Branch Profit and Expanded Royalty Exemptions

MEDIA ROOM

The Malta parliament approved tax amendments that were previously announced during the Budget speech in November 2012. This was announced on the 17th of May 2013. These new rules apply retroactively to tax periods commencing on or after 1 January 2012.

The above-mentioned tax amendments include the introduction of two new tax exemptions, namely:

Branch Profits

Malta operates a full participation exemption with respect to dividends and gains derived from qualifying shareholdings. The participation exemption regime is broadened to include profits and gains derived by a Maltese company that are attributable to a permanent establishment (PE) situated outside Malta, or to the transfer of such PE. The intent of this is the ensuring of compliance with EU law. Profits and gains are to be calculated as if the permanent establishment is an independent enterprise operating in similar conditions and at arm’s length.

Trademark Royalties

Malta operates a full tax exemption with respect to royalties derived from registered patents and copyrights. The amendments extend the exemption to royalties derived from qualifying trademarks. Details about the terms and conditions’ necessary for the application of the exemption to copyrights and trademark royalties are expected to be published shortly.

The new rules apply retroactively to tax periods commencing on or after 1 January 2012.