• Tax opportunities using Malta IP regime


    Malta offers many advantages for Intellectual Property, both from a tax but also from a legal perspective. In this article we will examine the tax benefits of using Malta as an IP regime. In Malta, Intellectual Property (IP) include patents, trademarks, copyrights and designs. Each category includes a number of items thus making the definition of IP in Malta very broad.

    Tax Exemption on Patents & Copyrights

    Malta has introduced a Patent & Copyright Box whereby royalty income arising from patents and copyright of intellectual property is exempt from taxation i.e. effective tax rate 0%.

    Qualifying patents - must be the result of Research & Development (R&D) activities which result to an invention which is registered as a patent. The R&D can be performed anywhere in the world. The patent can also be registered anywhere in the world as long as the same invention would be patentable in Malta. In addition, approval by the Malta Enterprise is required (domestic agency responsible for the promotion of foreign investment and industrial development in Malta).

    Qualifying copyrights - include artistic, audiovisual, databases, literary and musical works.

    Intra-group licensing - is allowable provided that the royalty paid is at arm's length i.e. at pure commercial terms that would have been applicable if the parties involved in the transaction were not related. In addition, the licensee should be directly involved in a productive economic activity.

    Individuals - an individual who receives royalty income from a qualifying patent is only entitled to the tax exemption if she/he is involved, alone or otherwise, in the research, planning, processing, experimenting, testing, devising, designing, developing or other similar activity leading to the relevant invention which is the subject of the said qualifying patent. No such requirement applies for companies.

    Exit route - a tax free exit (i.e. full tax exemption of capital gains upon disposal of IP) can be achieved if the IP is transferred within a group of companies or if the company holding the IP is redomiciled in another jurisdiction.

    Non-Exempt Intellectual Property

    Under Malta's tax refund system, a company in receipt of royalty income which does not qualify for the above tax exemption can still benefit from a reduced taxation. Maltese companies are taxed at a corporation tax rate of 35%. However, upon dividend distribution, a refund of 6/7th of the corporation tax liability can be obtained. Thus the effective tax rate can be as low as 5%.

    The above effective Malta tax cost can be further reduced by claiming amortisation on the intellectual property as well as claiming a foreign tax credit on tax suffered abroad.

    Other IP regimes:

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  • The information provided in this article is for general information purposes only. The information is not intended to be comprehensive or to include advice on which you may rely. You should always consult a suitably qualified professional on any specific matter.

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