 4. Legal Expenditure Legal expenditure incurred: on any claim, dispute or action arising in course of / by reason of ordinary operations undertaken by carrying on trade NB: not necessarily in any court or tribunal Expenditure incurred in enforcing a registered design © 2009 Margo™ (Intellectual Property) All Rights Reserved
  • 17. 4. Legal Expenditure Examples From Decided Cases defending restraint of trade disputes terminating agency agreements terminating contract for purchase of goods resisting municipal threats to remove your machinery from site dispute re: reverse-engineering of copyright- protected products (engineering drawings) recovering trade debts © 2009 Margo™ (Intellectual Property) All Rights Reserved
  • 18. 5. Restrictions & Limitations General deductions available at different rates deductible in different tax periods different qualifying, reporting requirements exclusions & limitations Section 23I connected party transactions many recoupment provisions may apply Section 11D Section 8(4), 8(5) frequent changes to the law © 2009 Margo™ (Intellectual Property) All Rights Reserved
  • 19. Benefit Summary Y-1 Yo Y1 Y2 … Yn 11D: R&D Disposal Allowances Other CapEx Allowances IP Renewal, Registration IP Acquisitions IP Royalty Deductions Restraints Finance Charges Tax Deduction = benefits n © 2009 Margo™ (Intellectual Property)
  • 20. 6. Plan Of Attack Gap Analysis: IT Deductions Generally what is (not) being claimed? At what rate? [Optimise] what has been overstated? [Mitigate risk] responsibility: skilled expertise [Optimise / Risk] Business Management: Future capturing each deductible transaction upfront developments & changes to law responsibility: skilled expertise [Identify / Implement / Risk] © 2009 Margo™ (Intellectual Property) All Rights Reserved
  • 21. 7. Questions . © 2009 Margo™ (Intellectual Property) All Rights Reserved
  • 22. Darren Margo 011 803 3222 082 377 1234 darren@margoip.co.za © 2009 Margo™ (Intellectual Property) All Rights Reserved