EXEMPTION ON ROYALTIES DERIVED FROM PATENTS RULES

EXEMPTION ON ROYALTIES DERIVED FROM PATENTS

SUBSIDIARY LEGISLATION 123.117

EXEMPTION ON ROYALTIES

DERIVED FROM PATENTS RULES

1st January, 2010

LEGAL NOTICE 429 of 2010, as amendede by Legal Notice 4 of 2016.

(1) The title of these rules is the Exemption on Royalties

Derived from Patents Rules.

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

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

patents in respect of inventions.

In these rules, unless the context otherwise requires -

"the Corporation" means Malta Enterprise as established in terms

of the Malta Enterprise Act;

"invention" shall have the meaning assigned to it in the Patents

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 Income Tax Act,

hereinafter referred to as "the Act", shall apply where any person

derives royalties or similar income from qualifying patents on or

after the 1st day of January 2010, chargeable to tax under article

4(1)(a) or (e) 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 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 r e t u r n m a d e p u r s u a n t t o a r t i c l e 1 0 o f t h e I n c o m e Ta x

Management Act, such company shall not be entitled to apply the

EXEMPTION ON ROYALTIES DERIVED FROM PATENTS

provisions of article 12(1)(v) of the Act 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)

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.

No determination by the competent authority in accordance

with rule 5 shall be issued after the 30th June 2016, and no benefits

under these rules may be availed of after the 30th June 2021.