Guidance note issued by the Commissioner for Revenue on the recovery measure regarding income tax and duty on documents and transfers

On 9 June 2020, the Commissioner for Revenue (‘CfR’) published a guidance note to clarify the recovery measure announced by the Government of Malta on 8 June 2020 relating to the reduced rates of income tax and duty on documents and transfers on certain property transfers. The measure forms part of a list of measures presented as part of the Government of Malta’s Economic Regeneration Plan and shall be implemented through the issuance of subsidiary legislation that shall be applicable retroactively with effect from 9 June 2020.

The measure shall apply to inter vivos transfers of immovable property or any real right over such property made on or after 9 June 2020, but before 1 April 2021. For transfers to qualify for the applicable reduced rates, the CfR should be given notice of the final deed in relation to the transfer by 30 April 2021.

Income tax

Where a transfer qualifies for the reduced rates under this measure and is subject to tax in terms of article 5A of the Income Tax Act (Chapter 123 of the Laws of Malta) at a rate that would otherwise exceed 5%, the tax on the first €400,000 of the transfer value shall be reduced to 5%.

In the case of a transfer of an undivided share of property, the benefit shall apply on a pro rata basis according to the share of the property being transferred.

Duty on documents and transfers

Where a transfer qualifies for the reduced rates under this measure and is subject to duty in terms of the Duty on Documents and Transfers Act (Chapter 364 of the Laws of Malta), the duty chargeable on the first €400,000 of the amount/value of the consideration for the transfer of the property/the value of the property, whichever is the higher, shall be levied at the rate of 1.5%.

This measure shall not apply to persons who require a permit for the purposes of the Immovable Property (Acquisition by Non-Residents) Act (Chapter 246 of the Laws of Malta). Furthermore, the reduced rate of duty shall not apply in conjunction with the exemption for transfers by a gratuitous title in terms of article 32C of the Duty on Documents and Transfers Act on the same transfer.
In the case of an acquisition of an undivided share of property, the benefit would apply on a pro rata basis according to the share of the property being acquired.

The full text of the guidance note may be found here.