Income Tax Act, article 5A
Malta property transfer tax: 8%, 5%, 2% and the exemptions
Updated
Malta taxes the sale of property on the price, not the profit, and the notary pays it over before you see the money. Which rate applies turns almost entirely on how and when you acquired it.
How the charge works
Article 5A of the Income Tax Act charges tax on the transfer value, which article 5A(6)(a) defines as the higher of the market value of the property and the consideration paid or payable. Article 5A(9)(a) says the amount charged shall not be reduced by any deduction whatsoever, except as prescribed, and article 5A(10)(a) makes the tax final: separate from all other tax, not available as a credit against anyone's liability, and not taken into account in any refund.
Article 5A(11) makes the tax due by the transferor and payable within fifteen working days of the transfer, and unless the Commissioner orders otherwise the payment is made by the notary publishing the deed, by bank draft or a cheque drawn on the notary's own account. There is no provisional tax under article 43 of the Income Tax Management Act on a transfer within article 5A.
The rate table
- 8% of the transfer value
- The general rate under article 5A(5)(a) for transfers made on or after 1 January 2015, replacing the 12% that the sub-article still opens with.
- 5% of the transfer value
- Article 5A(5)(e): a transfer made not later than five years after acquisition, of property not forming part of a project. Two provisos bite: it does not apply where the property was owned by a related person and formed part of a project in that period, and it does not apply if development-permission works were carried out on it in the five years before the transfer, unless the transferor had acquired it as their sole ordinary residence and declared that in the deed of acquisition.
- 2% of the transfer value
- Article 5A(5)(g): property that was, immediately before the transfer, owned by an individual or two co-owners who had declared on acquisition that it was for their sole ordinary residence, transferred not later than three years after acquisition, provided the individual owns no other residential property at the time. The notary records that declaration.
- 7% of the transfer value
- Article 5A(5)(c): property acquired causa mortis before 25 November 1992, or acquired causa mortis on or after that date and transferred by judicial sale by auction.
- 10% of the transfer value
- Article 5A(5)(f) for property acquired before 1 January 2004, notwithstanding the 8%, restored-property and five-year rates; and article 5A(5)(d) for transfers in the circumstances of article 31C(1), restored scheduled or urban conservation area property.
- 12% of the gain
- Article 5A(5)(b): property acquired causa mortis after 24 November 1992, or by a donation made more than five years before the transfer, taxed on the excess of transfer value over acquisition value rather than on the whole price. The transferor may elect out of this paragraph in the deed.
- 5% of the transfer value
- Article 5A(5)(h): urban conservation area or scheduled property restored or rehabilitated under a permit applied for on or after 1 January 2015, transferred on or after 1 January 2016, with the completion certificate produced to the notary.
When nothing is chargeable
- Your own residence. Article 5A(4)(c) exempts a transfer of a dwelling house, not part of a project, owned and occupied by the transferor as their own residence for at least three consecutive years immediately preceding the transfer, provided it is disposed of within twelve months of vacating and declared to be the main residence by an election made to the Commissioner. Periods of ownership and occupation by a direct ascendant or a deceased spouse can be counted.
- Donations within the family. Article 5A(4)(a) exempts a donation to a spouse, a descendant or ascendant in the direct line or their spouse, or, absent descendants, to a brother or sister or their descendants. On a later sale, the date of acquisition reverts to the original owner's acquisition date.
- Separation and divorce. Article 5A(4)(d) and (e) exempt assignments between spouses on separation or divorce, and on the dissolution of the community of acquests or a partition after a spouse's death.
- Group and incorporation transfers. Article 5A(4)(f) and (g) exempt intra-group transfers qualifying under article 5(9) and the incorporation of a business as a going concern into a limited liability company under article 5(15), each with its own claw-back conditions.
The declaration risk
Article 5A(12)(a) obliges the parties to declare to the notary every fact that determines whether the article applies, the amount chargeable and any exemption, including the value they consider reasonably reflects market value where that is higher than the price. The notary must warn them about the truthfulness of those declarations and record the warning in the deed. Where the Commissioner considers that tax was chargeable on a transfer declared exempt, or that more tax was due, an order may be issued up to six years from the end of the year in which the transfer was notified, with additional tax.
This page sets out statutory rates. Which one applies depends on dates, declarations made in the deed of acquisition, and whether property forms part of a project, none of which a website can verify. Have the position confirmed by a Maltese notary or tax adviser before you sign a promise of sale.