Malta is an archipelago of islands found in the Mediterranean Sea. Enjoying a warm sunny climate and a safe high-quality lifestyle with excellent healthcare and education, it’s no wonder many are choosing to relocate to Malta.
Persons looking into their options when considering moving to Malta must investigate the rules and regulations when it comes to real estate. Purchasing property in Malta is quite straightforward, but what about selling it? In this article we look at the tax due when selling residential real estate in Malta.
Property Transfer Tax - Final Withholding Tax
There is tax due when transferring property (immovable property) as a seller, and this is called the final withholding tax. The normal rate of property transfer tax is 8%, however, there are different rates for specific situations as follows.
- 5% final withholding tax is due if the property is transferred not more than 5 years after it was acquired (and it does not form part of a project).
- 5% final withholding tax is due if the property is located in an Urban Conservation Area, or is a scheduled building, and has been acquired after 1st January 2016, and has been restored or renovated (proof is required in the form of a Planning Authority compliance permit). Urban Conservation Areas are locations with cultural importance and protected by the law. These locations are specifically listed by the Malta Environment and Planning Authority.
- 2% final withholding tax is due if the property was acquired to be used as a sole ordinary residence, and transferred within 3 yeas from acquisition.
There are some exceptions to the rule in very specific cases. Our legal and notarial team can guide you and provide further information.
Tax on Capital Gains
A property seller has the option to pay tax on capital gains made on a property transfer, rather than paying the final withholding tax. There are specific situations where this is possible, and our legal and notarial team can guide you accordingly. A seller would normally consult a notary in order to find out the most beneficial option for their particular situation.
Taxation of Non-Residents
Non-residents can choose to pay tax on capital gains made on transfers of property. This will require a statement produced by their country’s tax authority to confirm they are and subject to tax on gains or profits from the sale of property in Malta.
Property Transfer Tax Exemptions
There are some situations where property transfers are exempt from tax:
- Donations (to a spouse, a direct descendant and their spouse, a direct ascendant and their spouse, siblings, and to philanthropic organisations).
- When selling a property that is the seller’s main residence which has been owned and occupied as such for at least 3 years before the transfer.
- When selling property as a result of separation or divorce between spouses
- When selling property between companies which belong to the same group.
There are other situations where tax on property transfers is not due – a notary will be able to guide the seller in these cases.
When selling property, usually 8% tax is due. However, there are different tax rates for different situations – which is why a seller should always consult a notary to make sure they are paying the correct rate. Get in touch with us to connect with a notary.