Malta introduced patent box deduction rules, which allow taxpayers actively involved in the development and exploitation of IP to opt for the application of special rules on calculating deductions (“Patent Box Deduction”).
Income and expenses which fall under the definition of ‘Qualifying IP’ will be eligible for the Patent Box Deduction. Such Qualifying IP include the following intangibles (if these are granted legal protection in at least one jurisdiction):
It is important to note that marketing-related IP assets such as brands, trademarks, and tradenames do not fall under the Qualifying IP definition and hence may not benefit from the patent box deduction. Furthermore, companies which activity consists solely of holding and marketing IP without development will not benefit from the patent box deduction either.
The patent deduction rules are available to taxpayers that are involved in activities of exploitation of IP, provided that they meet the following criteria:
Taxpayers are allowed to deduct their expenses related to qualifying IP in terms of more favourable conditions than the terms provided under the general rules.
The patent box deduction is calculate using the following formula:
95% x (Qualifying IP expenditure/Total IP expenditure) x Income/Gains from qualifying IP