On 25 December 2018, the Zambian Industrial Property Office issued a legal notice regarding the application of the Property Transfer Tax (Amendment) Act, 2017 on trade marks, patents and Industrial designs. The Amendment Act amends certain provisions of the Property Transfer Tax Act, Chapter 340 (Principal Act).
The definition of "property" has been amended to include "intellectual property", which is defined as including a patent, trade mark, copyright or industrial design. Section 4 of the Principal Act requires property transfer tax to be charged upon and collected from the person transferring the property. This would now include the transfer or assignment of intellectual property. Section 3 of the Amendment Act, which amends section 4 of the Principal Act, requires property transfer tax to be charged in respect of transfer of intellectual property at the rate of 5% of the realised value of the intellectual property concerned.
The Registrar has taken the view that the aforementioned provisions of the Amendment Act require both national and foreign owners of intellectual property in Zambia to pay property transfer tax when assigning or transferring trade marks, patents or industrial designs. However, this conclusion does not immediately flow from the wording of the Act. Although the position regarding foreign owners of intellectual property has not been clearly dealt with in the Act, the position regarding ownership of shares by foreign companies is clear. In terms of the Amendment Act, property transfer tax may be charged on shares issued by a company incorporated outside the Republic of Zambia where such a company directly or indirectly owns at least 10% of a company incorporated in Zambia. In such circumstances, the tax is charged and collected from the Zambian incorporated company as opposed to the foreign company. This seems to suggest that a foreign entity, whether it owns shares or intellectual property, is not required to pay property transfer tax.
The Registrar's decision has been met with some resistance from practitioners. We have since been informed that the Registrar has apparently referred the matter to the Zambia Revenue Tribunal. It is advisable to hold on instructions to assign or transfer trade marks, patents or industrial designs in Zambia until the legal position has been clarified.
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