The Maltese patent box regime is regulated by the Patent Box Regime (Deduction) Rules, 2019 – Legal Notice 208 of 2019 published on the 13th of August, 2019.
WHAT IS A QUALIFYING IP?
In terms of the rules a qualifying IP is deemed to consitute:
- A Patent or patents
- Assets in respect of which protection rights are granted in terms of national, European or international legislation, including those relating to plants and genetic material and plant or crop protection products and orphan drug designations
- Utility models
- Software protected by copyright under national or international legislation
- Other intellectual property assets which are non-obvious, useful, novel and having features similar to those of patents (this is only applicable for small entities as defined in the rules)
(Marketing related assets such as brands, trademarks and tradenames are excluded and do not constitute a qualifying asset under these rules.)
DEDUCTIONS
The deduction applicable for a qualifying IP shall be calculated as follows:
QUALIFYING EXPENDITURE
Expenditure incurred directly by the beneficiary for, or in the creation, development, improvement or protection of the qualifying IP;
Expenditure incurred by the beneficiary for activities related to the creation, development, improvement and protection of the qualifying IP subcontracted to persons which are not related to the beneficiary;
QUALIFYING INCOME
- Income which is derived from the use, enjoyment and employment of the qualifying IP
- Royalty or similar income whether this is embedded in the consideration for the sale of goods and, or services or otherwise
- Advances and similar income derived from the qualifying IP
- Any sum paid for the grant of a licence or similar empowerment to exercise rights under qualifying IP
- Compensation for infringements in respect of qualifying IP whether such compensation is granted through judicial means or otherwise
- Gains on disposal of qualifying IP and such other similar or related income as is derived from the qualifying IP and as being calculated after deducting such expenditure, whether of a capital nature or otherwise, as is deductible from income derived from the qualifying IP
GENERAL CONDITIONS FOR THE APPLICATION OF THE PATENT BOX REGIME
In general, the conditions for the application of these rules include:
- The research, planning, processing, experimenting, testing, devising, designing, development or similar activity leading to the creation, development, improvement or protection of the qualifying IP, shall be carried out wholly or in part by the beneficiary, solely or together with any other person or persons or in terms of cost sharing arrangements
- The beneficiary shall be the owner of the qualifying IP or the holder of an exclusive license in respect of the qualifying IP
- The qualifying IP is granted legal protection in at least one jurisdiction
- The beneficiary maintains sufficient substance in terms of physical presence, personnel, assets or other relevant indicators
For more information on the application of the patent box regime and how such regime can optimise the tax efficiency of your group, kindly contact:
Franco Falzon C.P.A. LL.M
(Managing Partner)
E: franco@ffinternational.com.mt
T: +356 2010 7771 (office)
M: +356 9989 5679 (mobile)
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