Malta's Intellectual Property Advantage: Tax Benefits and Legal Framework

1. Malta's Intellectual Property Advantage: Tax Benefits and Legal Framework Malta has established itself as the perfect jurisdiction for the implementation of Intellectual Property Lawthroughout the years for a variety of reasons. The nation provides several tax advantages for revenue earned from intellectual property. In addition to the tax exemption on income from patents, copyrights, and trademarks— which will be discussed in more detail below—Malta also maintains a thorough framework for Double Taxation Relief in Malta, with over 70 agreements in place that provide different kinds of relief to lessen the effects of double taxation. Furthermore, Malta has implemented relevant EU legislation, including the Interests and Royalties Directive. In light of these advantages, EMD Advocates can assist businesses in navigating Malta's intellectual property landscape seamlessly. Whether leveraging tax benefits or ensuring compliance with EU directives, EMD Advocates stands ready to guide clients through every step of the process

2. Trademarks, copyrights, and patents are exempt from taxes The Maltese Income Tax Act's Article 12(1)(v) exempts from tax any advances, royalties, and similar income received from: i. Patents The island nation of Malta offers a tax exemption on patent revenue. It is necessary to register each patent research and development activity for this tax exemption to be applicable. Even if the patent or idea was not created or registered on EU or Maltese soil, the royalty income will remain tax-exempt. ii. Copyright protection The Malta Revenue Tax Act additionally established a tax exemption for royalties and revenue obtained from copyrighted intellectual property as part of the execution of the 2012 budget measures. The Maltese Copyright Act states that creative, literary, audiovisual, and musical works are all protected by copyright. iii. Trademarks Royalties and equivalent income received from trademarks are likewise covered within the scope of the aforesaid tax exemption. However, one must register the trademark in Malta to take advantage of this tax exemption. These tax exemptions are only applicable if royalties are earned via legitimate commercial, professional, or trade activities. It is also contingent upon meeting any requirements for permissions, terms, and conditions that may be specified by subsidiary law. Tax refunds to Malta company shareholders The Maltese refundable tax credit scheme allows Maltese limited liability firms that receive royalty income—which does not qualify for the aforementioned tax exemption— to benefit from a much lower tax burden. Shareholders of Maltese firms are eligible to

3. receive one of the following tax refunds upon the distribution of their profits as dividends. 5/7ths tax refund: This refund is given when passive royalties make up the revenue and there is an effective 10% tax burden. Royalties that are not earned via commerce or business and that have not experienced foreign taxation or have experienced less than 5% of it are referred to as passive royalties. 2/3 tax refund - If double tax relief applies to foreign royalty income, the paying company will receive 2/3 of the tax paid. 6/7ths tax refund - When this applies, the tax payable is only 5%. In general, this is applicable in cases where the two tax refunds listed above are not relevant. Exemption from paying taxes on intellectual property transfers In Malta, capital gains tax applies to intellectual property transfers, yet a tax exemption is granted for affiliated businesses. To qualify, companies must share a parent- subsidiary link, have over 50% ownership by a common parent, or be over 50% owned by the same shareholders. Rollover relief is also available if a business replaces intellectual property used for at least three years with a comparable asset within a year. This defers taxation on the gain until the subsequent sale of the second or later acquired intellectual property, not its replacement. Taxation of Foundations is an important factor in the broader landscape of financial planning, and Malta's advantageous tax policy extends to foundations, giving strategic advantages to those contemplating founding and administering foundations inside the jurisdiction. In conclusion, Malta's robust Intellectual Property Law, coupled with generous tax exemptions, positions the nation as an ideal jurisdiction for businesses. From patents to trademarks, the tax advantages extend to copyrights and offer strategic benefits, further solidifying Malta's appeal for intellectual property ventures and financial planning.