On the 28th of December 2023, the Commissioner for Tax and Customs ("CfTC") announced an amendment on the manner in which intellectual property ("IP") and intellectual property rights ("IPR") may be deducted from the total income of any person in terms of Article 14(1)(m) of the Income Tax Act (Chapter 123 of the Laws of Malta)("Act"). With effect from the period covered by year of assessment 2024, expenditure of a capital nature on IP and IPRs which have been used or employed in the production of the income of a person may be wholly deducted.
Previously, taxable persons were required to spread their IP and IPR expenditure over a minimum three-year consecutive period, which would start to run in the first year wherein the expenditure was incurred or in the year in which the IP or IPR is first used or employed in producing the income. Whilst this avenue remains available, the CfCT provides an alternative to taxable persons who may wish to deduct the entire expense in the year in which the expense is incurred or in the year in which the IP or IPRs are first used in producing the income.
Persons who have incurred IP or IPR expenditure prior to year of assessment 2024 and whose deductions have not been fully claimed, have the option to claim the entirety of the remaining deduction in year of assessment 2024. Therefore, by way of example, where the taxable person has opted to spread his IP / IPR expenditure over a four-year period in equal portions, and having claimed 25% of the deductions in the last year of assessment, he may opt to claim the remaining 75% during year of assessment 2024.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
