IP Malta Holding Company
Why create an IP holding company in Malta?
Typically, IP holding companies are
created in a low tax jurisdiction.
Malta IP tax
In Malta royalties from qualifying patents or copyright are entitled to a full (100%) exemption from income tax in Malta (conditions apply)
Further information on the tax benefits of holding IP in Malta:
Moreover, a Malta holding company may also be used to hold shares in other companies (participating holding) and in such a case, provided certain anti-abuse provisions are satisfied, such company would be entitled to a full exemption from income tax in Malta upon receipt of dividends.
IP Assets are typically created by or transferred to the IPHC (IP holding company). This company would then enter into license agreements under which royalties would be due to the IPHC in exchange for an exclusive or non-exclusive right to use the IP Assets. The licence agreements may be concluded with third parties or even with other companies in the same group. With regard to group structures, IP holding companies in Malta may benefit from the application of the interest-royalties directive. Under this directive, the EU Member State of the paying company should not impose withholding tax on outgoing royalties (provided the requirements of the directive are fulfilled). For proper tax planning one would also have to examine the relevant double tax treaties. Malta has signed over 50 double tax treaties.
The issue of capital gains tax is extremely important for IPHC which may be sold by their shareholders at substantial profits therefore resulting in massive capital gains. Article 12 (c) (ii) of the Malta Income tax Act provides that there shall be exempted from tax in Malta any gains or profits accruing to or derived by any person not resident in Malta on a disposal shares or securities in a company whose assets do not consist wholly or principally of immovable property situated in Malta.
A word of cautionWith increased budget deficits in most
EU states, some tax authorities of Member States may
challenge IPHC structures. Accordingly, for EU groups of companies it
often very prudent to incorporate the IPHC in an EU country so as to
trigger the application of various beneficial EU rules (possibly, the
parent subisidiary directive and the European Court’s case law on the
free movement of services)). It is moreover important to establish the
IPHC in a country with which a relevant tax treaty exists. Typically no
double tax treaties would exist with offshore havens, whereas Malta is
not considered an offshore tax haven and has more than 50 double tax
Apart from licensing IP to another companies in the group, the IPHC should consider whether it is appropriate to perform certain IP activities itself from Malta. Examples of such activities include IP registrations, defending and enforcing breaches to its IP rights, R&D, marketing of the IP right or licensing to third parties. Malta effectively helps businesses engaging in such activities. Under various EU funded schemes which open from time to time funding for industrial research may be as high as 70% while funding for experimental development may be as high as 45% of eligible costs.
ACS effectively helps companies perform such activities from Malta in order to give substance to the Maltese company and to benefit from the various incentives on offer.
Liability protection & segregation of assets
If done properly, the creation of an intellectual property holding company (IPHC) may result in the segregation of your IP rights from the rest of your business. The result is that your IP rights and profits will be more secure from the reach of your general creditors. You can further protect your IP by placing various IP rights into a separate IPHCs. Under Maltese company law, the assets and liabilities of a company are separate from those of its members.
Malta’s IP Protection HeritagePatents, copyright, trademarks and unfair competition rights are all protected under Maltese law. In fact, it would be quite futile if Malta had to set up an attractive tax regime and ignore these very fundamental basics of intellectual property protection.
- a member of the WTO (since 1 January 1995) & party to TRIPS (Trade related Aspects of Intellectual Property Rights Agreement);
- Party to the Patent Cooperation Treaty. International filings under the PCT are filed with the Comptroller of Industrial Property as per the Patent Cooperation Treaty Regulations (Legal Notice 98 of 2007;
- Party to the European Patent Convention (EPC) of 1973 (entry into force for Malta on 1st March 2007). The Maltese implementing measures are entitled “European Patent Convention Regulations” (LN 99 of 2007, as amended). The EPC enables the applicant to obtain a patent which is valid in the contracting States of his choice.
- Party to WIPO & the various conventions concluded under the auspices of WIPO
- Not a member of the Madrid Protocol. However, as it is an EU member State, a Madrid registration can cover Malta through the European Community Trademark system (the EU acceded to the Madrid Protocol on 1 July 2004).