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100% Tax Exemption

Patent, Artistic Copyright &

Trademarks

A new Malta patent & copyright tax exemption has been introduced by virtue of the Budget Measures Implementation Act (Act V of 2012) of 14 May 2012 which amended the Income Tax Act. This copyright exemption will effectively come into force as from 2013.

Combined with Malta’s Participation Exemption, whereby income derived from subsidiaries can be repatriated to Malta without deduction of income nor withholding taxes, makes Malta A Perfect IP Holding Jurisdiction.

The 100% tax exemption applies:

  • No matter where patent or IP is registered or where the research was carried out
  • Available to individuals or companies
  • Applicable to royalties or other similar income
  • 0% tax for IP not covered due to Malta’s Remittance System which may apply for Malta tax resident but non-Malta incorporated companies
  • Trading income subject to an effective corporate tax rate of 5%
  • Other passive income subject to 10% tax rate

100% IP Tax Exemption – What does it include?

Royalties or other similar income derived from patents, trademarks or artistic copyright.

Article 12(1)(v) of the said Income tax Act now exempts royalties, advances or similar income derived from:

‘Patents, artistic copyright and trademarks whether in the course of a trade, business, profession or vocation or otherwise, subject to conditions which may be prescribed.’

Artistic Copyright – What is is?

The Malta Budget Speech of 2012 gave an indication of the intended beneficiaries of this new tax exemption:
“In the 2010 budget, we had announced an initiative related to royalties linked to patents. In this budget, we are extending this initiative to cover works protected by copyright, including books, film scripts, music and art. This benefit will consist of a tax exemption on income from copyright. This scheme should contribute towards attracting international artists to Malta, to make Malta more attractive to the film industry and to create broader economic benefits in various sectors.”

Reference to the Copyright Act should be made in order to assess the scope of the exemption as the Income tax Act does currently not contain a specific definition of copyright.

Under the Copyright Act works which are eligible for copyright are:
1. Artistic works;
2. Audiovisual works;
3. Databases;
4. Literary works; and
5. Musical works.

Artistic works”artistic works” include:

(a) paintings, drawings, etchings, lithographs, woodcuts, engravings and prints;
(b) maps, plans, diagrams and three-dimensional works relative to geography, science or topography, but excluding semiconductor product topographies;
(c) works of sculpture;
(d) photographs not comprised in an audiovisual work;
(e) works of architecture in the form of buildings or models; and
(f) works of artistic craftsmanship, including pictorial woven tissues and articles of applied handicraft and industrial art.

Audiovisual work”audiovisual work”  means a work that consists of a series of related images which impart the impression of motion, with or without accompanying sounds, susceptible of being made visible and, where accompanied by sounds, susceptible of being made audible;

Databases”database” means a collection of independent works, data or other materials arranged in a systematic or methodical way and individually accessible by electronic or other means without it being necessary for these materials to have been physically stored in an organized manner but does not extend to computer programs used in the making or operation of a database accessible by electronic means comprised within the term “computer program”;

Literary works”Literary work” includes:

(a) novels, stories and poetical works;
(b) plays, stage directions, choreographic works or entertainment in dumb show, film scenarios and broadcasting script;
(c) textbooks, treatises, histories, biographies, essays and articles;
(d) encyclopaedias and dictionaries;
(e) letters, reports and memoranda;
(f) lectures, addresses and sermons;
(g) computer programs. “computer program” includes computer programs whatever may be the mode or form of their expression including those which are incorporated in hardware, interfaces which provide for the physical interconnection and interaction or the interoperability between elements of software and hardware and preparatory design material leading to the development of a computer program:

Musical works”musical work”means any musical work, irrespective of musical quality, and includes works composed for musical accompaniment;NB:It is important to note that a literary, musical, or artistic work is not be eligible for copyright unless the work has an original character and it has been written down, recorded, fixed or otherwise reduced to material form.Furthermore, a database isnot be eligible for copyright unless by reason of the selection or arrangement of its contents, it constitutes the author’s intellectual creation. Moreover the copyright conferred to a database shall not extend to its contents and shall be without prejudice to any rights subsisting in such contents themselves.

Applicable copyright treaties and agreements
–    Berne Convention for the Protection of Literary and Artistic Works (1964)
–    Paris Convention for the Protection of IP (1967)
–    Universal Copyright Convention (1968)

Maltese membership of the above agreements and treaties implies that other signatories’ national laws automatically protect certain Maltese IP rights abroad and vice versa.

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