Taxation of intellectual property in Malta

Malta is the perfect European country to manage intellectual property. This is the reason, why more and more companies foisting Malta into their tax planning. On one hand, they don’t have to pay
taxes after the income from royalties, and on the other, the administration processes are free from bureaucracy. The secret of Malta’s popularity lies in its significant number of double taxation avoidance agreements, royalty payment deduction entitlement from royalty incomes, and the possibility to access tax certifications easily.

The law governing personal income taxation offers immunity on royalty related incomes – so it
includes income based on patents, copyrights, and trademarks. Of course tax exemption only applies if the royalties ensues from legal trading, commercial, or professional businesses.

Tax exemption for patents in Malta

The income ensue from patents are enjoying tax exemption in Malta. To achieve tax exemption you
need to register all patent researches and development activities separately. The royalty income will still be tax-free, even if the invention or the patent had not been developed or registered on the territory of Malta or the EU.

Tax exemption for royalties in Malta

The income ensue from royalties are enjoying tax exemption in Malta. To achieve tax exemption, your incomes must come from activities listed below:

– artistic creation

– audio-visual creation

– literary works

– compositions

– databases

Tax exemption for trademarks in Malta

The income ensue from trademarks are also enjoying tax exemption in Malta. But, to achieve tax
exemption, you have to register them in Malta (as well).

In Malta, there are options to achieve a considerably low taxes, even if our income from royalties are not meeting the requirements of tax-exemption. In most cases we can achieve the so called 6/7 tax return, so in this case, the necessary amount of tax payment will be only 5 percent.  In case of “passive royalties”, there is an other option called 5/7 return, so in this case, the necessary amount of tax payment will be only 10 percent. According to the law in Malta, only those incomes considered income from “passive royalties”, where the royalties are not directly or indirectly coming from commercial or business activities, and which has less than 5 percent foreign (for example source tax) tax load on it.

If Malta has a double taxation agreement with the country in question, Malta will return the 2/3 of the levy