Taxation and Duties on Maltese Real Estate
As a general guideline, when it comes to the transfer of immovable property, there is typically an 8% final withholding tax based on the property's transfer value. However, it's worth noting that the Income Tax Act (ITA) outlines specific situations where this general rule doesn't apply. These exceptions include:
- Transfers of properties that are not part of a larger project are subject to a final withholding tax of 5% if the transfer occurs within five years of the acquisition date.
- If the property being transferred was purchased before January 1, 2004, a 10% final withholding tax will be imposed.
- For a sole residential property sold within three years of acquisition, a reduced final withholding tax rate of 2% applies. Conversely, if a residential property has been owned and continuously occupied for at least three years, the transfer is exempt from income tax.
- When transferring a property that was either inherited by the current owner after November 24, 1992, or acquired through a donation made more than five years before the transfer, a tax rate of 12% is applied to the difference between the transfer value and the acquisition value, as declared in the causa mortis deed.
- In cases where a property was inherited before November 25, 1992, or if the inheritance occurred on or after November 25, 1992, and the property is transferred through a judicial sale by auction, the final withholding tax rate is set at 7%.
Duty on Documents and Transfers:
In essence, the standard duty rate for the acquisition or inheritance of immovable property in Malta is 5% (equivalent to €5 for every €100 or part thereof). However, there are several exceptions to this general rule, including:
- First-time buyers acquiring residential property are exempt from duty on the first €200,000 of the transfer value, provided the acquisition is completed by December 31, 2023.
- If the property is being acquired for the sole purpose of establishing an ordinary residence, and the purchaser doesn't need an immovable property permit, the duty on the first €200,000 is charged at a reduced rate of 3.5%. Any amount exceeding €200,000 is subject to the standard 5% rate.
- Transfers of immovable property between married or formerly married spouses are duty-exempt.
- Donations of immovable property by individuals to direct descendants, used for their sole ordinary residence, are exempt from duty on the first €250,000 of the property's value. Any excess value is taxed at a rate of 3.5%. The property's value is considered to be 80% of its market value on the transfer date.
- Individuals purchasing residential property in Gozo benefit from a reduced duty rate of 2%, applicable until December 31, 2023.
- No income tax or duty relief is granted when transferring property to individuals requiring permits under the Immovable Property (Acquisition by Non-residents) Act or those who would have required such permits if the property wasn't in a specially designated area.. The Income Tax Act (ITA) and the Duty on Documents and Transfers Act (DDTA) outline various other exemptions and exceptions. These include recent tax benefits applicable until December 31, 2024, for individuals involved in the acquisition or sale of immovable property that falls under certain categories, such as vacant properties, those within Urban Conservation Areas, or properties developed according to approved criteria. Under these circumstances, there is an exemption from final withholding tax and duty on the first €750,000 of the property's value. Any amount exceeding €750,000 is subject to regular tax rates.