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Malta: Personal Taxation

Property Tax

A Final Withholding Tax of 12% of the sale value was introduced on 1 November 2005. The government's rationale for switching to a withholding tax from a 35% capital gains tax was to cut down on under-declarations of selling price and to boost the housing supply by encouraging those who had held on to property for long periods to sell.

"We expect more honest declarations: Under capital gains you paid 35 per cent on each lira declared, now you would only pay 12 per cent, so there is less incentive to cheat," Parliamentary Secretary Tonio Fenech said.

"We also believe that there are a number of people who were hoarding property because the value would have gone up considerably over the years. They would have been reluctant to sell because they would have had to pay so much under the capital gains regime," he added.

In February, 2006, Malta's Parliamentary Secretary, Tonio Fenech, unveiled a number of amendments to the property tax in an attempt to head off criticism. The measures included provisions for taxpayers being allowed to elect to have the sale taxed at the applicable marginal rates on the gain or at the rate of 12%. No tax is payable if the property was owned and occupied for at least three years immediately following the purchase and if it is sold within one year of vacating the premises.



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