News
Commissioner for Tax & Customs publishes notice on deductions in respect of intellectual property and intellectual property rights
Deloitte Malta Tax Alert
5 January 2024
On 28 December 2023, the Commissioner for Tax & Customs (‘CfTC’) issued a notification relating to accelerated deductions which may be claimed against income produced through the use or employment of intellectual property (‘IP’) and intellectual property rights (‘IP rights’).
By way of background, in terms of article 14(1)(m) of the Income Tax Act, Chapter 123 of the laws of Malta (‘ITA’), there shall be deducted any expenditure of a capital nature on any IP or IP rights incurred by a person, to the extent such IP or IP rights are proved to have been used or employed in the production of the income of such person. In terms of this rule, such expenditure shall be spread equally over a number of years which shall not be less than a minimum period of three consecutive years, the first year being that in which the said expenditure has been incurred or the year in which the IP or IP rights is first used or employed in producing the income.
The communication published by the CfTC provides that, with effect from the period covered by the year of assessment 2024 (i.e., basis year 2023), any expenditure of a capital nature incurred on IP or IP rights may, at the option of the person that has incurred such expenditure, be deducted in full (as opposed to over a minimum period of three consecutive years) in terms of article 14(1)(m) of ITA in the year in which the said expenditure has been incurred or in the year in which the IP or IP rights are first used or employed in producing the income.
Any deductible expenditure resulting from the full expensing regime can only be claimed against income produced through the use or employment of IP or IP rights.
The CfTC clarifies that, with respect to expenditure of a capital nature on IP and IP rights that was incurred before the period covered by the year of assessment 2024, any deductions which were yet unclaimed as at the year of assessment 2023, may be claimed in full in the year of assessment 2024.
