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The Government of Malta has published new rules pertaining to the introduction of the Patent Box Regime Rules on Tuesday 13th August 2019 through Legal Notice 208 of 2019. These rules shall apply to qualifying income derived from Qualifying Intellectual Property on or after the 1st of January 2019.


The Patent Box Regime Deduction

The Patent Box Regime Deduction refers to a deduction that does not exceed the percentage of prescribed qualifying income. This refers to income or gains derived from Qualifying Intellectual Property and may be claimed by anyone entitled to it. It does not matter whether such income arises in the course of trade or otherwise.


Qualifying Intellectual Property (Qualifying IP)

Qualifying IP refers to patent/s issued or those whose application for registration is still pending. It also applies to extensions of patent protection. Qualifying IP includes utility models and software protected by copyright under national and international legislation.


Entitlement to the Deduction

Entitlement to the Patent Box Regime Deduction is subject to the satisfaction of a number of conditions:

  • The research, experimentation, design, testing or otherwise of the Qualifying IP must be carried out wholly or in part by the person claiming the deduction (the beneficiary);
  • The beneficiary must be the owner of the Qualifying IP or the holder of an exclusive license to the Qualifying IP;
  • The beneficiary must also maintain sufficient substance in terms of physical presence, assets or other relevant indicators, in proportion to the type and extent of activity being carried out in the relevant jurisdiction of the Qualifying IP;
  • The Qualifying IP must be granted legal protection in at least one jurisdiction;
  • In case the beneficiary is a body of persons, such beneficiary must be specifically empowered to receive such income; and
  • The beneficiary must request the Patent Box Regime Deduction in computing its income or gains in the tax return.


The new formula:

The Patent Box Regime deduction shall be calculated on the basis of the following formula:

‘Total IP Expenditure’ consists of expenses incurred in the acquisition, creation, development, improvement or protection of the Qualifying IP.

‘Qualifying IP Expenditure’ refers to all expenditure actually incurred by the beneficiary.

‘Income or gains derived from the Qualifying IP’ includes but is not limited to:

  • gains on disposal of Qualifying IP and such other similar income
  • any sum that is paid for the grant of a licence or other form of empowerment in order to exercise rights under the Qualifying IP.

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