Malta Company Formation

Malta Royalty Routing Companies

Maltese Royalty Structures

Intellectual Property is a valued asset in today‘s corporate world and the ownership and royalty routing of such Intellectual property should ideally be located within a tax efficient jurisdiction. Intellectual property may take the form of either (i) patents that protect inventions or new processes; (ii) trademarks that relate to the names of products and perhaps also their design and packaging; (iii) copyright, which attaches to any original creative idea expressed in words or pictures ; (iv) image rights. (v) Concepts.

The payment of licence fees or commissions by one individual or entity to another for the use of intellectual property (IP) is know as a royalty payment. To manage the flow of income arising from such IP rights in the most tax efficient manner possible such proprietor might want to consider the following:

The owner of the IP donates or sells it to an offshore company (ideally when the IP is still at a low value). The offshore company licences some or all of the rights for the use of the IP to an onshore intermediary or agency company created in a jurisdiction offering tax benefits (i.e.. tax treaty network, withholding tax exemption for royalty payments and other advantages). The onshore intermediary company then sub-licenses this right to customers in various countries. Royalty fees pass to the onshore intermediary company, which may be subject to zero or a low withholding tax rates due to double tax treaty provisions.

The (small) percentage kept by the onshore intermediary company for work done in negotiating contracts are subject to tax. The balance after tax is passed on by the onshore intermediary company to the offshore company free of any further withholding taxes.

Ideal intermediary companies

Malta companies are ideal intermediary companies because of their extensive double tax treaties. We recommend Malta ITCs for royalty routing structures because of the following advantages:

No withholding taxes on payments of royalties to licensors outside Malta, provided that the property is used outside Malta by the Malta onshore company.

Tax is only paid on the licence fee retained by the Malta company and the applicable rate is only 5% respectively, the lowest within the European Union.

The license fee to be retained by the Malta company will typically be 5%. So, the tax paid in a structure like that in our examples below is a maximum of 5% on 5% of the income generated: i.e. a net 0.25% (Malta). The balance is routed to the offshore company in a zero tax or low tax area.

Malta enjoy a wide network of double tax treaties, and since its accession to the European Union, the EU-Interest and Royalty Directive may provide for 0% withholding taxes on royalty payments made by affiliated companies in different EU- countries to the Malta company.

Other advantages include:

Competitive fees

Fast incorporation (Malta company 1-4 days)

Low capital requirements (Malta company EUR250)

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