In general, non-resident licensors are only subject to tax in South Africa on income that is attributable to a permanent establishment in South Africa of that licensor; or to the extent that tax is required to be withheld by the licensee.
Withholding tax is imposed on payments of royalties for a number of different types of IP including patent royalties, copyrights, trade marks and design rights. There are certain reliefs from the duty to deduct tax, the most common being where a double tax treaty (DTT) concluded between South Africa and the jurisdiction in which the licensor is resident provides that the rate of withholding is to be reduced.
Where no reduction in the rate of withholding tax on royalties is possible, the current rate of deduction is 15 per cent (this rate may increase during 2019) of the royalty. If a licensor has suffered a withholding, it may be able to claim credit for South African tax withheld in its home jurisdiction, either under local law or under the provisions of any applicable DTT.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.