Malta: Patent box regime launched

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Malta: Patent box regime launched

Sponsored by

sponsored-firms-fenech.png
li-malta-as248335701.jpg

Rebecca Diacono of Fenech and Fenech Advocates outlines conditions and benefits as Malta introduces new rules to create incentives for qualifying taxpayers.

The much-anticipated Patent Box Regime (Deduction) Rules (the patent box regime) were published on August 13 2019. The rules have been modelled to be compliant with the OECD's modified nexus approach and came into force on January 1 2019.

It caters for a tax deduction with respect to qualifying intellectual property (qualifying IP), which includes:

  • A patent or patents, whether issued or applied for (where an application for a patent is rejected, it would no longer fall within scope); or

  • Assets in respect of which protection rights are granted in terms of national, EU or international legislation, including protection rights in relation to plants and genetic material, utility models and software protected by copyright; or

  • With respect to small entities, as defined, intellectual property which is non-obvious, useful, novel and having features similar to patents may qualify subject to a determination by Malta Enterprise. The patent box regime refers to guidance provided by Malta Enterprise, which is yet to be published.

In all cases, the qualifying IP concerned must be granted legal protection in a jurisdiction. In addition, it should be noted that certain IP falls outside the scope of the new rules e.g. marketing related intellectual property, such as brands and trademarks are excluded.

Entitlement to a deduction in terms of the patent box begime is subject to the satisfaction of an exhaustive list of conditions which include:

i) the research, planning, processing, experimenting, testing, devising, designing, development or similar activity leading to the creation, development, improvement or protection of the qualifying IP must be carried out by the beneficiary – solely or together with any other persons – or in terms of cost sharing arrangements;

ii) the beneficiary must be the owner or holder of an exclusive licence in respect of the qualifying IP;

iii) an adequate level of substance must be put in place in the relevant jurisdiction – which includes physical presence, personnel and assets. The level of substance must be commensurate with the activities carried out by the beneficiary with respect to the qualifying IP;

Subject to satisfying all requirements, a beneficiary may then claim a deduction against income and capital gains derived from qualifying IP, which deduction is calculated according to the following formula:

malta

The deduction may be claimed against income or capital gains which fall within scope of the Income Tax Act. The income includes income derived from the use, enjoyment and employment of the qualifying IP, royalties or similar income received from the sale of goods or services and any sum paid for the granting of a licence or similar empowerment with respect to the qualifying IP, amongst others.

In applying the available deduction, the patent box regime provides guidance as to what constitutes qualifying IP expenditure, which includes inter alia expenditure – whether incurred directly by the beneficiary or through an unrelated subcontractor – in the creation, development, improvement or protection of the qualifying IP.

Fenech and Fenech Advocates
E: rebecca.diacono@fenlex.com
W: fenechlaw.com

more across site & shared bottom lb ros

More from across our site

Overall revenues and average profit per partner also increased in the UK, the ‘big four’ firm revealed
Increasingly complex reporting requirements contributed towards the firm’s growth in tax, it said
Sector-specific business taxes, private equity tax treatment reform and changes to the taxation of non-residents are all on the cards for the UK, authors from Herbert Smith Freehills Kramer predict
The UK’s Labour government has an unpopular prime minister, an unpopular chancellor and not a lot of good options as it prepares to deliver its autumn Budget
Awards
The firms picked up five major awards between them at a gala ceremony held at New York’s prestigious Metropolitan Club
The streaming company’s operating income was $400m below expectations following the dispute; in other news, the OECD has released updates for 25 TP country profiles
Software company Oracle has won the right to have its A$250m dispute with the ATO stayed, paving the way for a mutual agreement procedure
If the US doesn't participate in pillar two then global consensus on the project can’t be a reality, tax academic René Matteotti also suggests
If it gets pillar two right, India may be the ideal country that finds a balance between its global commitments and its national interests, Sameer Sharma argues
As World Tax unveils its much-anticipated rankings for 2026, we focus on EMEA’s top performers in the first of three regional analyses
Gift this article