Taxxa Proprjeta’

A relative departed, do I need a notary?

If the deceased had any immovable property or shares in a Limited Liability Company then you must visit your Notary, otherwise there is no need to go to your notary.

Sors: www. cfr.gov.mt/inlandrevenue

I inherited a property, what shall I do next?

A public notary has to be engaged to draw a public deed on the transfer of property from deceased to the heirs.

Sors: www. cfr.gov.mt/inlandrevenue

How much is the tax/duty on Causa Mortis?

5% on immovable property. However, there are exemptions and rebates one has to consider when calculating duty on causa mortis. This has to be worked out by a Notary.

Sors: www. cfr.gov.mt/inlandrevenue

Surviving spouses do not pay duty on their share of the house of residence?

As of 01/01/2013, property inherited by children which has been used as residence by their parents for the last three years, is exempt from duty, on the condition that the deed is made within one year from the death of the deceased. If one year elapses, taxes are to be charged. That is, there is an exemption of the first €35,000 for a full share and the remaining is charged at 5% per each heir.
 
On all immovable property there is a rebate of €250 if the total duty of each heir does not exceed €2300 and the deed is made within six months of the death of the deceased.
 
If heirs live in any one of the property inherited the first Euro 150000 is charged at 3.5%.
 
In the case of usufructuaries, stamp duty is worked out according to their age.

Sors: www. cfr.gov.mt/inlandrevenue

What are the interests on late causa mortis deed?

After the lapse of one  year, there is an 8% interest on the duty due for each year.

Sors: www. cfr.gov.mt/inlandrevenue

What is the new rate of the final withholding tax on property and from when is it effective?

With effect from 1st January, 2015 the current system consisting of both a 12% final withholding tax on the transfer value and 35% tax on the profit or gain will be replaced by one final withholding tax of 8% on the value of the property transferred.

Are there any exceptions?
There are four exceptions as follows:
•    On a transfer of property not forming part of a project, the applicable final withholding tax rate shall be 5% on the value of the property transferred if the property is transferred before five years from the date of its acquisition. Where the transferor is a company that had acquired the property by means of a transfer that qualified for the intra-group exemption, it shall be deemed to have acquired the property on the date on which the property had previously last been acquired by a company by means of a transfer that did not qualify for the intra-group exemption. This rate will not apply where the said property was at any time within the period of five years preceding the transfer, owned by a person related to the transferor and the property formed part of a project at such time. (An individual is deemed to be related to the transferor if the transferor is a body of persons of which the said individual is, directly or indirectly, a shareholder, partner or member. Two bodies of persons are deemed to be related persons if they are, directly or indirectly, controlled or beneficially owned as to more than twenty-five percent by the same persons.)
•    In the case of properties acquired before the 1st January 2004 in respect of which a notice of a promise of sale or transfer relating to that property had not been given to the CfR before the 17th November, 2014, the applicable final withholding tax rate shall be 10% of the value of the property transferred.
•    2% final withholding tax applies on a transfer of property that was immediately before the transfer owned by an individual, or co-owned by two individuals, who had for the purposes of Article 32(4)(a) of the Duty on Documents and Transfers Act declared in the deed of the acquisition of that property that the said property had been acquired for the purpose of establishing therein or constructing thereon his or their sole ordinary residence, and the transfer is made not later than three years after the date of the acquisition thereof. This shall only apply where the said individual does not own any other residential property at the time of the transfer. The notary who receives any deed of such a transfer shall record in the deed a written declaration by the individual so transferring that he does not own any other residential property at the time of the transfer and the notary shall warn the said individual of the importance of the truthfulness of such declaration.
•    5% final withholding tax applies when it is a transfer of property situated in an urban conservation area or scheduled by the Planning Authority in terms of article 81 of the Environment and Development Planning Act, and the transferor declares to the notary receiving the deed of the transfer that he has carried out works on that property in compliance with a permit issued by the Planning Authority providing for the restoration and, or rehabilitation of that property upon an application for that purpose that was filed with the Planning Authority on or after 1 January 2015.  This rate cannot be applied to the transfer if it has already been applied to a previous transfer of the same property. The transferor must produce to the notary the MEPA certificate confirming that the restoration and rehabilitation works were completed in compliance with the relative permit.

Sors: www. cfr.gov.mt/inlandrevenue

How will the new final withholding tax system apply in the case of property transferred on or after 1st January, 2015 where a notice of a promise of sale or transfer relating to that property had been given to the CfR before the 17th November, 2014?

A transfer of property, not forming part of a project and not made by the owner of an SDA project, made on or after the 1st January 2015 in respect of which a notice of a promise of sale or transfer relating to that property had been given to the CfR before the 17th November, 2014, and which is transferred to the same person or persons appearing on the said promise of sale agreement before the 1st January 2016 may be excluded from the Final withholding tax system if the transfer is made not later than twelve years after the date of the acquisition of the property.
In the case of a transfer of property acquired before the 1st January 2004 in respect of which a notice of a promise of sale or transfer relating to that property had been given to the CfR before the 17th November, 2014 the applicable final withholding tax rate shall be 12% of the value of the property transferred unless the previous paragraph applies and the transfer is excluded from the Final withholding tax system.

Sors: www. cfr.gov.mt/inlandrevenue

If a promise of sale or transfer relating to a property that forms part of a project or of property situated within a special designated area given to the CfR before the 17th November, 2014 is cancelled after this date or expires, and such transfer would have been subject to 12% final withholding tax if the transfer was made before the 1st January 2015, will an eventual transfer be taxed under the new system if made on or after the 1st January 2015 i.e. at a lower rate of 8% or 10%?

Where a notice of a promise of sale or transfer relating to a property that forms part of a project or of property situated within a special designated area given to the CfR in accordance with the provisions of article 3(6) of the Duty on Documents and Transfers Act before the 17th November, 2014 is cancelled after the said date or expires and, either the said property is transferred to the same persons appearing on the said promise of sale which has been cancelled or, another property forming part of the same project is transferred to the same persons appearing on the said promise of sale which has been cancelled or has expired, any of such transfers shall be deemed to be transfers in respect of which a notice of a promise of sale or transfer has been given to the CfR before the 17th November, 2014, which means that such transfers will remain taxable at the rate of 12% final tax.

Sors: www. cfr.gov.mt/inlandrevenue

Will it be possible to elect to exclude a transfer property from the scope of the final withholding tax system on or after the 1st January 2015?

Before the 1st January 2015 the transferor in a transfer of property made not later than twelve years after the date of the acquisition thereof or of property situated within a special designated area could elect by means of a declaration made to the notary at the time of the publication of the deed of the transfer and recorded in the said deed to exclude that transfer from the scope of the final withholding tax system. However as from 1st January 2015 it will no longer be possible to elect to exclude such transfers from the scope of the final withholding tax system except for limited cases explained further below.

Sors: www. cfr.gov.mt/inlandrevenue

What happens in the case of transfers made on or after the 1st January, 2015 of property that forms part of a project or of property situated within a special designated area?

In the case of transfers made on or after the 1st January, 2015 of property that forms part of a project or of property situated within a special designated area, where the transferor had elected to be excluded from the 12% final tax system such an election will no longer apply as from 1st January 2015 and any transfers taking place after this date will be subject to either 8% final withholding tax or else 10% final withholding tax in the case where the property was acquired before the 1st January, 2004, unless a notice of a promise of sale or transfer relating to the property has been given to the CfR in accordance with the provisions of article 3(6) of the Duty on Documents and Transfers Act made under that Act before the 17th November, 2014. If such notice was given, the property transferred in respect of which such notice was given will remain outside the scope of the final withholding tax system if transferred before 12 years from the date of acquisition unless the property is situated in a special designated area, in which case it will remain outside the scope of the final withholding tax system indefinitely.
Where the transferor had not elected to be excluded from the 12% final tax system any transfers taking place after the 1st January, 2015 shall be subject to either 8% final withholding tax or else 10% final withholding tax in the case where the property was acquired before the 1st January, 2004 unless a notice of a promise of sale or transfer relating to the property has been given to the CfR in accordance with the provisions of article 3(6) of the Duty on Documents and Transfers Act made under that Act before the 17th November, 2014. If such notice was given the property transferred in respect of which such notice was given shall be subject to 12% final withholding tax.

Sors: www. cfr.gov.mt/inlandrevenue

Where a transfer of property is made by a person who is not resident in Malta and who is resident for tax purposes in another country, such person may currently opt out of the 12% final withholding tax system. Will this remain the same under the new system?

Currently a transfer of property by a person who is not resident in Malta and who is resident for tax purposes in another country may opt out of the 12% final withholding tax system if that person produces to the notary who publishes the deed of transfer a statement signed by the tax authorities of the country of that person’s residence that confirms that person’s residence in that country and that certifies that that person is subject to tax in that country on gains or profits derived from the transfer of immovable property situated in Malta.
As from the 1st January, 2015 such non resident persons may still be entitled to opt out of the final withholding tax system and be taxed under article 5 (Capital gains) however the 7% provisional tax paid relating to a transfer of property made on or after the 1st January, 2015, shall not be available for refund under article 48 of the Income Tax Management Act. No claim can be made to reduce the 7% provisional tax payable.

Sors: www. cfr.gov.mt/inlandrevenue

Are there any circumstances where an election may still be made to exclude the transfer from final withholding tax system and elect to be taxed on the profit or gain?

Yes, the following have remained unchanged:
•    A transfer of property that was, immediately before the transfer, co-owned by two individuals and the transfer is made by one of the co-owners to the other. An election may still be made to exclude the transfer from the scope of article 5A.
•    A transfer of property to the Government of Malta made pursuant to an acquisition of that property in terms of the Land Acquisition (Public Purposes) Ordinance. An election may still be made to exclude the transfer from the scope of article 5A.
•    A transfer made by means of a judicial sale by auction or in the course of a winding up by the Court. Such transfer is not taxable under article 5A.
•    A transfer of property that had been used in a business for a period of at least three years and that is replaced within one year by property ("the new property") used solely for a similar purpose of the business. An election may still be made to exclude the transfer from the scope of article 5A.
•    A transfer of property forming part of a project made by a company which has issued bonds to the public and such bonds are listed on a stock exchange recognized under the Financial Markets Act, and if the transferor elects, by means of a declaration made to the notary at the time of publication of the deed of the transfer and recorded in the said deed.

Sors: www. cfr.gov.mt/inlandrevenue

Do the exemptions prescribed under article 5A(4) of the Income Tax Act still apply?

Yes, all the exemptions (described below) prescribed under article 5A (4) of the Income Tax Act have remained with some changes:
•    A donation made by a person to his spouse, to his descendant or ascendant in the direct line, or to the spouse of any such descendant or ascendant, or, in the absence of any descendants in the direct line, to his brother or sister or to a descendant of his brother or sister, or to a philanthropic institution approved for the purposes of article 12(1)(e).
•    A transfer of property that has been owned and occupied by the transferor as his own residence for a period of at least three consecutive years immediately preceding the date of transfer and provided that the property is disposed of within twelve months of vacating the premises or such other period or condition as may be prescribed and provided that such property is declared by the transferor to be his main residence through an election made to the CfR in such manner and subject to such rules as may be prescribed – Refer to FAQ No.10 & 11.
•    The assignment of property between spouses consequent to a judicial or consensual separation or a divorce.
•    The assignment of property that formed part of the community of acquests between the spouses or was otherwise owned in common between them, to one of the spouses on the dissolution of the community, or the partition of such property between the spouses or the surviving spouse and the heirs of the deceased spouse. Provided that on a subsequent transfer of the said property, the date of acquisition of the share assigned as aforesaid shall be the original date when the property was acquired by the two spouses.
•    A transfer of property from one company to another forming part of the same group.
•    The transfer of property upon the incorporation of a business or a partnership en nom collectif as a going concern into a limited liability company.
•    The settlement of property on trust, or the distribution or reversion of property settled on trust, or the transfer of all the property of a trust involving only a change in the trustee of a trust and where there is no change in the beneficiaries or in the beneficial interest.
•    A transfer of property by a company to its shareholder or to an individual related to its shareholder in the course of winding up or in the course of a distribution of assets pursuant to a scheme of distribution.

Sors: www. cfr.gov.mt/inlandrevenue

What happens if in the period of ownership of my residence there is a change in the dwelling house?

Where at any time in the period of ownership there is a change in the dwelling house or the part of it which is occupied as the individual’s residence, whether on account of a reconstruction or conversion of a building or for any other reason, or there have been changes as regards the use of part of the dwelling house for the purpose of a trade, business or profession or for any other purpose, the relief given may be adjusted in such manner as the CfR may determine in an assessment.

Sors: www. cfr.gov.mt/inlandrevenue

If I have a garden or a garage does it also form part as my own residence for the purpose of the exemption?

‘Own residence’ means the principal residence owned by the taxpayer or his spouse being a dwelling house which has been the owner’s only or main residence, including land transferred through the same deed with the principal residence, which the owner has for his or her own occupation and enjoyment with that residence as its garden or grounds consisting of an area which, regard being had to the size and character of the dwelling house, is required for the reasonable enjoyment of it as a residence. A garage attached to or underlying a house or block of flats, or a garage of not more than 70sqm situated within 500m of the dwelling house, and transferred through the same deed with the principal residence shall be deemed to be included as part of the residence.

Sors: www. cfr.gov.mt/inlandrevenue

Which date is to be taken as the date of acquisition where the transferor is a company that had acquired the property by means of a transfer that qualified for the intra-group exemption?

For the purposes of determining whether property has been acquired by the transferor before the 1st January, 2004 where the transferor is a company that had acquired the property by means of a transfer that qualified for the intra-group exemption, the date of acquisition is the date when it first entered the group.

Sors: www. cfr.gov.mt/inlandrevenue

How am I taxed if I inherited the property after the 24th November, 1992?

If the property was inherited after the 24th November, 1992, the transferor can elect either to pay 12% final tax on the difference between the transfer value and the cost of acquisition (denunzja) or he can elect to pay final withholding tax (10%, 8% or 5%) depending on the year the property in question was acquired by inheritance.

Sors: www. cfr.gov.mt/inlandrevenue

How am I taxed if the property was inherited before the 25th November 1992?

If you inherited the property before the 25th November, 1992 the tax is equal to 7% of the transfer value. The 7% tax is final.

Sors: www. cfr.gov.mt/inlandrevenue

How am I taxed if I acquired the property by donation?

A transfer of property that was acquired by the transferor in terms of a donation made more than five years before the date of the transfer in question, can either be taxed at 12% of the excess, if any, of the transfer value over its acquisition value, or the transferor can elect to be pay final withholding tax (10% or 8%).
Where the property transferred consists of a transfer of a property forming part of a project, the 12% of the excess will not apply. ‘Project’ means property that was acquired by the transferor by donation and which has been developed by the said transferor into more than one transferable property.
In the case of a transfer of property that was acquired by the transferor in terms of a donation made within five years before the date of the transfer in question, final withholding tax applies.  The rate of tax depends on the date it was acquired by the donor.  Hence, if the donor acquired it before 1st January 2004, 10% final withholding tax will apply, if after this date 8%.  However, if the property does not form part of a project and the donor acquired it within five years, 5% final withholding tax will apply.
One is to note that when there is an exempt transfer of property to a related person by way of donation, on a subsequent transfer, the donee is considered to have acquired the property on the date it was originally acquired by the donor.

Sors: www. cfr.gov.mt/inlandrevenue

How am I taxed if I sell the property on or after the 1st January, 2015 in the circumstances referred to in article 31C(1) of the Income Tax Act?

A transfer of property, which has been restored in accordance with any scheme issued for this purpose by the Malta Environment and Planning Authority providing for the restoration of grade 1 or grade 2 scheduled property or property situated in an urban conservation area, made on or after the 1st January, 2015, shall be chargeable at the rate of 10% of the transfer value if a notice of a promise of sale or transfer relating to that property has been given to the CfR in accordance with the provisions of article 3(6) of the Duty on Documents and Transfers Act or of rules made under that Act before the 17th November, 2014.
A transfer of property made on or after the 1st January, 2015 in the circumstances referred to in article 31C (1) of the Income Tax Act, shall be chargeable at the rate of 7% of the transfer value. The 7% tax is final.

Sors: www. cfr.gov.mt/inlandrevenue

How am I taxed in the case of an assignment of a right obtained in terms of a promise of sale (konvenju)?

Any gains or profits derived from the assignment of any right obtained in terms of a promise of sale (konvenju), including a promise to alienate in any manner immovable property or a promise in respect of emphyteusis, shall in all cases be deemed to be gains or profits derived from a trade, business, profession or vocation falling within the scope of article 4(1)(a) of the Income Tax Act to be declared in the tax return.
Provisional tax at the rate of 7% of the selling price must still be withheld by the notary.

Sors: www. cfr.gov.mt/inlandrevenue

Can I deduct brokerage fees from the value of the property transferred, before applying the final withholding tax?

Yes, brokerage fees will remain deductible. The amount of brokerage fees paid by the transferor shall continue to be allowable as a deduction from the transfer value as long as the conditions of verification mentioned in the Tax on Property Transfers Rules are satisfied. The final withholding tax is applicable on the result.

Sors: www. cfr.gov.mt/inlandrevenue

What happens in the case of transfers made on or after the 1st January, 2015 of property that forms part of a project or of property situated within a special designated area in the case where no units forming part of the project have been transferred by the 31st December 2014 but a notice of promise of sale has been registered before the 17th November, 2014?

In the case of transfers made on or after the 1st January, 2015 of property that forms part of a project or of property situated within a special designated area, in the case where no units forming part of the project have been transferred by the 31st December 2014, any transfers taking place after this date will be subject to either 8% final withholding tax or else 10% final withholding tax in the case where the property was acquired before the 1st January, 2004, unless a notice of a promise of sale or transfer relating to the property has been given to the CfR in accordance with the provisions of article 3(6) of the Duty on Documents and Transfers Act made under that Act before the 17th November, 2014. If such notice was given, the property transferred in respect of which such notice was given will either be taxed at 7% provisional tax if the transferor opts to exclude the transfer from the scope of article 5A or else, the 8% final withholding tax rate will apply unless the property was acquired before the 1st January 2004 in which case the 12% final withholding tax rate will apply.

Sors: www. cfr.gov.mt/inlandrevenue

If I choose to be taxed under Article 5 (tax on the capital gain) how am I going to be taxed?

If you choose to be taxed under Article 5 you will pay provisional tax on the deed at 7%. An election can only be made in the circumstances mentioned in Article 5A (3) of the Income Tax Act.

Then you would have to declare the gain in your income tax return. To calculate the taxable gain you have to see if the transfer is taxable on business profits or capital gains.

Business

If the gain is taxable as a business profit, it is taxed in terms of article 4 and you have to declare it in the same manner as all other business profits. You will be allowed to deduct the cost of acquisition and other expenses made in the production of the income. The net profit has to be declared in box 2 of your tax return. A profit and loss account is to be attached.

The Tax on Property Transfers Rules S.L 123.92, establish what records should be kept in respect of your property trading activity, apart from the other business records; how to establish the cost of acquisition and the transfer value in certain cases; and how to allocate expenses in case of a project.

Capital gain

If the transfer is taxable as a capital gain, it is taxed in terms of article 5. You will be allowed a deduction for the cost of acquisition and the other deductions mentioned by article 5 and the relative Capital Gains Rules S.L 123.27. Special rules regarding what records are to be kept apply in this case too.

If the tax on the capital gain or on business profits, as the case may be, is less than the tax that you would have already paid as provisional tax, you will be refunded the excess tax paid. If it results to be more, you will have to pay the balance.

Sors: www. cfr.gov.mt

What deductions can I claim to calculate the capital gain under Article 5?

To calculate the capital gain under Article 5 you can claim the following deductions:
 
•    The price at which the property was acquired;
•    The inflation element;
•    Any ground-rent paid on the property and for which a deduction has not been already claimed in any other way;
•    A maintenance allowance at the rate of 0.4% for every year that you owned the property;
•    Improvements carried out;
•    Any duty paid on acquisition;
•    Notary's fees;
•    Brokerage fees;
•    Other expenses directly related to the transfer but not exceeding 5% of the selling price.

Example: A property was purchased in 2003 for €60,000. €10,000 improvements were carried out in the same year. €3,000 was paid as duty, and notarial fees amounted to €500. The property is sold in 2006 for €150,000. The transferor has elected to be taxed under Article 5. The election can only be made in the circumstances mentioned in Article 5A (3) of the Income Tax Act. The capital gain is calculated as follows:
Selling Price €150,000
Deduct the cost of acquisition and other allowable deductions
Cost of the property per deed of purchase €60,000    
Improvements carried out in 2003 €10,000    
Legal and notarial fees €500    
Duty on documents paid on acquisition €3,000    
Inflation (calculated as follows)
Cost of acquisition x indexyd - indexya / indexya    
yd = index for the year immediately preceding that in which the transfer is made;
ya = index for the year immediately preceding that in which the property had been acquired;     
In this case we apply the index for years 2002 (638.54) and 2005 (684.88), i.e.:
70,000 x 684.88 - 638.54/ 638.54 = € 5,080
    
Maintenance allowance
(0.4% of the cost price for every year) i.e. 70,000 x 0.004 x 3= €840    
Total cost of acquisition and other allowable deductions €79,420
Capital gain to be declared in the tax return €70,580
The €70,580 gain is added to your other income for the year and the total is taxed at the normal rates which are applicable to you. If your other income has already reached the 35% tax bracket, all the capital gain amounting to €70,580 is taxed at 35% and the tax would therefore be equal to €24,704.
The notary would have already withheld 7% of €150,000 as provisional tax, i.e. €10,500. You will therefore have to pay the remaining balance equal to €24,704 - €10,500 = €14,204. This amount must be paid when you file your tax return.

Sors: www. cfr.gov.mt

My brother and I have inherited two properties. We are now going to take one each. Is there any tax involved?

Where no compensation (owelty) is due, the partition is not taxable. It will be considered that no compensation has been made if the value of the shares is equal to the value of the assets assigned to each co-partitioner. In this case, if you and your brother inherited half share each, and the two properties have the same value, no tax is to be paid.

Sors: www. cfr.gov.mt

My brothers and I have inherited two properties, a sum of money and some gold items. Two of us are going to take one property each; the other will take the money and the gold items. There is not going to be any compensation because the three shares are of equal value. Are we going to be charged tax?

No tax is due in this case either. The money and the gold items are not considered to be compensation because they are part of the inheritance itself. Tax would have been due if compensation was due to any of you.

Sors: www. cfr.gov.mt

My brother and I inherited a house from our father. The house will be taken by my brother and he will compensate me by paying me a sum of money. Am I going to be charged tax?

Let us say that the value of the property at the time of inheritance was €40,000. Therefore each one of you inherited €20,000. Today the value of the property is €60,000, so your share is €30,000 each. Therefore the compensation due to you is €30,000 which is not going to be paid out of the common property or other assets.

It is considered that in the partition you have transferred half of the house to your brother. If the house was inherited after 24 November 1992, you have to pay tax on the transfer value of half of the house less the value of half of the inheritance, i.e. 12% on (€30,000 - €20,000) = €1,200.

When any compensation is involved it is recommended that you seek professional advice because very often the relevant calculations are quite complicated. For more details about the tax on transfers involving an owelty, see the Tax on Property Transfers Rules S.L 123.92.

Sors: www. cfr.gov.mt

I bought a property about 15 years ago and its market value today is €100,000. I am going to exchange it with another person's property which he had inherited in 1999 when its value was €30,000. Today it is worth €96,000. How are we going to be taxed?

When property is transferred through an exchange, the parties are considered to have made two separate transfers.
The property that was purchased 15 years ago is taxed at 10% on €100,000 = €10,000.
The other person who had inherited the property at €30,000 is transferring the property at €96,000. He must therefore pay 12% on (€96,000 - €30,000) = €7,920.
Had the property been inherited before 25 November 1992 the tax would have been 7% on €96,000 = €6,720.

Sors: www. cfr.gov.mt

I am going to enter into a contract of emphyteusis. How am I taxed on the ground rent paid to me?

When you assign property by emphyteusis or sub-emphyteusis, the ground rent that you receive is taxed as income in accordance with the provisions of article 4 and must be declared in your tax return as income derived from property. Tax will be payable for every year during which you receive the ground rent.
However, if besides the ground rent you also receive a premium, you have to pay final withholding tax on the premium less any allowable deductions.

Sors: www. cfr.gov.mt

How are redemptions of ground rent taxed?

A redemption of ground rent is taxed at final withholding tax. However, when ground rent is redeemed by means of a schedule of redemption, the Registrar of Courts shall deduct from the deposit 10% of the sum payable for the redemption. The 10% is provisional.
As in other cases, if you had inherited the property that you are assigning by emphyteusis, or in respect of which you were receiving ground rent which has been redeemed, and you had inherited the property after 24 November 1992, the taxable amount is reduced by the acquisition value.
The same applies if you had acquired the property through a donation made more than 5 years before you assigned it by emphyteusis, as the case may be.
However, in such cases, the acquisition value is not wholly allowed as a deduction, because you would not be transferring the whole property.
The Tax on Property Transfers Rules S.L 123.92, give more details regarding the calculation of the acquisition value in such cases.

Sors: www. cfr.gov.mt

I have been living in a property for more than three years with a permit issued by the Housing Authority pursuant to a promise of sale (konvenju) by that Authority, but the contract has been made only this year. I now intend to sell the property. Is this transfer going to be taxable?

No, because the period during which you occupied the property as your own residence with the permission of the Housing Authority is considered to have been a period during which you owned that property. This transfer would be exempt from tax as long as you have occupied the property for a period of at least three consecutive years immediately preceding the date of the transfer.

Sors: www. cfr.gov.mt

I used to live with my mother for the past 10 years. The property had been my mother’s property. I have now inherited it and have kept on residing in it. I now intend to sell it, but I have not yet owned it for three years. Am I going to forfeit the exemption?

No, such a transfer would still be exempt.
If you are going to transfer property that you have occupied for at least three consecutive years, and you have inherited it from a direct ascendant (parents or grandparents), the period during which your mother had owned and occupied the property as her own residence is considered to be a period during which the property was owned by you. In this case it is important that you had occupied the property for at least three consecutive years immediately preceding the transfer.

Sors: www. cfr.gov.mt

I am going to transfer property that I had acquired under an assignment of property following a judicial separation from my husband. This property is my own residence but less than 3 years have elapsed since I became the owner of the whole property. Do I have to pay tax if I transfer it?

The period during which your husband owned the property and used it as his own residence is considered to be a period during which the property was owned by you. In this case you will not have to pay any tax as long as you occupied the property for at least three consecutive years immediately preceding the transfer.

Sors: www. cfr.gov.mt

Does this apply also where the separation was consensual?

Yes, in this case the transfer would also be exempt from tax.

Sors: www. cfr.gov.mt

My husband and I owned property in common between us. The property is now going to be assigned to my husband. Shall I be deemed to have made a taxable transfer?

No, you will not be charged any tax on this assignment.

Sors: www. cfr.gov.mt

My husband and I owned property in common. When my husband died, my children inherited his share and we are now going to partition the property amongst ourselves. Part of the property will be assigned to me, while the other part to my children. Are we going to have to pay any tax?

No. The assignment of property owned in common by you and your children, as heirs of your husband, is not taxable.

Sors: www. cfr.gov.mt

When a company transfers property to another company within the same group, is it charged any tax on the transfer?

The transfer of property from one company to another within the same group is exempt from tax. The conditions for a company to be considered as part of a group are found in article 5(9) of the Income Tax Act.

Sors: www. cfr.gov.mt

Jekk toġġezzjona għall-assessment tal-perit tal-gvern quddiem it-Tribunal Amministrattiv, jista’ jkun li apparti li titlef il-każ, tiġi ordnat tħallas aktar?

Iva. Fil-fatt, hekk ġara f’każ riċenti (C H Formosa Company Limited vs Direttur Ġenerali (Taxxi Interni) – deċiżjoni tat-Tribunal mogħtija nhar id-29/5/19). It-Tribunal għamel referenza għall- Artikolu 58(4) tal-Kap.364 tal-Liġijiet ta’ Malta, li jgħid hekk: ‘bla ħsara għad-dispożizzjonijiet tas-subartikolu (3) it-Tribunal għandu jikkonferma, inaqqas, iżid jew jannulla l-likwidazzjoni jew jagħmel dak l-ordni dwarha li jidhirlu xieraq, iżda kull tnaqqis jew żieda bħal dawk jistgħu jsiru biss dwar dawk il-kapijiet tad-deċiżjoni tal-Kummissarju li kontra tagħhom ikun sar appell.’

F’dan il-każ, it- Tribunal mhux talli ċaħad l- appell tas-soċjetà rikorrenti mid-deċiżjoni ta’ rifjut ta’ oġġezzjoni tal-Kummissarju tat-Taxxi Interni u mill-kont tal-likwidazzjoni tat-taxxa maħruġa fil-konfront tagħha iżda in forza ta’ l-Artikolu 58(4) tal-Kap.364 tal-Liġijiet ta’ Malta, it- Tribunal ordna li l-likwidazzjoni tat- taxxa fil-konfront tas-soċjetà rikorrenti tiżdied.

X’jiġri jekk il-valur tal-post kif muri fil-kuntratt ikun differenti minn dak li jagħti l-Perit tal-Gvernmeta jiġi fuq il-post?

Jekk il-prezz dikjarat fl-att ta’ trasferiment huwa inqas minn 85% tal-valur stmat mill- Perit tal-Gvern, il-Kummissarju tat-Taxxi Interni joħroġ kont li jirrappreżenta likwidazzjoni tad-differenza fit- taxxa dovuta.

 

Mr. X purchased a flat on the 30th June 2007, which he will be selling on the 15th June 2015. The notice of promise of sale was registered with the IRD on the 6th September 2014.

Given that the notice of promise of sale was registered with the IRD before the 17th November 2014 and the property is transferred not later than twelve years after the date of the acquisition thereof Mr. X has two options:
1.    Elect, by means of a declaration made to the notary at the time of the publication of the deed of the transfer to exclude the transfer from the final withholding tax system. In such case 7% provisional tax is paid at the time of publication of the deed and the gain or profit is to be declared in the tax return for year of assessment 2016.
2.    If no election is made the transfer will be subject to a final withholding tax of 8% on the transfer value to be collected by the notary at the time of the publication of the deed of the transfer.

This example also applies in the case where the transferor is a company.

Mr. X purchased a flat on the 30th June 2007, which he will be selling on the 15th June 2017. The notice of promise of sale was registered with the IRD on the 6th September 2014.

Given that the property will be transferred after the 31st December 2015 even though the notice of promise of sale was registered with the IRD before the 17th November 2014 and the property is transferred not later than twelve years after the date of the acquisition thereof Mr. X cannot elect to exclude the transfer from the final withholding tax system. The transfer will be subject to a final withholding tax of 8% on the transfer value to be collected by the notary at the time of the publication of the deed of the transfer.

This example also applies in the case where the transferor is a company.

Mr. X purchased a flat on the 30th June 2007, which he will be selling on the 15th June 2015. The notice of promise of sale was registered with the IRD on the 15th December 2014.

Given that the notice of promise of sale was registered with the IRD after the 17th November 2014 the transfer cannot be excluded from the final withholding tax system and the transfer will be subject to a final withholding tax of 8% on the transfer value to be collected by the notary at the time of the publication of the deed of the transfer.

This example also applies in the case where the transferor is a company.

Mr. X purchased a flat on the 30th June 2011, which he will be selling on the 15th June 2015. The notice of promise of sale was registered with the IRD on the 6th September 2014.

Given that the notice of promise of sale was registered with the IRD before the 17th November 2014 and the property is transferred not later than twelve years after the date of the acquisition thereof Mr. X has two options:
1.    Elect, by means of a declaration made to the notary at the time of the publication of the deed of the transfer to exclude the transfer from the final withholding tax system. In such case 7% provisional tax is paid at the time of publication of the deed and the gain or profit is to be declared in the tax return for year of assessment 2016.
2.    If no election is made the transfer will be subject to a final withholding tax of 5% on the transfer value to be collected by the notary at the time of the publication of the deed of the transfer. The 5% rate applies because the transfer is made not later than five years after the date of the acquisition of the property.
The reduced 5% final withholding tax rate referred to in this above example applies if the transfer of property does not form part of a project.

This example also applies in the case where the transferor is a company.

Mr. X purchased a flat on the 30th June 2011, which he will be selling on the 15th June 2015. The notice of promise of sale was registered with the IRD on the 15th December 2014.

Given that the notice of promise of sale was registered with the IRD after the 17th November 2014 the transfer cannot be excluded from the final withholding tax system and the transfer will be subject to a final withholding tax of 5% on the transfer value to be collected by the notary at the time of the publication of the deed of the transfer. The 5% rate applies because the transfer is made not later than five years after the date of the acquisition of the property.

This example also applies in the case where the transferor is a company.

Mr. X purchased a flat on the 30th June 2002, which he will be selling on the 15th June 2015. The notice of promise of sale was registered with the IRD on the 6th September 2014.

Mr. X cannot elect to exclude the transfer from the final withholding tax system because the transfer is made later than 12 years after the date of the acquisition of the property. The transfer will be subject to a final withholding tax of 12% on the transfer value to be collected by the notary at the time of the publication of the deed of the transfer. The 12% rate applies because property was acquired before the 1st January 2004 and the notice of promise of sale was registered with the IRD before the 17th November 2014.

This example also applies in the case where the transferor is a company.

Mr. X purchased a flat on the 30th June 2002, which he will be selling on the 15th June 2015. The notice of promise of sale was registered with the IRD on the 15th December 2014.

Mr. X cannot elect to exclude the transfer from the final withholding tax system because the notice of promise of sale was registered with the IRD after the 17th November 2014. The transfer will be subject to a final withholding tax of 10% on the transfer value to be collected by the notary at the time of the publication of the deed of the transfer. The 10% rate applies because property was acquired before the 1st January 2004 and the notice of promise of sale was registered with the IRD after the 16th November 2014.

This example also applies in the case where the transferor is a company.

Mr. X purchased a flat on the 31st December 2003, which he will be selling on the 15th June 2015. The notice of promise of sale was registered with the IRD on the 6th September 2014.

Given that the notice of promise of sale was registered with the IRD before the 17th November 2014 and the property is transferred not later than twelve years after the date of the acquisition thereof Mr. X has two options:
1.    Elect, by means of a declaration made to the notary at the time of the publication of the deed of the transfer to exclude the transfer from the final withholding tax system. In such case 7% provisional tax is paid at the time of publication of the deed and the gain or profit is to be declared in the tax return for year of assessment 2016.
2.    If no election is made the transfer will be subject to a final withholding tax of 12% on the transfer value to be collected by the notary at the time of the publication of the deed of the transfer. The 12% rate applies because property was acquired before the 1st January 2004 and the notice of promise of sale was registered with the IRD before the 17th November 2014.

This example also applies in the case where the transferor is a company.

Company X purchased land on the 31st December 2008, which was developed into 20 units for resale. 10 of these units forming part of the project that have been sold by the 31st December 2014 have all been subject to 12% final withholding tax since the owner did not elect to exclude the first transfer from the final withholding tax system. A notice of promise of sale was registered with the IRD before the 17th November 2014 in respect of 5 unsold units. Company X will be transferring the remaining 10 units in 2015.

The 5 units in respect of which a notice of a promise of sale has been given to the IRD before the 17th November, 2014 will remain subject to 12% final withholding tax on the transfer value.
The other 5 units in respect of which a notice of a promise of sale has not been given to the IRD before the 17th November, 2014 will be subject to 8% final withholding tax on the transfer value.

This example also applies in the case where the transferor is an individual and where the property is located within a special designated area.
 

Company X purchased land on the 31st December 2001, which was developed into 20 units for resale. 10 of these units forming part of the project that have been sold by the 31st December 2014 have all been subject to 12% final withholding tax since the owner did not elect to exclude the first transfer from the final withholding tax system. A notice of promise of sale was registered with the IRD before the 17th November 2014 in respect of 5 unsold units. Company X will be transferring the remaining 10 units in 2015.

The 5 units in respect of which a notice of a promise of sale has been given to the IRD before the 17th November, 2014 will remain subject to 12% final withholding tax on the transfer value.
The other 5 units in respect of which a notice of a promise of sale has not been given to the IRD before the 17th November, 2014 will be subject to 10% final withholding tax on the transfer value. The 10% rate applies because the land was acquired before the 1st January 2004.

This example also applies in the case where the transferor is an individual and where the property is located within a special designated area.

Company X purchased land on the 31st December 2008, which was developed into 20 units for resale. 10 of these units forming part of the project that have been sold by the 31st December 2014 have all been subject to 35% tax on the profit since the owner elected to exclude the first transfer from the final withholding tax system. A notice of promise of sale was registered with the IRD before the 17th November 2014 in respect of 5 unsold units. Company X will be transferring the remaining 10 units in 2015.

The 5 units in respect of which a notice of a promise of sale has been given to the IRD before the 17th November, 2014 will remain subject to 35% tax on the profit.
The other 5 units in respect of which a notice of a promise of sale has not been given to the IRD before the 17th November, 2014 will be subject to 8% final withholding tax on the transfer value.

This example also applies in the case where the transferor is an individual and where the property is located within a special designated area.

Company X purchased land not situated within a special designated area on the 31st December 2003, which was developed into 20 units for resale. 10 of these units forming part of the project that have been sold by the 31st December 2014 have all been subject to 35% tax on the profit since the owner elected to exclude the first transfer from the final withholding tax system. A notice of promise of sale was registered with the IRD before the 17th November 2014 in respect of 5 unsold units out of which 3 will be transferred before the 31st December 2015 and the other two will be transferred during 2016. The remaining 5 units in respect of which a notice of promise of sale was not registered with the IRD are expected to be sold during 2016.

The 3 units in respect of which a notice of a promise of sale has been given to the IRD before the 17th November, 2014 will remain subject to 35% tax on the profit since these will be sold during 2015 i.e. sold before the 12 year period from date of acquisition of the land has elapsed.
The 2 units in respect of which a notice of a promise of sale has been given to the IRD before the 17th November, 2014 will be subject to 12% tax on the transfer value since these will be sold after the 31st December 2015 i.e. after the 12 year period from date of acquisition of the land has elapsed. The 12% rate applies because the land was acquired before the 1st January 2004 and the notice of promise of sale was registered with the IRD before the 17th November 2014.
The remaining 5 units in respect of which a notice of promise of sale was not registered with the IRD will be subject to 10% tax on the transfer value since the land was acquired before the 1st January 2004.

This example also applies in the case where the transferor is an individual and where the property is located within a special designated area.

Company X purchased land situated within a special designated area on the 31st December 2003, which was developed into 20 units for resale. 10 of these units forming part of the project that have been sold by the 31st December 2014 have all been subject to 35% tax on the profit since the owner elected to exclude the first transfer from the final withholding tax system. A notice of promise of sale was registered with the IRD before the 17th November 2014 in respect of 5 unsold units out of which 3 will be transferred before the 31st December 2015 and the other two will be transferred during 2016. The remaining 5 units in respect of which a notice of promise of sale was not registered with the IRD are expected to be sold during 2016.

The 5 units in respect of which a notice of a promise of sale has been given to the IRD before the 17th November, 2014 will remain subject to 35% tax on the profit irrespective of when they are sold.
The remaining 5 units in respect of which a notice of promise of sale was not registered with the IRD will be subject to 10% tax on the transfer value since the land was acquired before the 1st January 2004.

This example also applies in the case where the transferor is an individual and where the property is located within a special designated area.

Company X purchased land not situated within a special designated area on the 1st January 2004, which was developed into 20 units for resale. 10 of these units forming part of the project that have been sold by the 31st December 2014 have all been subject to 35% tax on the profit since the owner elected to exclude the first transfer from the final withholding tax system. A notice of promise of sale was registered with the IRD before the 17th November 2014 in respect of 5 unsold units out of which 3 will be transferred before the 2nd January 2016 and the other two will be transferred after the 1st January 2016. The remaining 5 units in respect of which a notice of promise of sale was not registered with the IRD are expected to be sold after the 1st January 2016.

The 3 units in respect of which a notice of a promise of sale has been given to the IRD before the 17th November, 2014 will remain subject to 35% tax on the profit since these will be sold during 2015 i.e. sold before the 12 year period from date of acquisition of the land has elapsed.
The 2 units in respect of which a notice of a promise of sale has been given to the IRD before the 17th November, 2014 will be subject to 12% tax on the transfer value since these will be sold after the 1st January 2016 i.e. after the 12 year period from date of acquisition of the land has elapsed. The 12% rate applies because the notice of promise of sale was registered with the IRD before the 17th November 2014.
The remaining 5 units in respect of which a notice of promise of sale was not registered with the IRD will be subject to 8% tax on the transfer value since the land was acquired after the 31st December 2003.

This example also applies in the case where the transferor is an individual and where the property is located within a special designated area.

Company X purchased land situated within a special designated area before the 1st January 2004, which was developed into 20 units for resale. 10 of these units forming part of the project that have been sold by the 31st December 2014 have all been subject to 35% tax on the profit since the owner elected to exclude the first transfer from the final withholding tax system. A notice of promise of sale was registered with the IRD before the 17th November 2014 in respect of 5 unsold units out of which 3 will be transferred before the 2nd January 2016 and the other two will be transferred after the 1st January 2016. The remaining 5 units in respect of which a notice of promise of sale was not registered with the IRD before the 17th November 2014 are expected to be sold after the 1st January 2016.

The 5 units in respect of which a notice of a promise of sale has been given to the IRD before the 17th November, 2014 will remain subject to 35% tax on the profit irrespective of when they are sold.
The remaining 5 units in respect of which a notice of promise of sale was not registered with the IRD will be subject to 10% tax on the transfer value since the land was acquired before the 1st January 2004.

Company X purchased land on the 31st December 2008, which was developed into 20 units for resale. None of these units have been sold by the 31st December 2014 and no notice of a promise of sale has been given to the IRD before the 17th November, 2014, in respect of these units.

The 20 units will be subject to 8% final withholding tax on the transfer value.

Company X purchased land on the 31st December 2003, which was developed into 20 units for resale. None of these units have been sold by the 31st December 2014 and no notice of a promise of sale has been given to the IRD before the 17th November, 2014, in respect of these units.

The 20 units will be subject to 10% final withholding tax on the transfer value since the land was acquired before the 1st January 2004.

Could you outline the current applicable tax provisions for immovable property?

With effect from 1st January 2015 the capital gains tax system was, with minor exceptions, fully replaced by the tax on property transfer system, in respect of immovable property situated in Malta. Capital gains continued to apply in respect of the transfer of shares and other prescribed items as well as immovable property situated abroad.
The new Final Withholding Tax is now 8% on the value of the property transferred. There are however four exceptions to this as follows:
1.    On a transfer of property not forming part of a project, the applicable final withholding tax rate amounts to 5% on the value of the property transferred if the property is transferred before five years from the date of its acquisition.
2.    In the case of properties acquired before the 1st January 2004 in respect of which a notice of a promise of sale or transfer relating to that property had not been given to the Commissioner before the 17th November, 2014, the applicable final withholding tax rate amounts to 10% of the value of the property transferred.
3.    2% final withholding tax applies on a transfer of property that was immediately before the transfer owned by an individual, or co-owned by two individuals, who had declared in the deed of the acquisition of that property that the said property had been acquired for the purpose of establishing therein or constructing thereon his or their sole ordinary residence, and the transfer is made not later than three years after the date of the acquisition thereof.
4.    5% final withholding tax applies when it is a transfer of property situated in Valletta, that was acquired by the transferor before the 31st December 2018, and such property has been restored and/or rehabilitated after the date of acquisition in accordance with any planning permit issued for this purpose by the Malta Environment and Planning Authority (MEPA), and on completion of such restoration and/or rehabilitation works are certified as satisfactory by MEPA before the 31st December 2018.  The said transfer of property has to be made not later than five years from the 31st December 2018.
Transfers of inherited immovable property has remained subject to a 12% final tax on the difference between the transfer value and the cost of acquisition (denunzja); and to a 7% final tax on the consideration if inherited before 25/11/1992. Nothing has changed in this regard.
The previous exemptions are not affected by the new system and will therefore continue to apply. For example: transfers of one’s own residence, donations as prescribed, assignments during separation and divorce, intra-group transfers, etc, will remain exempt from tax.
There are transitory provisions with respect to properties in respect of which a notice of a promise of sale or transfer relating to that property has been given to the Commissioner before the 17th November, 2014.

What happens if in the period of ownership of my residence there is a change in the dwelling house?

Where at any time in the period of ownership there is a change in the dwelling house or the part of it which is occupied as the individual’s residence, whether on account of a reconstruction or conversion of a building or for any other reason, or there have been changes as regards the use of part of the dwelling house for the purpose of a trade, business or profession or for any other purpose, the relief given may be adjusted in such manner as the Commissioner may determine in an assessment.

If I have a garden or a garage does it also form part as my own residence for the purpose of the exemption?

‘Own residence’ means the principal residence owned by the taxpayer or his spouse being a dwelling house which has been the owner’s only or main residence, including land transferred through the same deed with the principal residence, which the owner has for his or her own occupation and enjoyment with that residence as its garden or grounds consisting of an area which, regard being had to the size and character of the dwelling house, is required for the reasonable enjoyment of it as a residence. A garage attached to or underlying a house or block of flats, or a garage of not more than 70sqm situated within 500m of the dwelling house, and transferred through the same deed with the principal residence shall be deemed to be included as part of the residence.

What is the applicable value on purchased immovable property, in the case of buyers?

5% Duty on Documents calculated on the purchase price of the immovable property
If the Buyer is a European Union Citizen declaring on deed that he shall reside in the property being purchased as his sole ordinary residence, then the preferential rate of 3.5% is applied on the first €150,000 of the price.
In respect of transfers of immovable property, made on or after the 5th November 2013 but before the 1st July 2015, no duty shall be chargeable on the first €150,000 of the aggregate value of the consideration paid for the acquisition of such property, provided that this is the first immovable property acquired inter vivos by such person.

How will the new final withholding tax system apply in the case of property transferred on or after 1st January 2015 where a notice of a promise of sale or transfer relating to that property had been given to the Commissioner before the 17th November 2014?

A transfer of property, not forming part of a project and not made by the owner of an SDA project, made on or after the 1st January 2015 in respect of which a notice of a promise of sale or transfer relating to that property had been given to the Commissioner before the 17th November, 2014, and which is transferred to the same person or persons appearing on the said promise of sale agreement before the 1st January 2016 may be excluded from the Final withholding tax system if the transfer is made not later than twelve years after the date of the acquisition of the property.
In the case of a transfer of property acquired before the 1st January 2004 in respect of which a notice of a promise of sale or transfer relating to that property had been given to the Commissioner before the 17th November, 2014 the applicable final withholding tax rate shall be 12% of the value of the property transferred unless the previous paragraph applies and the transfer is excluded from the Final withholding tax system.

If a promise of sale or transfer relative to a property that forms part of a project or of property situated within a special designated area given to the Commissioner before the 17th November 2014 is cancelled after this date or expires, and such a transfer would have been subject to 12% final withholding tax if the transfer was made before the 1st January 2015, will an eventual transfer be taxed under the new system if made on or after the 1st January 2015 i.e. at a lower rate of 8% or 10%?

Where a notice of a promise of sale or transfer relating to a property that forms part of a project or of property situated within a special designated area given to the Commissioner in accordance with the provisions of Article 3(6) of the Duty on Documents and Transfers Act before the 17th November, 2014 is cancelled after the said date or expires and, either the said property is transferred to the same persons appearing on the said promise of sale which has been cancelled or, another property forming part of the same project is transferred to the same persons appearing on the said promise of sale which has been cancelled or has expired, any of such transfers shall be deemed to be transfers in respect of which a notice of a promise of sale or transfer has been given to the Commissioner before the 17th November, 2014, which means that such transfers will remain taxable at the rate of 12% final tax.

Will it be possible to elect to exclude a transfer property from the scope of the final withholding tax system on or after the 1st January 2015?

 Before the 1st January 2015 the transferor in a transfer of property made not later than twelve years after the date of the acquisition thereof or of property situated within a special designated area could elect by means of a declaration made to the notary at the time of the publication of the deed of the transfer and recorded in the said deed to exclude that transfer from the scope of the final withholding tax system. However as from 1st January 2015 it will no longer be possible to elect to exclude such transfers from the scope of the final withholding tax system except for limited cases explained further below.

What happens in the case of transfers made on or after the 1st January 2015 of property that forms part of a project or of property situated within a special designated area?

In the case of transfers made on or after the 1st January, 2015 of property that forms part of a project or of property situated within a special designated area, where the transferor had elected to be excluded from the 12% final tax system such an election will no longer apply as from 1st January 2015 and any transfers taking place after this date will be subject to either 8% final withholding tax or else 10% final withholding tax in the case where the property was acquired before the 1st January, 2004, unless a notice of a promise of sale or transfer relating to the property has been given to the Commissioner in accordance with the provisions of Article 3(6) of the Duty on Documents and Transfers Act made under that Act before the 17th November, 2014. If such notice was given, the property transferred in respect of which such notice was given will remain outside the scope of the final withholding tax system if transferred before 12 years from the date of acquisition unless the property is situated in a special designated area, in which case it will remain outside the scope of the final withholding tax system indefinitely.
Where the transferor had not elected to be excluded from the 12% final tax system any transfers taking place after the 1st January, 2015 shall be subject to either 8% final withholding tax or else 10% final withholding tax in the case where the property was acquired before the 1st January, 2004 unless a notice of a promise of sale or transfer relating to the property has been given to the Commissioner in accordance with the provisions of Article 3(6) of the Duty on Documents and Transfers Act made under that Act before the 17th November, 2014. If such notice was given the property transferred in respect of which such notice was given shall be subject to 12% final withholding tax.

Where a transfer of property is made by a person who is not resident in Malta and who is resident for tax purposes in another country, such person may currently opt out of the 12% final withholding tax system. Will this remain the same under the new system?

Currently a transfer of property by a person who is not resident in Malta and who is resident for tax purposes in another country may opt out of the 12% final withholding tax system if that person produces to the notary who publishes the deed of transfer a statement signed by the tax authorities of the country of that person’s residence that confirms that person’s residence in that country and that certifies that that person is subject to tax in that country on gains or profits derived from the transfer of immovable property situated in Malta.
As from the 1st January, 2015 such non resident persons may still be entitled to opt out of the final withholding tax system and be taxed under Article 5 (Capital gains) however the 7% provisional tax paid relating to a transfer of property made on or after the 1st January, 2015, shall not be available for refund under Article 48 of the Income Tax Management Act. No claim can be made to reduce the 7% provisional tax payable.

Are there any circumstances where an election may still be made to exclude the transfer from final withholding tax system and elect to be taxed on the profit or gain?

Yes, the following have remained unchanged:
•    A transfer of property that was, immediately before the transfer, co-owned by two individuals and the transfer is made by one of the co-owners to the other. An election may still be made to exclude the transfer from the scope of Article 5A.
•    A transfer of property to the Government of Malta made pursuant to an acquisition of that property in terms of the Land Acquisition (Public Purposes) Ordinance. An election may still be made to exclude the transfer from the scope of Article 5A.
•    A transfer made by means of a judicial sale by auction or in the course of a winding up by the Court. Such transfer is not taxable under Article 5A.
•    A transfer of property that had been used in a business for a period of at least three years and that is replaced within one year by property ("the new property") used solely for a similar purpose of the business. An election may still be made to exclude the transfer from the scope of Article 5A.

Do the exemptions prescribed under Article 5A(4) of the Income Tax Act still apply?

Yes, all the exemptions (described below) prescribed under Article 5A(4) of the Income Tax Act have remained the same.
•    A donation made by a person to his spouse, to his descendant or ascendant in the direct line, or to the spouse of any such descendant or ascendant, or, in the absence of any descendants in the direct line, to his brother or sister or to a descendant of his brother or sister, or to a philanthropic institution approved for the purposes of Article 12(1)(e).
•    A transfer of property that has been owned and occupied by the transferor as his own residence for a period of at least three consecutive years immediately preceding the date of transfer and provided that the property is disposed of within twelve months of vacating the premises.
•    The assignment of property between spouses consequent to a judicial or consensual separation or a divorce.
•    The assignment of property that formed part of the community of acquests between the spouses or was otherwise owned in common between them, to one of the spouses on the dissolution of the community, or the partition of such property between the spouses or the surviving spouse and the heirs of the deceased spouse.
•    A transfer of property from one company to another forming part of the same group.
•    The transfer of property upon the incorporation of a business or a partnership en nom collectif as a going concern into a limited liability company.
•    The settlement of property on trust, or the distribution or reversion of property settled on trust, or the transfer of all the property of a trust involving only a change in the trustee of a trust and where there is no change in the beneficiaries or in the beneficial interest.
•    A transfer of property by a company to its shareholder or to an individual related to its shareholder in the course of winding up or in the course of a distribution of assets pursuant to a scheme of distribution.

Which date is to be taken as the date of acquisition where the transferor is a company that had acquired the property by means of a transfer that qualified for the intra-group exemption?

For the purposes of determining whether property has been acquired by the transferor before the 1st January, 2004 where the transferor is a company that had acquired the property by means of a transfer that qualified for the intra-group exemption, the date of acquisition is the date when it first entered the group.

How am I taxed if I inherited the property after the 24th November 1992?

If the property was inherited after the 24th November, 1992 a 12% final tax on the difference between the transfer value and the cost of acquisition (denunzja) is applicable.

How am I taxed if the property was inherited after the 25th November 1992?

If you inherited the property before the 25th November, 1992 the tax is equal to 7% of the transfer value. The 7% tax is final.

How am I taxed if I acquired the property by donation?

A transfer of property that was acquired by the transferor in terms of a donation made more than five years before the date of the transfer in question, shall be chargeable at 12% of the excess, if any, of the transfer value over its acquisition value.

How am I taxed if I sell the property on or after the 1st January 2015 in the circumstances referred to in Article 31C(1) of the Income Tax Act?

A transfer of property, which has been restored in accordance with any scheme issued for this purpose by the Malta Environment and Planning Authority providing for the restoration of grade 1 or grade 2 scheduled property or property situated in an urban conservation area, made on or after the 1st January, 2015, shall be chargeable at the rate of 10% of the transfer value if a notice of a promise of sale or transfer relating to that property has been given to the Commissioner in accordance with the provisions of Article 3(6) of the Duty on Documents and Transfers Act or of rules made under that Act before the 17th November, 2014.
A transfer of property made on or after the 1st January, 2015 in the circumstances referred to in Article 31C (1) of the Income Tax Act, shall be chargeable at the rate of 7% of the transfer value. The 7% tax is final.

How am I taxed in the case of an assignment of a right obtained in terms of a promise of sale (konvenju)?

Any gains or profits derived from the assignment of any right obtained in terms of a promise of sale (konvenju), including a promise to alienate in any manner immovable property or a promise in respect of emphyteusis, shall in all cases be deemed to be gains or profits derived from a trade, business, profession or vocation falling within the scope of Article 4(1)(a) of the Income Tax Act to be declared in the tax return.

Can I deduct brokerage fees from the value of the property transferred, before applying the final withholding tax?

Yes, brokerage fees will remain deductible. The amount of brokerage fees paid by the transferor shall continue to be allowable as a deduction from the transfer value as long as the conditions of verification mentioned in the Tax on Property Transfers Rules are satisfied. The final withholding tax is applicable on the result.

Tista’ toggezzjona meta tirċievi kont tat- taxxa wara li ssir stima mill- perit tal- gvern tal- post li xtrajt?

L-Artkolu 56(1) tal- Kap. 364 tal-Liġijiet ta’ Malta jgħid li  tista’ tagħmel oġġezzjoni għal- Likwidazzjoni tal-Kummissarju tat-Taxxi – basta din  titressaq fi żmien tletin ġurnata min-notifika lit-tax payer ta’ l-Avviż ta’ Likwidazzjoni.

X’ għandu jkun fiha l-oġġezzjoni wara Avviż ta’ Likwidazzjoni marbuta ma' valuation tal- perit tal- gvern?

L-individwu għandu jitlob għal revoka jew għal reviżjoni tagħha b’avviż ta’ oġġezzjoni bil-miktub li jispeċifika r-raġunijiet għall-oġġezzjoni għal-liwkidazzjoni. Din trid issir fi żmien tletin ġurnata mid-data tan-notifika ta’ l-avviż imsemmi qabel.

Jista’ jitwal iż-żmien ta’ tletin ġurnata biex tagħmel oġġezzjoni lill- Kummissarju tat- taxxi marbuta ma valuation tal- perit tal- gvern?

Iva. L-Artkolu 56(1) tal-Kap. 364 fil- fatt għandu proviso li jgħid li “l-Kummissarju għandu jtawwal l-imsemmi żmien skond kif ikun xieraq fiċ-ċirkostanzi meta jkun sodisfatt li l-persuna ma setgħetx tikkontesta l-likwidazzjoni minħabba nuqqas minn Malta, mard jew kull raġuni oħra.”

X’ rimedju għandu t- taxpayer wara li jirċievi kont tat- taxxa marbut ma valuation tal- perit tal- gvern?

L-ewwel, it-taxpayer jeħtieġ li jressaq oġġezzjoni ghall-Likwidazzjoni quddiem id-Direttur Ġenerali (Taxxi Interni). Jekk din ma tiġix milqugħa kif mitlub, huwa jista’ jibda proċeduri quddiem it-Tribunal Amministrattiv. Dawn il-proċeduri jistgħu jiġu istitwiti biss mit-taxpayer kontra d- Direttur Ġenerali (Taxxi Interni) u mhux vice versa, u l-iskop tagħhom huwa biss dak ta’ reviżjoni u mhux ukoll ta’ kundanna għal ħlas f’kaz li t-talba tat-taxpayer għar-reviżjoni tiġi miċħuda jew milqugħa in parte biss.

Kemm hemm żmien biex it-taxpayer jagħmel appell quddiem it- Tribunal Amministrattiv?

Kull persuna illi tħoss ruħha aggravata b’likwidazzjoni u li ma tkunx ftehmet mal-Kummissarju dwar l-ammont ta’ taxxa li għandha titħallas tista’ tagħmel appell lit-Tribunal fi żmien tletin ġurnata mid-data tan-notifika lilha ta’ avviż tar-rifjut tal-Kummissarju li jemenda l-likwidazzjoni kif mitlub [Artikolu 58].

Wara li l- Kummissarju jirċievi oġġezzjoni bil- miktub, hemm xi żmien biex dan iwieġeb lit-taxpayer?

Iva. Il-Kummissarju għandu jiddeċiedi t-taxxa b’ordni bil-miktub u jinnotifika lill-persuna li toġġezzjona avviħ li hu jirrifjuta li jemenda l-likwidazzjoni kif mitlub minn dik il-persuna fi żmien tlett snin mid-data ta’ meta jirċievi l-imsemmi avviż ta’ oġġezzjoni [Artikolu 56].

F’liema stadju il- likwidazzjoni tkun finali ai fini tal- ligi?

Il-likwidazzjoni tkun finali u konklużiva għall-finijiet kollha tal- liġi f’ dawn is-sitwazzjonijiet:

•    Meta ma tkun saret ebda oġġezzjoni fi żmien tletin ġurnata mid-data tan-notifika ta’ l-Avviż ta’ Likwidazzjoni;
•    Meta ma jkunx sar  appell validu kontra l-likwidazzjoni jew l-appell irtirat jew ċedut;
•    Meta l-ammont tat-taxxa jkun ġie miftiehem;
•    Meta l-ammont ta’ taxxa u taxxa addizzjonali jitħallas;
•    Meta l-ammont tat-taxxa li għandha titħallas ikun ġie stabbilit wara oġġezzjoni jew appell.

X’ jiġri meta l-likwidazzjoni tkun finali?

Meta l-likwidazzjoni tkun finali u konklużiva, din hija titolu eżekuttiv fi hdan it-tifsira u għall-finijiet tat-Titolu VII tat-Taqsima tat-Tieni Ktieb tal-Kodiċi ta’ Organizzazzjoni u Proċedura Ċivili.

X’ jiġri jekk il- likwidazzjoni tkun finali u t-taxpayer ma jħallasx?

Jekk taxxa u/jew taxxa addizzjonali u/jew imgħax ma jitħallasx kif preskritt fil- Kap. 364, il-Kummissarju għandu jinnotifika nota ta’ talba lill-persuna responsabbli għall-ħlas, u jekk ma jsirx il-ħlas fi żmien ħmistax -il jum mid-data tan-notifika ta’ dik in-nota ta’ talba, il-Kummissarju jista’ jinforza l-ħlas bis-saħħa tat-titolu eżekuttiv wara jumejn
min-notifika ta’ intimazzjoni għall-ħlas magħmula permezz ta’ att ġudizzjarju.

Jekk il- Kummissarju jirrifjuta l- oġġezzjoni tat- taxpayer għal- valur tal- perit tal- gvern, għandek taghmel kawza quddiem il- Qorti?

Il-Qorti m’hijiex vestita bil-kompetenza li tissindika l-quantum tal-likwidazzjoni finali u konklussiva rappreżentanti taxxa u taxxa addizzjonali.  Dak is- sindikar jista’ jsir a tempo debito skond il-proċedura stipulata fil-Kap. 364 tal-Liġijiet ta’ Malta, u cioè tramite appell lit-Tribunal ta’ Reviżjoni Amministrattiva minn Avviż ta’ Rifjut ta’ Oġġezzjoni fi zmien tletin (30) ġurnata skond l-Artikolu 58 tal-Kap. 364 tal-Ligijiet ta’ Malta w appell lill-Qorti ta’ l-Appell fi żmien tletin (30) ġurnata ai termini ta’ l-Artikolu 59 ta’ l-imsemmi Kap. 364 tal- Ligijiet ta’ Malta.

F’ kaz ta’ tpartit ta’ proprjeta’, kif tinhadem it-taxxa?

Skont l-Artikolu 41 tal-Kap. 364, kuntratt ta’ permuta għandu jitqies li jikkostitwixxi trasferiment wieħed u t-taxxa li titħallas fuq dak il-kuntratt għandha tinħadem fuq l-ogħla mill-valuri tal-ħwejjeġ li jiġu trasferiti. Jekk per modi di dire, il-valur reali tal-proprjetà trasferita fl-ewwel parti tal-kuntratt kien ta’ €240,000 u l-valur reali tal-proprjetà trasferita fit-tieni parti tal-kuntratt kien ta’ €100,000, il-valur taxxabbli skond il-Kap.364 huwa l-ghola valur, ossja dak ta’ €240,000.

Fil- kaz ta’ inter vivos, huwa biss min jirċievi bi trasferiment li jrid iħallas it-taxxa addizjonali?

Le - kemm min jirċievi bi trasferiment kif ukoll min jitrasferixxi huma soġġetti għall-ħlas tat-taxxa addizzjonali.

Kemm tista’ tkun id-differenza bejn il- valur dikjarat fil- kuntratt u dak stmat mill- perit tal- gvern biex it-taxpayer ma jeħilx taxxa addizzjonali?

Il-Kummissarju jrid ikun sodisfatt li l-prezz jew dak li jkollu jingħata bi ħlas jew valur għal immobbli kif dikjarat f’kuntratt ta’ trasferiment jew f’dikjarazzjoni ta’ trasferiment causa mortis m’huwiex inqas minn hamsa u tmenin fil-mija tal-valur reali.

What is the new rate of the final withholding tax on property and from when is it effective?

With effect from 1st January, 2015 the previous system consisting of both a 12% final withholding tax on the transfer value and 35% tax on the profit or gain was replaced by one final withholding tax of 8% on the value of the property transferred.

Having said that, there are four exceptions as follows:
- On a transfer of property not forming part of a project, the applicable final withholding tax rate shall be 5% on the value of the property transferred if the property is transferred before five years from the date of its acquisition. Where the transferor is a company that had acquired the property by means of a transfer that qualified for the intra-group exemption, it shall be deemed to have acquired the property on the date on which the property had previously last been acquired by a company by means of a transfer that did not qualify for the intra-group exemption. This rate will not apply where the said property was at any time within the period of five years preceding the transfer, owned by a person related to the transferor and the property formed part of a project at such time. (An individual is deemed to be related to the transferor if the transferor is a body of persons of which the said individual is, directly or indirectly, a shareholder, partner or member. Two bodies of persons are deemed to be related persons if they are, directly or indirectly, controlled or beneficially owned as to more than twenty-five percent by the same persons.)
- In the case of properties acquired before the 1st January 2004 in respect of which a notice of a promise of sale or transfer relating to that property had not been given to the Commissioner before the 17th November, 2014, the applicable final withholding tax rate shall be 10% of the value of the property transferred.
- 2% final withholding tax applies on a transfer of property that was immediately before the transfer owned by an individual, or co-owned by two individuals, who had for the purposes of Article 32(4)(a) of the Duty on Documents and Transfers Act declared in the deed of the acquisition of that property that the said property had been acquired for the purpose of establishing therein or constructing thereon his or their sole ordinary residence, and the transfer is made not later than three years after the date of the acquisition thereof. This shall only apply where the said individual does not own any other residential property at the time of the transfer. The notary who receives any deed of such a transfer shall record in the deed a written declaration by the individual so transferring that he does not own any other residential property at the time of the transfer and the notary shall warn the said individual of the importance of the truthfulness of such declaration.
- 5% final withholding tax applies when it is a transfer of property situated in Valletta, that was acquired by the transferor before the 31st December 2018, and such property has been restored and/or rehabilitated after the date of acquisition in accordance with any planning permit issued for this purpose by the Malta Environment and Planning Authority (MEPA), and on completion of such restoration and/or rehabilitation works are certified as satisfactory by MEPA before the 31st December 2018. The said transfer of property has to be made not later than five years from the 31st December 2018.

(Source: ird.gov.mt)