Selling inherited property in Malta: which rate applies to you

The two dates that decide it

Death on or after 25 November 1992

Article 5A(5)(b) charges 12% on the excess, if any, of the transfer value over the acquisition value. Because it is charged on the gain rather than the whole price, it is frequently the lower charge on a long-held family property, and it is the only paragraph in the sub-article that works that way.

Death before 25 November 1992

Article 5A(5)(c) charges 7% of the transfer value, on the whole price, with no reference to acquisition value.

A judicial sale by auction of property acquired causa mortis on or after 25 November 1992 also falls under the 7% paragraph rather than the 12% one.

The election out of the 12%

The third proviso to article 5A(5)(b) allows the transferor to elect out of that paragraph by a declaration made to the notary at the time of publication of the deed and recorded in it. Electing out moves the transfer to the ordinary rates in paragraph (a) or elsewhere in the sub-article. That is worth modelling where the property has appreciated sharply since the death, since 12% of a large gain can exceed 8% of the whole price.

Where the 12% does not apply at all

• Project property. The first proviso excludes property forming part of a project, meaning property acquired by donation more than five years earlier and then developed by the transferor into more than one transferable property.
• Recent donations. Where the property was donated five years or less before the transfer, the third proviso deems the transferor to have acquired it on the date of the acquisition preceding the donation, which pulls the case back into the ordinary rates.
• Property acquired before 1 January 2004. Article 5A(5)(f) charges 10% of the transfer value, notwithstanding paragraphs (a), (d) and (e), which is a separate route to check against the inheritance paragraphs.

Establishing the acquisition value

Article 5A(6)(b) provides that the acquisition value shall be determined in such manner as may be prescribed. For inherited property that generally means the value declared in the declaration causa mortis, which is why an heir's tax position on a future sale is partly fixed by paperwork completed years earlier when the estate was settled. It is worth locating that declaration before agreeing a price.

What the estate itself pays

Malta has no inheritance tax as such. What the heirs face on the inheritance is duty on the declaration causa mortis under the Duty on Documents and Transfers Act, a charge on the acquisition rather than on the disposal, and entirely separate from the article 5A tax discussed here. The two are settled at different moments, by different people, under different statutes.

Which paragraph of article 5A(5) applies, and whether an election out helps, depends on the date of death, the values declared at the time, what has been done to the property since, and whether it is part of a project. That is a matter for a Maltese notary and tax adviser with the deeds in front of them.