Property Tax When Selling Property in Malta for Private Individuals

Malta has a number of factors that make this archipelago nestled in the beautiful Mediterranean, an appealing and rewarding place to stay for locals and foreigners alike. Besides the fact that Malta enjoys 300 days of sun and is surrounded by crystal clear blue seas, the island’s year on year GDP growth and favourable tax laws has made it a magnet for foreign investment, this is especially true when looking at the property tax in Malta.

Unlike many other countries, there isn’t a long list of taxes associated with purchasing a property in Malta. There are no VAT implications on the purchase or sale of any immovable property situated in Malta or Gozo, nor is there any local council or municipal tax. 

Byers are subject to Stamp Duty Taxes (link to stamp duty page) and there are also some tax implications which are payable by the seller when selling immovable property in Malta which is known as Withholding Tax or Property Transfer Tax.  

What is Withholding Tax in Malta?

Withholding tax in Malta is an income tax that needs to be paid by the seller of immovable property in Malta from the funds collected after the sale of a property. Withholding tax in Malta is generally an applicable rate of 8% on the value of the property transferred minus brokerage/agency fees and is payable regardless of whether or not the seller has made any profit on the sale of the property.

Due to the Covid-19 pandemic, the Maltese Government recently reduced the general withholding tax rate to 5% until March 2021. 

What are the Exceptions to Withholding Taxes in Malta?

There are several circumstances that will allow for exceptions to be made to the withholding tax rate, providing that the seller applies for the deduction. These circumstances include, but may not be limited to the following;

- If the property is transferred before five years from the date of purchase.

• Should you decide to sell your immovable property within the first five years of purchase, the withholding tax will be reduced to 5%. This is providing that the property does not form part of a project.
• As of the 20th of March 2020, the 5% final withholding tax will not apply if at any time during the five years an application for development permission was needed under the Development Planning Act.

- If the property is transferred within three years from the date of purchase

• Should you decide to sell your property within the first three years of purchasing the property then the withholding tax will be reduced to 2%. This is providing that the property does not form part of a project and that you the seller declared on the original dead that the property was purchased for your sole ordinary residence.
• This is only applicable if the seller does not own any other residential property at the time of the sale.

- If the property is situated in an urban conservation area and or scheduled by the Planning Authority in terms of article 81 of the Environment and Development Planning Act for restoration and, or rehabilitation

• Should you the seller be able to produce to the notary the MEPA certificate confirming that the restoration and rehabilitation works were completed in compliance with the relative permit then a withholding tax of 5% will apply.
• This is providing that this deduction has not already been applied for previously on the transfer of the same property.

- If the seller purchased the property before the 1st of January 2004 and a notice of the promise of sale or transfer relating to the property was not given to the CfR before the 17th of November 2014 then the applicable withholding tax rate will be 10%.

• If the promise of sale or transfer relating to the property was given to the CfR before the 17th of November 2014 then the applicable withholding tax rate will be 12%.

When are you Exempt from Withholding Taxes in Malta?

There are some instances that will make the withholding tax null and void, these are but not limited to as follows;

- If the property is transferred after three years from the date of purchase

• Should you sell your property after the first three years from the date of purchasing the property but within one year after vacating the property you will be exempt from paying withholding tax.

- If the property is donated

• Should you the seller decide to donate your property to a spouse, descendants or other direct family members, then you will be exempt from paying withholding tax.

- If the property is assigned

• Should the property be on assignment due to a separation or divorce then you will be exempt from paying withholding tax.

What are the Withholding Taxes on Inherited Property in Malta?

Taxes related to selling an inherited property in Malta are subject to a number of conditions and circumstances;

- If the property was inherited before the 25th of November 1992 then the withholding tax when selling the property will be equal to a final tax rate of 7% of the transfer value.

- If the property was inherited after the 25th of November 1992 then the seller can choose to pay a 12% withholding tax on the difference between the transfer value and the cost of acquisition, or the seller can choose to pay a final withholding tax of either 10%, 8% or 5% depending on what year the property was purchased as per the guidelines stipulated above. 

It is always important to work with a registered and accredited Real Estate company such as Malta Sotheby’s International Real Estate, to ensure that you are guided and introduced to the correct people in order to comply with Malta Tax regulations. For more property tax information, click here. (link to tax table)