Taxation of gains derived on the assignment of rights acquired under a promise of sale of immovable property situated in Malta

A legal notice has been issued on 12 May 2020 which has codified the budget measures concerning the taxation on the assignment of rights acquired under a promise of sale of immovable property situated in Malta.

The salient features of these new rules are the following:

Such rules shall be applicable to any assignments made on or after 1 January 2020, provided that (i) the assignment is made through a written agreement which is signed by the assignor and assignee and authenticated by a notary or an advocate, (ii) notice is given to the Commissioner for Revenue within 21 days, and (iii) payment of tax is made in accordance with these rules.

Where the consideration does not exceed €100,000

Where the consideration for the assignment of rights acquired under a promise of sale does not exceed €100,000, the gain (being the consideration net of allowable deductions) shall be subject to tax at the rate of 15%. Such tax constitutes a final tax and shall not be available as a credit against the tax liability of any other person or as a refund.

The tax due in such cases is due to be paid to the notary or advocate who is also required to authenticate the relative written agreement. Such tax is to be remitted to the Commissioner for Revenue within 21 days from the assignment.

Where the consideration exceeds €100,000

Where the consideration for the assignment of rights acquired under a promise of sale exceeds €100,000, the first €100,000 shall be subject to tax in the manner as described above. The excess shall form part of the assignor’s chargeable income for the particular year in question and shall be subject to tax at the rates applicable to the assignor. Provisional tax at the rate of 7% is payable within 21 days, on the excess consideration less any allowable deductions.

Allowable deductions

Expenses which can be deducted against the consideration consist of any brokerage fees in relation to the assignment being transferred and any consideration paid by the assignor to acquire the promise of sale in the event that the assignor had acquired the rights from another person in question.

Where the consideration exceeds €100,000, the allowable deductions are to be apportioned and taken as a deduction separately against the first €100,000 of consideration and the excess.

These expenses can be deducted to the extent that relevant documentation as further defined in these rules is made available.