What are the duty rates charged when buying a property in Malta?
Download Duty Rates Fact Sheet – Business
Download Duty Rates Fact Sheet – Individual
Generally, individuals acquiring property as their sole residence in Malta benefit from a reduced duty rate of €3.50 per €100 on the first €200,000 of the property value, with the standard rate applying to any excess. Joint acquisitions receive proportional benefits based on each individual’s share
Documents Chargeable to Duty for Transfer of Property in Malta
Under Article 32 of the Duty on Documents and Transfers Act (DDTA), any document or legal ruling that results in the transfer of immovable property or any real right over such property to another person incurs a duty. The duty rate is set at €5 per €100 or part thereof of the property’s transfer value, with a minimum duty based on the higher of the transfer value or the consideration amount.
Key Requirements for Duty Charges
- Document: The term ‘document’ refers to a notarial deed, which is the legally required format for transferring immovable property in Malta or rights over it. A private writing is not considered valid for these transfers, and thus no duty applies.
- Immovable Property: The Civil Code defines “immovable property” to include land, buildings, springs of water, conduits, trees attached to the ground, unharvested fruits, and any movables annexed to a tenement. The location of the property, whether in Malta or abroad, is irrelevant for duty imposition.
- Transfer: A transfer refers to the conveyance of property rights as outlined in the DDTA.
- Person: The duty on property transfer in Malta applies regardless of the residence, nationality, or domicile of the parties involved. However, duty reductions apply if the transferee intends to establish the property as their ordinary residence or if they qualify under the first-time buyer schemes.
- Chargeable Rate of Duty: The standard duty rate on property transfer in Malta is €5 per €100 or part thereof of the transfer value. This differs slightly from the commonly referenced 5% due to the rounding-up mechanism applied in duty calculations. For example, if the transfer value is €318,243, the duty is calculated on €318,300, resulting in a total duty of €15,915.
- Transfer Value: Duty is assessed on the higher of the actual consideration paid or the market value of the property on the transfer date, including improvements. This valuation is crucial in determining the exact duty payable on real estate transfers in Malta.
Duty Reductions and Exemptions
Ordinary Residence: Individuals acquiring property in Malta as their sole residence in Malta benefit from a reduced duty rate of €3.50 per €100 on the first €200,000 of the property value, with the standard rate applying to any excess. Joint acquisitions receive proportional benefits based on each individual’s share.
First-Time Buyer Scheme: First-time buyers of property in Malta are exempt from duty on the first €200,000 of the property value for transfers occurring between specified dates. The notary must ensure that the buyer declares this as their first property acquisition to benefit from the exemption.
Second-Time Buyer Scheme: For individuals replacing their primary residence, a refund of the duty paid on the first €86,000 of the new property’s value is available, provided the transaction meets specified criteria and occurs within 12 months of the sale of the previous property. This is part of Malta’s property tax benefits.
Donations: Transfers by gratuitous title to close family members for establishing a sole residence are valued at 80% of the market value, with no duty on the first €250,000 and a 3.5% rate on the excess. These provisions are part of the real estate duty reduction in Malta.
Transfers Causa Mortis
Duty is also applicable to transfers upon death (causa mortis) based on the property’s value at the date of death. The inheritor must declare the property transfer and pay the corresponding duty Causa Mortis related to the succession of immovable property in Malta from a deceased person. This succession must be formalized through a deed of Declaration Causa Mortis, published by a Notary Public and registered in the Public Registry of Malta.
Each heir can independently approach a Notary Public to declare their share. There is no requirement for heirs to make the declaration together. The declaration must include the true value of each property or share being transferred. Stamp duty on declarations Causa Mortis is regulated by the Duty on Documents and Transfers Act. To benefit from stamp duty rebates, the deed of Causa Mortis must be concluded within six months from the date of death. Failure to do so within one year results in 4% annual interest on the tax due and may disqualify the heirs from certain exemptions.
The basic duty rate is 5% on the property’s market value at the date of death. A reduced rate of 3.5% applies to the first €175,000 of the value for those inheriting a property used as their sole residence. Exemptions apply, such as when a surviving spouse inherits the sole residence shared with the deceased, or children inherit their parents’ residence.
This applies to immovable property in Malta, regardless of the heirs’ residence and nationality.
Transfers by Causa Mortis are subject to vetting by departmental assessors and an internal board to ensure the correctness of values attributed to the property. Heirs have the right to object to any assessment raised and must adhere to established timeframes.
Exemption
No duty is levied under certain conditions, such as the transfer of immovable property in Malta to a surviving spouse/cohabitant, to a disabled individual by a parent or legal guardian, or from a parent to their direct descendants.
Additional Information
In inter vivos transfers, parties must conclude a document for the transaction to take place. The Act ensures duty collection by making it due upon document creation.
In causa mortis transfers, property is transferred due to a person’s death and acquired by the heir or legatee regardless of a declaration. The Act imposes a duty on every person receiving immovable property causa mortis to make a public declaration. Failure to declare allows the Commissioner to assess and charge the deemed due duty.
A notary cannot publish a deed concerning undeclared immovable property.
Benefits Applicable to Registered Family Business – Business Property
When a family business transfers as a going concern to family members (as defined in the Family Business Act) and includes immovable property used for at least three years, duty is charged at €3.50 per €100 on the first €500,000 of the property’s value. The notary must record a declaration confirming the conditions are met.
Transfer of Property Within 3 Years (Claw-back)
If the property is transferred inter vivos or ceases business use within three years, duty relief is forfeited, and the previously exempt duty becomes payable.
Replacement Property
If replaced within one year by a similar property used in the family business, the paid duty is deductible. The family business must present an updated certificate, and the Commissioner must issue a certificate confirming the conditions are fulfilled.
Business Property Donated by Individuals to Relatives
Duty is reduced to €1.50 per €100 for a commercial property used in a family business for at least three years, transferred by donation to close relatives. No other exemption or relief applies.
Immovable Property in Malta Situated Within an Urban Conservation Area or Scheduled Property
What is an Urban Conservation Area?
Urban Conservation Areas are protected and preserved areas of special architectural or historic interest.
Applicability of Reduced Rate of Duty
Duty is exempt on the first €750,000 on the value of UCA immovable property on transfers inter vivos of property within an urban conservation area or scheduled by the Planning Authority, under certain conditions:
- No permit is required under the Immovable Property (Acquisition by Non-Residents) Act.
- Certification from the Planning Authority confirming the property’s status.
- No previous relief was claimed for the property.
- No stamp duty reduction was claimed on the property’s donation.
Relief is lost if the Commissioner’s notice requirements are not met within 30 days.
Forfeiture of Relief
Relief is forfeited if illegal development occurs, the property is not regenerated according to area characteristics, or restoration is not done. The excess duty becomes payable if the forfeited relief results in a higher duty than initially paid.
Exemptions
Transfers Between Spouses
Transfers between spouses (or former spouses post-divorce) are exempt under specific circumstances such as consensual or judicial separation, divorce, or dissolution of community of acquests. This includes property owned by a fully owned company of either spouse.
Transfers of ordinary residence between spouses are exempt, regardless of the community of acquests.
Transfers Between Co-Owners
No duty is charged on the transfer of an undivided share of a dwelling house co-owned by two individuals if it was intended as their sole ordinary residence. Partitions of property from a transmission causa mortis are exempt, provided duty was paid. No duty is charged on a partition deed where the real value of each co-owner’s share remains equal before and after partition. If the value exceeds, duty is paid on the excess. This facilitates partition between co-owners who did not acquire the property causa mortis.
Transfer Causa Mortis
To a Person with Disability [Article 35(2)(iv) of DDTA]
A transfer causa mortis to a person registered as disabled is exempt from duty if the deceased was the parent or legal guardian of the transferee.
To a Descendant in the Direct Line [Article 35(2)(v) of DDTA]
The transmission of the deceased’s dwelling house is exempt from duty if:
- The heirs are the deceased’s direct descendants.
- The residence was the deceased’s ordinary residence for three years immediately preceding their death.
Intra-Group Transfers [Article 32(6)(a) & (b) of DDTA]
Exemption Criteria for Intra-Group Transfers
An exemption from duty applies when immovable property in Malta is transferred between companies within the same group, as defined under capital gains laws (Chapters 7 & 8). The exemption requires a certificate from the Commissioner, issued upon request. If the transfer occurs before the exemption is issued, the notary must collect the duty, which may be refunded upon application.
Transfer of Property in Malta by a Company to its Shareholder during Winding Up [Article 32(6)(c) of DDTA]
An exemption from duty applies on the transfer of immovable property in Malta by a company to a shareholder during winding up or asset distribution if:
- The shareholder or spouse owns, directly or indirectly, at least 95% of the share capital and voting rights.
- The shares were held for over five years preceding the transfer.
- The property, including land, was held as a capital asset by the company for over five years preceding the transfer.
Similar to intra-group transfers, a certificate from the Commissioner is required to confirm the applicability of this exemption.
Company Divisions [Article 41A of DDTA]
No duty is chargeable on a company division if:
- The ultimate individual beneficial shareholders in the recipient companies remain the same as in the company to be divided.
- Each shareholder maintains the same proportion of shares in each recipient company as held in the original company.
Assessments and Additional Duty [Article 52 of DDTA]
Valuation and Assessments by the Commissioner
After the transfer of immovable property, the Commissioner may use his architects to determine the property’s value. If the declared price or value is less than 85% of the Commissioner’s valuation, an assessment for additional stamp duty may be issued.
Timeframes for Raising Assessments
- For a transmission causa mortis, assessments can be raised within four years of notification to the Inland Revenue Department.
- For a transfer inter vivos, assessments can be raised within one year of notification.
Penalties for Under-declared Values
Penalties equal to 20% of the additional duty are chargeable. In a transfer inter vivos, both the transferor and transferee are liable for 10% each of the additional duty. In a transmission causa mortis, the transferee is liable for the full additional duty.
Interest for Late Payment
Interest at 0.75% per 30 days (or part thereof) is payable on late payments, capped at 50% of the assessed duty
