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Property transactions: Malta tax and duty considerations

Deloitte Malta Tax Alert

11 April 2022

Transfers of immovable property situated in Malta can give rise to several Malta income tax and duty considerations, depending on the facts and circumstances of the transfer.

Income tax considerations

Transfers of immovable property situated in Malta are typically subject to Malta income tax at the rate of 8% on the transfer value of the property. However, various other rates might find application depending on the fact pattern, as outlined below:

8%

Default rate

10%

Transfers of property acquired before 1 January 2004

5%

Transfers of property acquired within 5 years from transfer when the said property does not form part of a project

Qualifying transfers of property situated in an Urban Conservation Area

7%

Certain transfers of property acquired through an inheritance

12%*

Certain transfers of property acquired through an inheritance / donation

2%

Transfers of main residence within the first 3 years of acquisition

*In certain cases, tax is levied on the difference between the transfer value and the acquisition value

Certain exemptions may apply in relation to specified transfers of immovable property, including:

  • Transfers between group companies
  • Donations (including settlement on trust) in favour of qualifying family members
  • Certain transfers pursuant to a liquidation
  • Qualifying transfers of main residence
  • Certain transfers between spouses and persons who are / were formerly married
  • Transfers of property situated in an Urban Conservation Area (capped at €750,000)

Duty considerations

Acquisitions of immovable property situated in Malta are typically subject to duty at the standard rate of 5% of the value of the property. Nevertheless, (partial) exemptions, reduced rates and / or (partial) rebates may apply in certain instances, as outlined below:

Exemptions

Acquisitions for the purposes of establishing sole ordinary residence (currently capped at €200,000)

Acquisitions of property situated in an Urban Conservation Area (currently capped at €750,000) 

Transfers between group companies

Certain transfers between spouses, persons who are / were formerly married and registered cohabitants 

Certain acquisitions of property acquired through an inheritance where the property inherited was previously the ordinary residence of the deceased

Certain acquisitions by descendants in the direct line of property acquired through an inheritance where the property inherited was previously the ordinary residence of the deceased

Reduce rates

Acquisitions of residential property in Gozo

Certain acquisitions of property acquired through an inheritance where the property inherited was previously the ordinary residence of the deceased and the acquirer

Rebates

Acquisitions of qualifying second residential property

Business transfers between family members

Certain income tax exemptions and reduced duty rates may find application in the context of donations of assets, including immovable property, between family members undertaken as part of a multigenerational transition.

In terms of current legislation, donations of assets between qualifying family members should be exempt from Malta income tax.

Additionally, duty is levied at the rate of 1.5% (instead of the standard 5% / 2% rate) in the following instances:

  • Donations of shares to qualifying family members
  • Donations of immovable property which had been used in a family business for a period of at least 3 years.

How can we assist?

Deloitte Malta can assist you in transactions revolving around transfers of immovable property, succession planning and generational transitions, as well as group and operational restructurings. Please do not hesitate to reach out to us for any further guidance you may require.

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