Taxation on income and gains derived from intellectual property and its disposal : a comparative study

Abstract

Intellectual property has become a major asset to many businesses. The exploitation of intellectual property brings with it massive income and revenue. Thus, legislation and incentives are set in place to attract such investment. Chapter 1 will provide for a brief overview of the wide scope of all the areas that fall under the umbrella of the term 'Intellectual Property". This is necessary for our better understanding of the ways in which such property can be exploited, and how such exploitation is taxed. The second chapter provides a bridge between the field of Intellectual Property and that of Taxation. It look5 at the 2 branches of taxation) i.e. Direct and Indirect and proceeds in providing a general analysis of the applicable tax rates under each. Chapter 3 deals with Value Added Tax on transactions of supply of goods or services. Perhaps the most important matter discussed here is in determining whether the transaction incurs VAT in Malta or no, i.e. the place of supply of services. A reference to the old and new rules in the determination of place of supply of services is made. This will ultimately lead us to establishing which rules arc applicable tor intangible assets. This chapter will also look at the unclear scenarios brought forward by the concept of know-how and franchise, where scenarios of mixed contracts make it unclear whether the transaction is VAT chargeable or not. The fourth chapter deals with direct taxation. The difference between income and capital is analysed in light of various English cases on the subject. The importance of such a concept presently is because income and capital have different treatment under the ITA especially with regards to the deductions allowed. An analysis of the relevant exemptions and deductions is also made, as well as other relevant tax incentives. Finally chapter four compares the tax measures taken by other European jurisdiction in in order to compete for the attraction of IP investment. Chapter 5 delves into the problematic issue of international double taxation, which is a burden on cross border transaction and is thus applicable even for IP. After analysing the four types of double taxation relief found under our law, the chapter proceeds in looking at the OECD Model convention, which is the Model convention used in the absolute majority of the double tax treaties entered into by Malta. The interest and royalties Directive is also taken into consideration and its content is contrasted with the OECD model, this will show the inefficiencies, and lack of clarity found under community law with regards to the relatively underdeveloped area of double taxation at community level.