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moreSELLING AND TRANSFERRING MALTESE REAL ESTATE
DIRECT SALE OF REAL ESTATE
Resident individual
Transfer Tax
Transfer of immovable property is subject to property transfer tax of 8% on the transfer value of the property, which would be the higher of the market value and the consideration being received for the transfer of the said immovable property. There are specific circumstances where different rates may apply, mostly depending on the date of acquisition, whether the acquisition was through a donation or through inheritance and the duration of ownership.
VAT
The transfer of real estate in Malta is out of scope VAT.
Losses
No losses may be taken against the property transfer tax.
Non-resident individual
Capital gains
There is an opt-out from the property transfer tax system for non-resident individuals. Such individuals are subject to a non-refundable provisional capital gains tax at the rate of 7% on the value of the property being transferred. The actual capital gain realised would be calculated at a later stage in the individual’s tax return and taxed at the progressive non-resident tax rates (up to a maximum of 35%). However, no claim may be made to reduce the 7% provisional capital gains tax already paid.
Transfer Tax
In general, property transferred by non-resident individuals is subject to a property transfer tax of 8% on the transfer value of the property. Nevertheless, there are specific circumstances where other property transfer tax rates may apply.
Resident company
Capital gains
There are very limited exemptions stipulated in the law where an opt out from the Property Transfers Tax regime is permitted and the Capital Gains Tax regime applies. However, these are exceptional situations and we have excluded them for the purposes of this guide.
Transfer Tax
A resident company is subject to property transfer tax on the transfer of immovable property at the rate of 8% of the transfer value. However, there are specific circumstances where different rates may apply.
Losses
The property transfer tax is a final tax against which no deductions, including losses, can be taken. Losses may therefore only be taken where the company has opted out of the property transfer tax regime and is subject to capital gains tax. Unutilised trading losses may be offset against all company profits whereas capital losses may only be only offset against capital gains.
Non-resident company
The same rules apply as in the case of non-resident individuals.
INDIRECT SALE
Resident individuals
Capital gains
Where an individual owns shares in a Malta property company, a provisional tax of 7% of the market value of the shares being transferred is payable upon the disposal of such shares. Any capital gain realised is subject to the individual’s progressive tax rates (up to35%) subject to a credit of the amount paid by way of provisional tax.
VAT
The transfer of shares is out of scope of VAT.
Transfer Tax
No property transfer tax is due on the transfer of shares in a Malta property company.
Non-resident individual
The same rules outlined above in the case of resident individuals are applicable to non-resident individuals.
Resident company
The same rules outlined above in the case of resident individuals are applicable to resident companies. Furthermore, any capital losses incurred due to disposal of shares in a property company would be carried forward to offset any future capital gains. If the shareholder holds less than 25% of the shares within a company, the capital gains are calculated on the consideration received for the shares being transfer rather than the percentage of the market value of the company attributable to the same shares.
Non-resident company
Non-resident companies are taxed in Malta on Malta source income and capital gains arising in Malta. Income generated from real estate located in Malta qualifies as Malta source income and would be taxed in Malta in accordance with the rates outlined above.
DIRECT TRANSFER INTRA CONCERN
(MALTESE REAL ESTATE TO MALTESE COMPANY)
Resident Company
Capital gains
Transfers of immovable property between two resident companies that form part of the same group are exempt from capital gains by virtue of an intra-group exemption subject to certain conditions.
VAT / Transfer tax
The transfer of real estate is out of scope of VAT and no property transfer tax is applicable upon the transfer from one company to another forming part of the same group.
Non-resident company
A non-resident company is not eligible to form part of a group for the purposes of the intra-group transfer provisions.
INDIRECT TRANSFER INTRA CONCERN
(MALTESE REAL ESTATE TO MALTESE COMPANY)
Resident company
Capital Gains
Where the necessary conditions are met, the transfer of shares between two companies forming part of the same group are exempt from capital gains by virtue of the intra-group exemption provisions.
VAT
The transfer of real estate is out of scope of VAT and no property transfer tax is applicable upon the transfer from one company to another group company.
Non-resident company
A non-resident company is not eligible to form part of a group for the purposes of the intra-group transfer provisions.
DIRECT TRANSFER INTRA CONCERN
(MALTESE REAL ESTATE TO FOREIGN COMPANY)
Resident company
Capital gains
In the case of a transfer of immovable property from a Malta resident company to a non-resident company, the intra-group exemption outlined above would not apply.
Companies may opt-out of the property transfer tax regime and be taxed under the capital gains rules at a flat company income tax rate of 35% in certain exceptional circumstances. Intra-group transfers of property may be exempt from capital gains tax.
VAT
VAT is not applicable in the case of a transfer of real estate from a Malta resident company to a non-resident company. However, it is pertinent to point out that the acquirer of the Maltese real estate would be subject to the payment of stamp duty amounting to 5% of the higher of the market value or consideration of the property being transferred.
Non-resident company
Non-resident companies are treated in the same manner as resident companies.
INDIRECT TRANSFER INTRA CONCERN
(MALTESE REAL ESTATE TO FOREIGN COMPANY)
Resident company
Capital gains
As outlined above and in accordance with the general rule, the transfer of property by companies is subject to a property transfer tax.
There are very limited exemptions stipulated in the law where an opt-out from the Property Transfers Tax regime is permitted and the Capital Gains Tax regime applies. However, these are exceptional situations and we have excluded them for the purposes of this guide, as outlined above.
VAT
The transfer of shares is out of the scope of VAT.
It is pertinent to point out that the acquirer of the shares within a Maltese company would be subject to the payment of stamp duty amounting to 5% of the market value of the shares being transferred. If the company is not considered to be a property company, the duty rate would be 2% of the market value of the property. However, a request to the Commissioner for Revenue may be submitted since there is no change in the ultimate beneficial ownership of the same property.
Non-resident company
Since the shares being transferred are those of a foreign entity, such a transfer would be out of scope from a Maltese Tax Perspective since the property will still be held by the same foreign company.
TRANSFER OF MALTESE REAL ESTATE TO AN EU-COMPANY
The transfer of Maltese Real Estate to an EU company would be subject to the same treatment as any other transfer of property in the manner outlined above.