Taxation on the Transfer of Immovable Property in Malta

A final withholding tax (FWT) system is applicable to to the transfer of immovable property in Malta, payable on the transfer value rather than net capital gains. This streamlines tax compliance while ensuring predictability for both local and international property holders.

• The standard rate of FWT is 8% of the transfer value.
• A reduced rate of 5% applies if:
  • The property does not form part of a development project, and
  • Is transferred within five years of acquisition.
• A further reduced rate of 2% applies to the transfer of a sole ordinary residence, where the property is sold within three years of purchase.

These provisions encourage short- to medium-term investment while ensuring tax fairness in personal residential sales.

Several categories of transfer of Immovable Property in Malta are exempt from final withholding tax altogether, particularly where no commercial gain is intended:

• Donations to close relatives, including spouses, direct descendants or ascendants, siblings (in the absence of descendants), or approved philanthropic bodies, are fully exempt.
• The assignment of property between spouses following separation or divorce, or the dissolution of a community of acquests, is tax-exempt.
• Transfers causa mortis (inheritance) are exempt from FWT, though they remain subject to stamp duty.
• Property owned and occupied as a main residence for at least three consecutive years, and sold within twelve months of vacating, qualifies for full exemption—provided it is declared as the transferor’s principal home.

These rules are aimed at facilitating intra-family succession and relieving private individuals from undue tax burdens on non-commercial transfers.

Certain property transfers in Malta, which is related to business activity or group restructuring, also benefit from exemption, provided legal conditions are met:

• Property used for business for at least three years, and replaced within one year for similar use, may be transferred without incurring tax.
• Transfers during the incorporation of a sole trader or partnership (en nom collectif) into a limited liability company are tax-exempt if structured as a going concern.
• Intra-group transfers between companies that form part of the same group—typically defined through direct or indirect control thresholds—may be exempt, enabling tax-neutral internal reorganisation.

These rules promote business continuity and efficient asset management within corporate structures.

Malta’s tax framework also provides exemptions for transfer of immovable property in Malta involving trusts, where no real change in beneficial ownership occurs:

• The settlement of property on trust, or its distribution or reversion, is exempt from FWT where beneficiaries remain unchanged.
• A change in trustee, with no alteration to the underlying beneficial interest, also qualifies for exemption.

These provisions support the use of trusts for estate planning, succession, and asset protection without triggering unintended tax consequences.