Through the publication on 24 December 2021 of Legal Notice 490, the 15% tax rate on profits derived upon the assignment of rights on a promise of sale of immovable property situated in Malta has been extended by another year, until the end of 2022 (formerly 2021). Unlike the scheme as it was in 2020, the current 15% tax rate is not capped and applies on all the proceeds derived from valid assignments.
Valid assignments of promise of sale agreements are those made in writing, signed by the assignor and assignee and authenticated by a notary/advocate, notified to the Commissioner for Revenue through a notice of assignment within 21 days from the date of the agreement and in respect of which tax is paid according to the Assignment of Rights Acquired under a Promise of Sale Agreement Rules (‘the Rules’).
Certain expenses are allowed as a deduction from the proceeds received on assignment. Such allowable deductions are brokerage fees and, where the assignor was not a party to the promise of sale in question but had acquired its rights from another person in terms of a previous valid assignment, the consideration, if any, which it may have paid to that other person for the acquisition of those rights in terms of that previous assignment. Such deductions are allowable provided that they are backed up by the relevant documentation as prescribed by the Rules.
The 15% is a final tax and shall be payable by the assignor to the notary/advocate who authenticates the agreement, who in turn shall remit the tax to the Revenue within 21 days of the relative assignment.
The Rules include an anti-abuse provision which imposes a 35% tax rate when income from assignments, or transactions intending to be an assignment of rights under a promise of sale agreement, is not reported or is not reported fully and correctly.