Tax on the Sale of Immovable Property

Dr Trudy Marie Attard | 02 Jul 2019

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The transfer of immovable property in Malta or any rights relating to such property attracts property transfers tax (“PTT”) as the default liability.

Malta Property Transfers Tax

PTT is payable by the transferor. It is calculated at 8% of the higher of the market value of the immovable property and the consideration for which it is sold. Other rates may apply in special cases. PTT is final so that it is neither available as a credit against the tax liability of any person nor taken into account for the purpose of determining the amount of any tax refunds. Indeed, Maltese companies are to allocate the distributable profits derived from such transfers and on which PTT is payable to the final taxed account. PTT must be paid within fifteen days of the transfer of property. 

Tax on Capital Gains

There are a number of instances where the transferor may choose to pay tax on the capital gains realised on the transfer of property, rather than a final withholding tax: 

  • A transfer from one co-owner to another co-owner;
  • A transfer of property to the Government of Malta following a requisition order;
  • A transfer made by means of a judicial sale by auction or in the course of a winding up by the Court.
  • A transfer of property used for business for a period of at least 3 years and which is replaced within one year used solely for a similar purpose of the business;
  • A transfer of property that forms part of a project made by a company that has issued listed bonds to the public.

If the transferor chooses to be taxed under the provisions regarding the tax on capital gains, he or she will be obliged to pay a 7% provisional capital gains tax on the deed. The actual gain would subsequently be declared in the transferor’s tax return and the provisional capital gains tax takes as a credit against the actual tax due. 

Malta Tax Exemptions

The following categories of transfers of immovable property situated in Malta are exempt from taxation:

  • Donations 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 an approved philanthropic institution.
  • 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 which is disposed of within twelve months of vacating the premises, on condition that such property is declared to be the main residence of the transferor.
  • The assignment of property between spouses, consequent to judicial or consensual separation or a divorce or upon dissolution of the community of acquests between the spouses.
  • A transfer of property between companies forming part of the same group.
  • The transfer of property upon the incorporation of a business or a partnership en nom collect if 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.

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. 

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