Tax Commissioner allows accelerated deductions in respect of intellectual property and intellectual property rights

The Commissioner for Tax and Customs in Malta issued a notification, ushering in changes to the rules relating to deductions in respect intellectual property (IP) and intellectual property rights (IPRs). The key modification introduced by this notification involves an acceleration in the timing of deductions for capital expenditures on IP or IPRs and is effective from the period covered by the year of assessment 2024. Whereas, prior to such notice taxpayers were required to spread such deductions equally over a minimum of three consecutive years, this recent announcement gives the option, to the person that has incurred the expenditure, to deduct the entire capital expenditure in the year it was incurred or in the year when the IP or IPRs are first utilized in producing the income. This represents a departure from the previous requirement of a multi-year spread.

The Commissioner’s notification also addresses the retrospective aspect of these deductions. For capital expenditures on IP or IPRs incurred before the year of assessment 2024, any deductions that were unclaimed as of the year of assessment 2023 can now be claimed in full in the year of assessment 2024.

It is important to note that the accelerated deductions, as outlined in the Commissioner’s notification, come with a condition. Taxpayers can only claim these deductions against income that is produced through the use or employment of the IP or IPRs. This ensures that the deductions are directly tied to the income-generating activities associated with the IP or IPRs in question.

The full announcement may be accessed here – Deductions in Respect of Intellectual Property and Intellectual Property Rights (gov.mt).

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