Entrepreneurial success: Master the offshore IP game

In the global landscape where Intellectual Property (IP) reigns as one of the most coveted assets, it’s imperative for entrepreneurs to grasp the intricacies of international IP strategies. Countries worldwide have implemented stringent legislative provisions to safeguard domestically created IP, often accompanied by challenging requirements for transferring IP abroad.

South Africa is no exception, with entrepreneurs seeking to sell their IP to offshore investors or secure inward investments grappling with the complexities of regulatory approvals from the South African Reserve Bank and the South African Revenue Service.

Transferring and licensing South African IP to non-residents necessitates SA Reserve Bank approval, a process that can be both time-consuming and costly, according to Ralph Wichtmann, managing director of Sovereign Trust South Africa.

Stringent exchange control regulations govern the sale or assignment of IP to non-residents, making it vital to determine where the IP originated and its exact composition. Simplifying the IP transfer process becomes feasible when the IP was initially created outside South Africa, as it then falls under the IP laws of the relevant jurisdictions.

Choosing the right jurisdiction to establish your entrepreneurial venture is pivotal.

A carefully selected jurisdiction can yield benefits like comprehensive legislative and infrastructural IP protection, a competitive fiscal regime, minimised or no exchange control for IP sales or investments, and access to favourable trading terms, particularly in jurisdictions such as the European Union.

Wichtmann emphasises, “IP is the most valuable asset of the information age. It’s critical that entrepreneurs and start-ups take the time to develop a proper IP strategy up front, as this will play a major role in the way they raise money or sell their business in the future.”

Properly structuring your entrepreneurial venture can aid international business expansion, provide access to fiscal advantages, and facilitate estate planning while mitigating exchange control hurdles that may impede potential IP sales.

“It’s essential to seek suitable offshore structuring advice before creating the IP and, if possible, determine upfront the target market or buyer of the IP,” Wichtmann advises.

Selecting an offshore jurisdiction also requires consideration of potential licensing arrangements, particularly if royalties are involved. Some countries impose withholding taxes on royalty payments, so it’s crucial to ensure that the jurisdiction of your company has signed double taxation avoidance agreements with those countries to mitigate withholding tax burdens.

Once IP is owned by an offshore company, it should be registered to protect against unauthorised copying or potential misuse by competitors or employees. Even if your IP is primarily intended for the local South African market, proper business structuring is still essential to safeguard your IP and prevent it from becoming part of your estate’s assets, especially as its value increases.

READ NEXT: Africa’s climatetech boom ‘a lucrative long-term bet’