Several schemes allowing for the reduction in duty on the acquisition of immovable property are provided for in the Duty on Documents and Transfers Act, some of which are the following:
Additionally, currently both transferors and buyers can benefit from the COVID-19 measure providing for a reduced tax and duty rate of 5% and 1.5% respectively on the first EUR400,000 of immovable property transferred inter vivos. This scheme was initially part of Government’s Economic Recovery Plan for Malta, pursuant to the COVID-19 pandemic, and became effective on 9 June 2020 through Legal Notices 240 and 241 of 2020.
Hereunder is a summary of each scheme.
The incentive is for first time buyers of residential property. If made until the end of 2021, acquisitions of such property are exempt from duty on the first €200,000), or on a pro-rata portion in case of co-acquisition, of the aggregate value of the consideration paid for the acquisition of such immovable property. The incentive applies provided that:
The scheme applies also to buyers of residential property even if they had previously acquired inter vivos an undivided share of immovable property representing less than 25% of the real value of the whole of such property.
An amendment passed in July 2021 made it possible for persons who had acquired a garage of not more than 30m2 before the acquisition of their first ‘sole residence’ property, to avail themselves of the First Time Buyer Scheme on such latter property as long as certain duty relief was not availed of on the acquisition of the garage.
* Updated on 5 July 2021 following the publication of LN227 on 2 July 2021.
The incentive is for individuals who acquire residential property situated in Gozo by the end of 2021, including a garage as defined, or land on which only one residential unit is to be built. This incentive reduces the rate of duty from the standard 5% to 2% on the higher of the consideration or value of the property. Such applies provided that:
The incentive is for individuals who acquire residential property situated within a UCA or a property that is scheduled by the Planning Authority. The incentive, extended until the end of 31st December 2021, reduces the rate of duty from the standard 5% to 2.5% on the higher of the consideration or value of the property. The incentive shall be forfeited in case of illegal development of the property or if the property is not regenerated according to the characteristics of the area or restoration of the said property. Such incentive applies provided that:
The reduction applies in the case of a transfer of marketable securities issued by a company, or of immovable property being a commercial tenement used in a family business for at least 3 years preceding the transfer by donation from an individual to qualifying family members. A qualifying family member refers to one’s spouse or partner in a civil union, descendants and ascendants in the direct line and their relative spouses or civil union partners or in absence of descendants to one’s brothers or sisters and their descendants.
This reduction in duty applies provided that the donee does not transfer the securities/commercial tenement, inter vivos, within 3 years from the donation and uses the commercial tenement within a business carried on by the donee for 3 years following the donation.
No other exemption or relief from duty may be availed of.
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 by 31 December 2021 or on transfers made until 30 June 2022 where, in the latter case, a promise of sale or promise of transfer agreement is 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:
Claw back provisions apply for both tax and duty in the case of transfers or acquisitions of immovable property with an abusive intent.