The purchase of immovable property situated in Malta attracts duty on documents and transfers if the transfer document is executed in Malta. The default rate of tax payable by the buyer is 5% of the value of the property or of the purchase price, whichever is higher.
Where a beneficiary under a trust for immovable property transfers his beneficial interest, duty is payable on the value of immovable property which is proportionate to the value of the beneficial interest transferred by the beneficiary.
Reduction in the rate of duty
Maltese and EU citizens who were resident in Malta for a continuous period of five years at any time before the purchase of the property are entitled to a reduction in the rate of duty from 5% to 3.5% on the first €150,000 of the aggregate value of the consideration paid for the acquisition. One important condition is that the property is bought with the intention to live in it as the buyer’s sole, ordinary residence. If the purchase price is more than €150,000, the excess is charged at 5%.
A garage attached to or under the property, situated in the same block of apartments or a garage measuring not more than 30m2 which is within 500m of the property, is considered as the same residence if it is purchased on the same deed.
Refund of duty in whole or in part
Where a person had purchased his first residence under the reduced rate of duty and purchases a second residence (under the normal 5% rate), he is entitled to a refund of the 1.5% difference paid upon the purchase of the second residence where he sells his former residence within a year.
Exemptions to the payment of duty
No liability to duty arises upon a:
- Transfer of immovable property held in common between the same spouses, including a transfer of common property following personal separation or the dissolution of the community of acquests between them and including any partition of property held by them in common;
- Inter-group transfer within a group of companies where the individual, direct or indirect, beneficial owners of the companies are the same and each holds substantially the same percentage interest in the nominal share capital and voting rights in each of the said companies;
- Transfer of immovable property by a company to its individual shareholder in the course of winding up or a distribution of assets, where the shareholder owns all of the company’s share capital (disregarding the holding of one share having no preferential rights). This applies where the property was held as a capital asset by the company and the shareholder held all the company’s share capital for more than five years immediately prior to the transfer the, and as long as the property consists of one transferable unit, such as a home, office or garage.
In relation to property held on trust, no duty arises on the transfer of immovable property or real rights on such property:
- by a settlor to the trustees of a trust of which the settlor is the sole beneficiary and where the settlor has an irrevocable vested right to receive the trust property;
- by a settlor to the trustees of a trust created for the purpose of a designated commercial transaction or of an approved commercial transaction;
- between trustees consequent to a change in the trustees as long as no beneficial interest in the trust is transferred;
- by trustees to the settlor where the trust property reverts back to the settlor; and
- by trustees to a beneficiary of the trust where duty has been previously charged on the initial transfer by the settlor to the trustees, provided that duty shall be chargeable in relation to any increase in value between the initial transfer and the subsequent distribution.
Provisional duty upon a Promise of Sale
Upon entering into a promise of sale, the buyer is liable for 20% of the duty, which provisional payment should accompany a notification of the promised transfer to the Commissioner.
This article is intended to be of a general nature and is not intended to address the specific circumstances of any individual or entity. The authors shall not be responsible for any damage which may arise from reliance on information contained in this article. Specialist advice should also be sought before any action is taken on this basis.
