Aiming to further increase its competitiveness as a jurisdiction for the holding and development of intellectual property rights, Malta has introduced a Patent Box Regime by means of Legal Notice 208 of 2019 entitled the Patent Box Regime (Deduction) Rules. The rules are applicable as from 1 January 2019 (Year of Assessment 2020),
The rules provide a deduction in terms of Article 14 (1) (p) of the Income Tax Act (the Act) against the taxable income in terms of Article 4 and 5 of the Act derived from patents and other qualifying intellectual property rights by the beneficiaries of such rights for expenditure incurred in respect of the creation, development, improvement or protection thereof. The deduction is calculated by means of the formula below:
95% X (Qualifying IP Expenditure / Total IP Expenditure X Income or Gains derived from Qualifying IP)
Qualifying IP includes patents that are issued, applied for or pending, other intellectual property assets protected by national, European or international law, utility models or software protected by copyright under national or international law a well other non-obvious, useful or novel assets similar to patents belonging to smaller entities certified by Malta Enterprise.
These rules are understood to be compliant with the OECD Modified Nexus Approach for IP Regimes and compliant with the requirements of the EU Code of Conduct Group.