New tax exemption on royalty income

In our Malta Budget 2012 Tax Highlights, we had announced the introduction of a new income tax exemption on royalties and similar income derived from copyright. This exemption is now in force and is contained in Article 12(1)(v) of the Maltese Income Tax Act.

The exemption applies to royalties, advances and similar income derived from copyright and IP protected by copyright, whether in the course of a trade or business or otherwise. The exemption will be supplemented by subsidiary legislation which will prescribe the conditions that need to be met in order to benefit from the exemption. In the case of royalty income derived by a Maltese company, such income will be exempt as long as it?is not?disclosed in the company’s tax return.

The above exemption complements a similar exemption available to royalty income from qualifying patents that was introduced recently and represent interesting tax planning opportunities for IP owners in general and for IP licencing in?cross-border?structures.

For further information, please contact Damien Fiott.

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