Yes, there are the following rates:

• 12% of the transfer value (in case property transferred had been purchased)
• 12% of the difference between the transfer value and the acquisition value (where transferred property had been acquired through inheritance after 24 November 1992 or through a donation made more than 5 years before the transfer)
• 7% of the transfer value (inherited before 25 November 1992)

You are to consider your case as if you were selling two "halves": the half that you inherited is taxed at 7% (because you acquired it before November 1992) and the other half is taxed at 12% (more than 5 years have passed since acquisition). If you are going to sell the whole house for €100,000, you will be taxed at 7% on €50,000 and at 12% on the other €50,000.

In some cases, when the property is acquired through different acquisitions, rather than as a whole, you will have to apportion the values. In order to find out how to carry out this apportionment, see the Tax on Property Transfers Rules, 2006. In such circumstances it is recommended that you seek professional advice.

The following example illustrates this scenario:

In some cases, when the property is acquired through different acquisitions, rather than as a whole, you will have to apportion the values. In order to find out how to carry out this apportionment, see the Tax on Property Transfers Rules, 2006. In such circumstances it is recommended that you seek professional advice.

The only deduction allowed is for brokerage fees. Tax at 12% is computed on the balance. Brokerage fees may be deducted only if you show the relative receipt to the notary on contract. The notary will attach a copy of the receipt to the contract and record the amount involved and the name of the broker.

Examples:

No other deductions are allowed under the final tax system.

On contract, the notary deducts 12% or 7% of the transfer value, depending on the circumstances.

If the transfer takes place by means of a donation, the transfer value would be the market value of the property, and this has to be declared on the contract.

If, in case the transfer takes place through a sale at a price lower than the market value, the tax will be paid at 12% of the market value just the same.

The Commissioner may appoint an architect to establish whether the value of the property shown on the deed reasonably reflects its market value. Where this varies by more than 15% he may, the Commissioner may issue an order in writing requesting the difference in tax. Such order in writing may be issued within twelve months after the date on which the transfer is notified to the Commissioner.

Example:

Yes. The additional tax is equal to the difference in the tax and it is due by the transferor. However, this can be reduced if the difference in tax is paid without undue delay as shown in the table below:

In the example illustrated in the previous question, the difference in tax was €2,400, hence the additional tax would also be €2,400. This brings the total payment to:

However (using the table above), if the payment is made within 3 months (90 days) the additional tax would be reduced to 10%

This brings the total payment to:

a total reduction of €2,160

If the tax paid on contract is less than what should have been paid, interest shall be charged at the rate of 1% per month until the amount is paid. However, if there is a dispute regarding the market value and you pay the amount within 330 days, you will not be charged any interest. You will, however, be charged the tax and the reduced additional tax (penalty) as explained in the previous answer.

You can object to the Commissioner's order in the same way that you object to a normal assessment. Objections are to be made in writing, within 30 days. To prove that the value declared on contract was the correct market value, you may produce a valuation drawn up by an architect.

No. The architect is appointed only to help the Commissioner establish whether the market value has been reasonably reflected on the deed. If it results that you have not made a true declaration - for example, you did not declare the whole price - the Commissioner may issue an order even without first appointing an architect. In this case the order in writing may be issued within six years following the year in which the transfer is made, and it will not be possible to reduce the penalty or reverse the interest. However, even here, you can still object to the order, in the normal way.

The tax is paid by the transferor at the time the contract is being made. The notary will remit the tax to the Commissioner, within fifteen working days from the relative transfer, by means of a bank draft or a cheque drawn on the notary's personal bank account.

Under the new system, if you pay the correct amount of tax on contract, you need not declare the transfer in your tax return. The tax will be final and no further tax will be payable, nor will there be any refunds.

In your trading books you have to record all the income and expenditure, as well as the profit on each transfer. These must be kept separate from all your other business profits and must not be included in the profits that you declare in your tax return. The Tax on Property Transfers Rules, 2006 provide more details regarding the records that are to be kept by persons trading in property.

The new system applies to individuals as well as to companies and other bodies. Transfers by a company to its shareholders - even if made during the course of its winding up - are taxable. This also applies when the transfer is made by a partnership to its partners.

When a company resident in Malta derives profits from transfers on which 12% final tax has been withheld, such profits have to be allocated to the property transfers reserve, which forms part of the Maltese taxed account. Dividends distributed from the property transfers reserve are not subject to further tax and must not be declared in the income tax returns of the shareholders.