The transfer of property in Malta is subject to both the provisions of the Income Tax Act (Cap 123) and the Duty on Documents Act. The seller must pay capital transfer taxes on the transfer of any property located in Malta, whilst stamp duty is paid by the buyer. The tax and stamp duty paid on the transfer of property situated in Malta is dependent on several factors including the relationship between the buyer and the seller, whether the transfer is subject to exemptions and whether or not the transfer benefits under any incentive measure that may be available at the time of transfer.
Inter Vivos Following a Promise of Sale agreement
A seller may seek the assistance of an estate agent to help him find a prospective buyer for his property. Once a deal is agreed upon, the parties have to delegate a Notary which is usually chosen by the buyer. Once a promise of sale is signed, it is to be presented at the Capital Transfer Duty within 21 days of the actual signing. The market value of the property does not necessarily have to be the same as the price declared on contract. Thus, the tax payable should be calculated on the higher value and it is on this amount that liability arises.
After a Contract is Signed
Upon signing of the contract, the notary publishing the deed must submit the following documents
a. Relative ‘DDT1’ form at the Capital Transfer Duty section
b. A copy of the signed contract
c. Site-plans of the property being sold
d. A copy of the Public Registry note
e. The stamp duty payment (due by the buyer)
f. The capital gains tax payment (due by the seller)
g. Completed Schedule 8 (for residential property only).
The relative receipts are normally issued not later than 3 weeks from the date of submission of the notice of transfer (DDT1) at the department. At this stage, an internal departmental board will decide whether an architect is sent to inspect the property in order to establish the market value of the property. Although valuations are carried out professionally, they still remain subjective. For this reason, the law allows a 15% tolerance between the declared value and the market value established by the department’s architect. If the difference between the market value as established by the department’s architect and the price declared is more than 15%, the department will issue a claim (assessment) both on the buyer and the seller.
What happens after an Assessment
An objection in writing will only be valid if it specifies the valid grounds it is based upon and if submitted within thirty days from the date of service of assessment. The seller has a right to object to any assessment however if no agreement upon objection is reached, the Commissioner shall issue a refusal. The refusal may be appealed before the Administrative Review Tribunal within 30 days from date of notification of the refusal.