Buying a Property

Last updated: 07/09/2022

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 Transfer Following a Promise of Sale Agreement

For a transfer of property to take place in Malta, a Notary must be engaged to process property searches and file the necessary deeds with local authorities. The Notary is usually chosen by the buyer and is also engaged to process provisional duty payments on behalf of the buyer.

Once a promise of sale is signed, it is to be presented to the Capital Transfer Duty section of the Office of the Commissioner for Revenue within 21 days. At this stage a provisional duty of 1% is paid by the purchaser, based on the market price or transfer value as per contract, whichever is the higher. This can be explained with the following example:

	Euro
Market Price	200,000
Transfer Value	180,000
Final Stamp Duty at 5%	10,000

Provisional stamp duty at 1%	2,000

A receipt for provisional stamp duty will be issued to the taxpayer once payment is received by the Capital Transfer Duty section. The receipt confirms that the Notary has submitted a copy of the promise of sale to the Office of the Commissioner for Revenue and that provisional duty has been paid by the buyer.

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. Site-plans of the property being transferred
c. A copy of the Public Registry note,
d. The stamp duty payment (due by the buyer),
e. The capital gains tax payment (due by the seller)
f. Schedule 8 (for residential property only) outlining the physical attributes of the property being transferred.
The relative receipts are normally issued not later than 3 weeks from the date of submission of the notice of transfer (DDT1) to 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 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 on the sales contract (deed) is more than 15%, the department will issue a claim (assessment) both to the buyer and the seller on the difference.
In the case of the buyer, the claim issued will include the duty due together with the additional duty (penalty) based on the difference in the value of property transfer. The duty is calculated on the value added by the architect at the applicable rate with the additional duty (penalty) being equivalent to 20% of the duty due. In addition, if the claim is not paid, the transferee shall be liable to pay interest at the rate of zero point seven five per cent (0.75%) for every thirty (30) days or part thereof, which interest shall start accruing after the expiration of three months from the date of notification of the original assessment.
What happens after an Assessment?
Taxpayers have a right to object to any assessment raised by the Office of the Commissioner for Revenue. 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. 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.
Legal Action for Collection by the department
If a claim is not settled or not objected to, the Department may initiate legal action for collection of the duty and additional duty. At this stage, legal fees will start to accrue upon the pending claim.