New Property Tax as from 2015

With effect from 1st January 2015 the capital gains tax system will, with minor exceptions, be fully replaced by the tax on property transfer system, in respect of immovable property situated in Malta. Capital gains will continue 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 will be 8% on the value of the property transferred. There will however be four exceptions to this as follows:

  1. 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.
  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 shall be 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 will remain 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 current 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.