Frequently Asked Questions about Capital Gains Tax

The following is a list of frequently asked questions about Capital Gains Tax. Click on a subject heading below to view questions and answers related to your selection. You may also click a particular question to go directly to its answer.

Taxable Transfers Under the New System

• Which transfers are taxable under the new system?
• How is the transfer of immovable property taxed today?

Transfer of Property Acquired through Purchase

• If I transfer immovable property which I had acquired through purchase, how will I be taxed?
• What if the five years from the date of purchase have already passed?
• Can I deduct the value of the acquisition from the transfer value of Lm50,000?

Transfer of Property Acquired through Inheritance

• If I transfer property that I had inherited, how shall be taxed?
• How am I taxed if the property was inherited up to 24 November 1992?
• How am I taxed if the property was inherited after 24 November 1992?

Transfer of Property Acquired through Donation

• If I had acquired the property through a donation how am I taxed?

The Final Tax System

• So are there different rates of final tax?
• What tax do I pay in case of multiple acquisitions? For example, I inherited half the property in 1990 and I purchased the other half in 1998. Now I am selling the whole house.
• I have inherited property and now I am selling part of it.
• Are there any allowable deductions?
• Is the final tax withheld on the price shown on the contract?
• Are any penalties imposed?
• Will any interest be due as well?
• What can I do if I disagree with the valuation given by the Government-appointed architect?
• Is the Commissioner obliged to appoint his own architect prior to issuing an order in writing?
• How is the tax paid?
• What am I obliged to declare in my tax return?
• If the transfer forms part of my trade or business, how am I to report it in my books of account?
• Does the new 12% final tax apply also to companies?

Partition of Property

• My brother and I have inherited two properties. We are now going to take one each. Is there any tax involved?
• My brothers and I have inherited two properties, a sum of money and some gold items. Two of us are going to take one property each; the other will take the money and the gold items. There is not going to be any compensation because the three shares are of equal value. Are we going to be charged tax?
• My brother and I inherited a house from our father. The house will be taken by my brother and he will compensate me by paying me a sum of money. Am I going to be charged tax?

More on the Final Tax System

• I bought a property about 10 years ago and its market value today is Lm50,000. I am going to exchange it with another person’s property which he had inherited in 1999 when its value was Lm15,000. Today it is worth Lm48,000. How are we going to be taxed?
• I am going to enter into a contract of emphyteusis. How am I taxed on the ground rent paid to me?
• How are redemptions of ground rent taxed?
• How am I taxed if I enter into a promise of sale (konvenju) and later cede that right to another person?
• If a company, in the course of its winding up, transfers immovable property to its shareholders, is it charged to tax?

Property not Taxed at 12%

• Are there any transfers that are not taxed at 12%?
• How is a transfer made between 1 November, 2005 and 31 March, 2006 taxed?
• How am I taxed if I transfer property within five years from purchase?
• According to the Income Tax Act, when property is transferred between companies within the same group, the transfer is exempt from tax. If the property is now transferred to another company outside the group and more than five years have passed, can the option (to be taxed under the old system) be taken?
• If I am going to sell more than one property, can I choose to be taxed under different systems? In other words, can I be taxed at 12% on one property and under the old system on another property?
• How do you tax a transfer of a property situated in a special designated area?
• A couple break up their engagement. One sells his/her share to the other. How is he/she taxed on the transfer?
• How is the transfer of a property to the Government of Malta taxed?
• What tax will be due where a transfer is made through a judicial sale by auction by the Court or in the course of a winding up by the Court?
• Does the new system provide for roll-over relief?
• Various cases have been mentioned where the transferor may choose to be taxed under one system or another. How is the election made?
• Must the 12% tax be paid also when the transferor is a non-resident?
• I am going to transfer property that is situated outside Malta. Shall I be charged tax at 12%?

Transfers Taxable under the Old System

• If I choose to be taxed under the old system how am I going to be taxed?
• What deductions can I claim to calculate the capital gain under the old system?
• Can you give an example?

Transfers that are Exempt from Tax

• Which transfers are exempt from tax?
• If I donate a property, do I have to pay tax?
• Is the exemption on the transfer of one’s own residence still applicable?
• I have been living in a property for more than three years with a permit issued by the Housing Authority pursuant to a promise of sale (konvenju) by that Authority, but the contract has been made only this year. I now intend to sell the property. Is this transfer going to be taxable?
• I used to live with my mother for the past 10 years. The property had been my mother’s property. I have now inherited it and have kept on residing in it. I now intend to sell it, but I have not yet owned it for three years. Am I going to forfeit the exemption?
• I am going to transfer property that I had acquired under an assignment of property following a judicial separation from my husband. This property is my own residence but less than 3 years have elapsed since I became the owner of the whole property. Do I have to pay tax if I transfer it?
• Does this apply also where the separation was consensual?
• My husband and I owned property in common between us. The property is now going to be assigned to my husband. Shall I be deemed to have made a taxable transfer?
• My husband and I owned property in common. When my husband died, my children inherited his share and we are now going to partition the property amongst ourselves. Part of the property will be assigned to me, while the other part to my children. Are we going to have to pay any tax?
• If any condition for exemption is satisfied only with respect to an undivided part of the property, is the exemption forfeited or does it apply to the whole property?
• When a company transfers property to another company within the same group, is it charged any tax on the transfer?
• I am using an immovable property for business purposes. I now intend to incorporate my business into a company. Would this transfer be taxable?