Tax and Duty Schemes on the Transfer of Immovable Property

• The replaced property has been owned and occupied as own residence for a period of at least 3 consecutive years immediately preceding the date of transfer.
• The acquirer does not require a permit in terms of Immovable Property (Acquisition by Non-Residents) Act.
• Replaced property must have qualified for a reduced rate of duty upon acquisition for the purpose of establishing therein or constructing thereon the sole, ordinary residence of the transferor.
• The replacement property is acquired by the transferee inter vivos for the purpose of establishing therein or constructing thereon their sole, ordinary residence but not through a donation from close relatives as defined.
• At time of acquisition, the transferee must not own any other residential property acquired inter vivos other than the replaced property.
• If the replaced property had qualified for the duty exemption under the First Time Buyer Scheme certain duty exemptionor as a donation granted for the purpose of establishing / constructing a sole, ordinary residence, 5 years must pass before this incentive can be availed of.
• Whereas the relevant duty form must reach the Revenue by 28 February 2023, the claim for duty refund must be made in writing within 6 months from the contract.

The incentives apply provided that:

• The conditions relating to completion and vacancy of the building are confirmed by an architect’s report and a report issued by ARMS Ltd and/or other evidence as may be determined by Commissioner for Revenue [ARMS Ltd being the company that manages water and electricity billing in Malta].
• The UCA status is confirmed by a certificate issued by the Planning Authority and/or other evidence as may be determined by Commissioner for Revenue.
• The transfer must be one whereby the acquirer does not require a permit in terms of Immovable Property (Acquisition by Non-Residents) Act or, if the property is situated in a Special Designated Area (‘SDA’), the acquirer would not have required such permit had the property been located in a non-SDA.
• All the prescribed documents and declarations are duly supplied.
• At any point after the transfer but until the date when the property is transferred again inter vivos or causa mortis;
  • the building is neither demolished nor subjected to structural alterations or additions as a result of which it is divided into more transferable units than the number of transferable units that comprised the property at the time of the transfer. In addition, no permit for such demolition or works must be issued to the owner who benefited from the exemption.
  • no transfer is made of any divided part of the property.
• Should the latter conditions be breached within the said timeframe, the relevant tax and duty would become payable to the Revenue by the acquirer of the property at the time of relief, due on the date of the breach.
• When there is a transfer that benefitted from one of these schemes followed by a subsequently transfer of a divided part of the same property, the latter transfer cannot benefit from these schemes.
• The relevant notice of transfer is filed with the Revenue by not later than 31 January 2025.

When the transfer value is higher than €750,000, the excess is taxed and/or dutiable at the normal rates.

This measure, effective from 12 October 2021, provides an exemption from duty on the first €750,000 of the higher of the value and consideration of a property that is developed subsequent to the date of the transfer in conformity with certain criteria, as approved by the competent authority. Such authority, comprising of a board or any other entity that will be designated for the purpose may publish guidelines relating to procedure, terms and conditions and architecture / design requirements. According to the 2022 Budget Speech, such incentive is targeted at ‘new properties that are built in a typical traditional Maltese style and architecture’.

The incentive operates as a refund scheme with the duty being refunded to the payor of the duty upon application and after fulfilment of all conditions.

The transfer must be made by the end of 2024.

The incentive applies provided that:

• The approval of the competent authority is filed with the Revenue within 3 months from the date of its issue together with any other required evidence.
• The transfer must be one whereby the acquirer does not require a permit in terms of Immovable Property (Acquisition by Non-Residents) Act or, if the property is situated in a Special Designated Area (‘SDA’), the acquirer would not have required such permit had the property been located in a non-SDA.
• At any point after the transfer, but until the date when the property is transferred again inter vivos or causa mortis, the property is neither demolished nor subjected to structural alterations or additions as a result of material changes to the approved architectural design, nor dividend into more transferable units, unless expressly allowed by the competent authority.
• Should the latter conditions be breached, the duty benefit would become refundable to the Revenue by the owner of the property at the time the approval was granted, due on the date of the breach.
• The relevant notice of transfer is filed with the Revenue by not later than 31 January 2025.

When the transfer value is higher than €750,000, the excess is taxed and/or dutiable at the normal rates.

This measure provides that no transfer tax and duty on documents and transfers is due on the first €200,000 of the transfer value of immovable property transferred after 1 January 2022 where:

• such property had been leased for a period of 10 years ending on the date of the transfer, and
• during the whole 10-year period the tenant was entitled to a benefit in respect of that lease under the Private Rent Housing Benefit Scheme administered by the Housing Authority.

If the above conditions are satisfied, except that:

• the transferee is not the said tenant, or
• the lease period is for less than 10 years but more than 3 years; or
• the tenant was entitled to the Private Rent Housing Benefit for less than 10 years but more than 3 years;

the applicable tax and duty rates are halved on the first €200,000.

Tax and duty on the transfer value in excess of €200,000 remain chargeable at the applicable rates.

The duty exemption/reduction does not apply if the acquirer requires a permit in terms of Immovable Property (Acquisition by Non-Residents) Act or, if the property is situated in a Special Designated Area (‘SDA’) the acquirer would have required such permit had the property been located in a non-SDA.

Certain documentation would need to be filed with the Revenue for the exemption/reduction to apply.

On the part of the purchaser of immovable property in Malta, the scheme provides that the duty rate chargeable will be calculated at 1.5% on the first €400,000 of the higher of the consideration and the market value of such property, with the remaining duty being calculated at the applicable duty rate (normally 5% unless qualifying for some other reduced rate). On the part of the transferor of the immovable property, where the transfer would otherwise have been subject to tax at 8% or 10%, the rate of final property tax is reduced to 5% on the same first €400,000, with the excess value taxable at the standard applicable rate. 

The measure applies on transfers made until 30 June 2023 where a promise of sale or promise of transfer agreement has been entered into by 31 December 2021. Standard procedures apply for the payment of the tax by the notary publishing the promise of sale or deed of transfer.

The duty reduction  applies provided that:

• The acquirer does not require a permit in terms of Immovable Property (Acquisition by Non-Residents) Act.
• If the property is situated in a special designated area (‘SDA’), the acquirer would not have required a permit in terms of the Immovable Property (Acquisitions by Non-Residents) Act had the property been located in a non-SDA.
• The reduced rate of duty is not applied in conjunction with the exemption under Article 32C of the Duty on Documents and Transfers Act on the same transfer, applicable to donations of immovable property by a person to his descendants in the direct line for the purpose of the donee establishing therein or constructing thereon, his sole ordinary residence.

Claw back provisions apply for both tax and duty in the case of transfers or acquisitions of immovable property with an abusive intent.