Last updated: 07/09/2022
The transfer of property in Malta
is subject to both the provisions of the Income Tax Act (Cap 123) and the Duty on Documents Act. The
seller must pay capital transfer taxes on the transfer of any property located
in Malta, whilst stamp duty is paid by the buyer. The tax and stamp duty paid
on the transfer of property situated in Malta is dependent on several factors
including the relationship between the buyer and the seller, whether the
transfer is subject to exemptions and whether or not the transfer benefits
under any incentive measure that may be available at the time of transfer.
Inter Vivos Transfer Following a Promise of Sale Agreement
For a transfer of property to
take place in Malta, a Notary must be engaged to process property searches and
file the necessary deeds with local authorities. The Notary is usually chosen
by the buyer and is also engaged to process provisional duty payments on behalf
of the buyer.
Once a promise of sale is signed, it is to be presented to
the Capital Transfer Duty section of the Office of the Commissioner for Revenue
within 21 days. At this stage a provisional duty of 1% is paid by the purchaser,
based on the market price or transfer value as per contract, whichever is the
higher. This can be explained with the following example:
|
Euro
|
Market Price
|
200,000
|
Transfer
Value
|
180,000
|
Final Stamp Duty
at 5%
|
10,000
|
|
|
Provisional
stamp duty at 1%
|
2,000
|
A receipt for provisional stamp duty will be issued to the
taxpayer once payment is received by the Capital Transfer Duty section. The
receipt confirms that the Notary has submitted a copy of the promise of sale to
the Office of the Commissioner for Revenue and that provisional duty has been
paid by the buyer.
After a Contract is Signed
Upon signing of the contract, the Notary publishing the deed
must submit the following documents:
a.
Relative ‘DDT1’ form at the Capital Transfer
Duty section
b.
Site-plans of the property being transferred
c.
A copy of the Public Registry note,
d.
The stamp duty payment (due by the buyer),
e.
The capital gains tax payment (due by the
seller)
f.
Schedule 8 (for residential property only)
outlining the physical attributes of the property being transferred.
The relative receipts are normally issued not later than 3
weeks from the date of submission of the notice of transfer (DDT1) to the
department.
At this stage, an internal
departmental board will decide whether an architect is sent to inspect the
property in order to establish the market value of the property. Although
valuations are carried out professionally, they remain subjective. For this
reason, the law allows a 15% tolerance between the declared value and the
market value established by the department’s architect. If the difference
between the market value as established by the department’s architect and the
price declared on the sales contract (deed) is more than 15%, the department
will issue a claim (assessment) both to the buyer and the seller on the
difference.
In the case of the buyer, the
claim issued will include the duty due together with the additional duty (penalty)
based on the difference in the value of property transfer. The duty is calculated
on the value added by the architect at the applicable rate with the additional
duty (penalty) being equivalent to 20% of the duty due. In addition, if the
claim is not paid, the transferee shall be liable to pay interest at the rate
of zero point seven five per cent (0.75%) for every thirty (30) days or part
thereof, which interest shall start accruing after the expiration of three
months from the date of notification of the original assessment.
What happens after an Assessment?
Taxpayers have a right to object
to any assessment raised by the Office of the Commissioner for Revenue. An
objection in writing will only be valid if it specifies the valid grounds it is
based upon and if submitted within thirty days from the date of service of
assessment. If no agreement upon objection is reached, the Commissioner shall
issue a refusal. The refusal may be appealed before the Administrative Review
Tribunal within 30 days from date of notification of the refusal.
Legal Action for Collection by the department
If a claim is not settled or not objected to, the Department
may initiate legal action for collection of the duty and additional duty. At
this stage, legal fees will start to accrue upon the pending claim.
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