Exemption on Royalties Derived from Patents Rules, 2010

L.N. 429 of 2010

INCOME TAX ACT

(CAP. 123)

Exemption on Royalties Derived from Patents Rules, 2010

IN exercise of the powers conferred by articles 12(1)(v) and 96

of the Income Tax Act, hereinafter referred to as "the Act", the

Minister of Finance, the Economy and Investment has made the

following rules

(1)

The title of these rules is the Exemption on Title and

commencement.

Royalties Derived from Patents Rules, 2010.

(2) These rules shall apply to royalties and similar income

derived on or after the first (1 st ) day of January, 2010 from qualifying

patents in respect of inventions.

In these rules, unless the context otherwise requires -

Definitions.

"the Corporation" means Malta Enterprise as established in Cap. 463.

terms of the Malta Enterprise Act;

"invention" shall have the meaning assigned to it in the Patents Cap.417.

and Designs Act, and shall also include any invention which is

classified as such in terms of any guidelines issued by the

Corporation even where the particular invention does not fall within

the meaning assigned to the term in the Patents and Designs Act;

"qualifying patent" means a patent, which is registered in Malta

or elsewhere, in relation to which the research, planning, processing,

experimenting, testing, devising, designing, developing or similar

activity leading to the relevant invention was carried out in Malta or

elsewhere;

"royalties and similar income" include any sum paid for the

grant of a licence to exercise rights under a qualifying patent.

The provisions of article 12 (1)(v) of the Act shall apply Applicability.

where any person derives royalties or similar income from qualifying

patents on or after the first (1 st ) day of January 2010, chargeable to

tax under paragraphs (a) or (e) of subarticle (1) of article 4 of the Act,

and where the said person makes a claim in accordance with the

provisions of rule 4 and makes a declaration of his total income from

all sources in the return made pursuant to article 10 of the Income Tax Cap. 372.

Management Act

Provided that an individual shall not be entitled to have

any amount of income arising to him from a qualifying patent exempt

from tax as aforesaid, unless the said individual carried out, either

solely or together with another person or persons, research, planning,

processing, experimenting, testing, devising, designing, developing

or other similar activity leading to the invention which is the subject

of the qualifying patent

Provided further that if a company shows such income

derived from a qualifying patent as part of its chargeable income in a

return made pursuant to article 10 of the Income Tax Management

Act, such company shall not be entitled to apply the provisions of

article 12(1)(v) to any of its income derived from that patent for that

year of assessment and subsequent years of assessment.

(1)

A person shall submit to the Commissioner in

respect of every qualifying patent relative to income in respect of

which the exemption referred to above is claimed a copy of a

determination issued by the Corporation describing the particular

invention, and confirming that it has received to its satisfaction all

information and documentation requested thereby relative to the

particular patent and the invention to which it refers and that after

making such ascertainment as it considered necessary, it is satisfied

that the particular invention to which the patent refers is in existence

and is not in breach of any public policy objectives of Malta.

(2) Evidence of the determination referred to in sub-rule (1)

above shall be submitted to the Commissioner together with the tax

return, in such manner as the Commissioner may require, for every

year of assessment in respect of which the exemption is claimed.

The determination referred to in rule 4 shall be issued by

the Corporation after receiving an application in this respect by or on

behalf of the person owning the patent in terms of guidelines issued

by the Corporation, when the Corporation is satisfied that the

application is a bona fide application, that the patent and the

invention to which it refers comply with the provisions of these rules,

and after it has obtained all such information and documentation and

made such ascertainment as it has considered necessary for this

purpose.

€0.19