Malta Budget 2015: A Focus on – Taxation on transfers of immovable property

As from 1 January 2015 the current tax regime applicable to transfers of immovable property will be replaced with the new rules introduced by Hon. Minister Prof. Edward Scicluna during the presentation of the Budget for 2015.

The current system includes a final tax of 12% on the transfer value. Where possible, a 35% rate or the applicable progressive rates in the case of individuals, are also applied to the gain being made on the transfer of the property.

As from the coming year, a new final withholding tax system will be introduced and the tax on the gain will be removed. The new withholding tax will be as follows:

General Rule: A final withholding tax of 8% on the Transfer Value subject to the following exceptions:

  1. Transfers of immovable property acquired before 1 January 2004 will be subject to a final withholding tax of 10% on the transfer value;
  2. Transfers of immovable property by individuals, who do not trade in property, within five years from the date of acquisition, will be subject to a final withholding tax of 5% on the transfer value.

The above mentioned rules will come into force as from 1 January 2015.  Cases where the promise of sale for the said transfer has been registered with the Inland Revenue Department by 17 November 2014,  will however be taxed in accordance with the current tax regime.

Existing exemptions and relief will remain applicable, particularly with regards to:

  • Transfers of one’s own residence;
  • Intra group transfers;
  • Transfers made between spouses consequent to a separation or divorce.

Choice of Principal Residence for tax purposes

In accordance with the exemption applicable on transfers of one’s main residence, which is owned and occupied by the transferor for a period of 3 years immediately prior to transfer, a system is being introduced whereby individuals must state their principal residence in accordance with the new rules to be introduced.

For further information kindly contact Nicky Gouder.