Malta Company -Royalty, Patent & Trademark
Intangible Property (hereinafter referred to as IP) may take various forms such as trade-marks, trade-names, copyrights, brands, patents, designs, inventions and technical know-how. The location of an IP company often has a material impact on the overall results of a group or a standalone structure. It is therefore imperative that an IP is located in a jurisdiction which offers flexibility, protection and yet a tax efficient solution.
On setting up an IP company or migrating an IP to another jurisdiction, various tax and non-tax considerations should be addressed:
- Legal framework to ensure full protection of intangible property rights
- Regulatory issues
- Skilled work-force
- Language barriers
- Operating and maintenance costs
- Tax incentives during development stage
- Amortisation of the IP
- Tax consequences arising on the inbound migration of an IP
- Deductibility of royalty payments
- Withholding tax rate outbound royalty payments
- Effective tax rate on active and passive royalty income
- Capital gains tax
- Double tax treaty network
- Domestic relief from double taxation
- Access to EU directives
Relevant Features of the Maltese Tax System
Amortisation of Patents or Patent Rights
Expenditure on patents or patent rights may be amortised over the life of the patent or patent right. Any expenditure on intellectual property rights of a capital nature may be amortised over a period of three years, commencing on the period during which the expenditure was incurred.
Tax credits for Research and Development
Certain qualifying research and development expenditure approved by the Malta Development Corporation (Malta Enterprise) may benefit from further deductions and tax credits.
Deductions for the payment of royalties
Royalties paid by a Maltese company to a related or non-related licensee may be deducted in full.
No Withholding tax on outbound royalty payments
Malta does not levy any withholding tax on outbound royalty payments, provided that certain conditions are met.
Transfer Pricing Rules
Malta does not have any structured transfer pricing rules however, any prices charged should be charged at arms‘ length. Given that no restrictive rules are prescribed on the minimum royalty spread which should arise in Malta, it is possible to structure royalty payments in a manner which ensures that a low royalty spread arises in Malta. This feature of the Maltese tax system makes Malta an attractive location for carrying out sub-licensing activities.
Extensive Tax treaty network
Malta currently has over 60 tax double tax treaties into force. Most of Malta‘s double tax treaties provide for a reduced rate of withholding tax on royalties paid to a Maltese company. In particular, Malta‘s double tax treaties with Barbados, Croatia, Denmark, Iceland, Spain and Sweden provide a 0% withholding tax for royalties paid to a Maltese company. Limitation of benefits provisions may apply for Maltese companies subject to tax on a remittance basis.
Access to EU Interest and Royalties Directive
Following Malta‘s accession to the European Union, the Interest and Royalties Directive applies to royalty payments made to Maltese companies. Royalty payments from associated companies resident in EU Member States are not subject to withholding tax in the country of source provided that the relevant conditions imposed by the particular Member State are fulfilled.
No stamp duty is levied on the acquisition of intangible property by a Maltese company.
Malta does not have any CFC legislation or any similar anti-avoidance rules.