Patent Box Regime (Deduction) Rules

The Patent Box Regime Rules, implemented through Legal Notice 208 of 2019, apply to income derived from qualifying intellectual property on or after the 1st of January 2019. A qualifying Intellectual Property (IP) is a patent which could either be already approved and issued or is awaiting approval. It can also be an asset towards which […]

Written By Shanice Finch

On April 10, 2020
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The Patent Box Regime Rules, implemented through Legal Notice 208 of 2019, apply to income derived from qualifying intellectual property on or after the 1st of January 2019.

A qualifying Intellectual Property (IP) is a patent which could either be already approved and issued or is awaiting approval. It can also be an asset towards which protection rights have been granted in terms of national, European or International legislation or utility models or software protected by copyright under national or international legislation.

With respect to small entities, these regulations still apply to intellectual property assets which are innovative but having features similar to those of patents.  Entitlement to the deduction under these rules shall be applicable if a number of conditions are satisfied. For a full list of such conditions, kindly read our updates on our website.

The available deduction under this regime is arrived at by using the following formula;

The total income or gains shall be the income directly derived from the use, enjoyment and employment of the qualifying IP. The Total IP Expenditure shall include all expenses directly incurred in the acquisition, creation, development, improvement or protection of the qualifying IP. 

As for qualifying IP Expenditure, one needs to include the expenses for the creation, development, improvement or protection of the IP that are:

a) directly incurred by the beneficiary or

b) subcontracted to persons not related to the beneficiary.

With respect to expenses incurred which do not fall within the above definitionan amount equal to the lower of the costs actually incurred or thirty percent (30%) of the total costs referred in a) and b) above can be taken into account.

For further information regarding the Patent Box Regime, kindly read our updates on our website.

How can we help?  

For further information, please contact one of the firm’s tax partners, Stephen Balzan on [email protected] or Elaine Camilleri [email protected]. ACT can help you understand the changes to the tax rules and how these can impact your business.  

Apart from its offices in St. Julian’s Malta, ACT operates from a second office in Gozo, which is situated in the capital city of Victoria.  For an appointment in our Gozo office, please call on 00356 21378672 or send us an email on [email protected]. 

Disclaimer: This article contains general information only and is not intended to address the circumstances of any particular individual or entity. ACT, by means of this article is not rendering any accounting, business, financial, investment, legal, tax, or other professional advice or service. This article is not a substitute for such professional advice, nor should it be used as a basis for any decision or action that may affect your finances or your business. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. Before making any decisions or before taking any action that may affect your finances or your business, you should consult a qualified professional adviser. ACT shall not be responsible for any loss whatsoever sustained by any person who relies on this article.