Duty on Documents and Transfers
The Duty on Documents and Transfers Act is administered by the Capital Transfer Duty branch (Inland Revenue Department).
The procedure involved after a promise of sale or a contract is concluded is as follows:
Following a Promise of Sale agreement
Once a promise of sale is signed at the notary’s office, the agreement is presented at the Capital Transfer Duty Department (Merchants Street, Valletta) within 21 days of the actual signing. At this stage provisional duty of 1% is paid by the purchaser. For example, if the market price of a property is €200,000, then the duty payable on contract would be €10,000. Therefore at promise of sale stage, the provisional duty would be €2,000. A receipt for this payment is issued to the person submitting the promise of sale.
After a Contract is Signed
Once a contract is signed, the notary publishing the deed submits the relative ‘DDT1’ form at the Capital Transfer Duty Department together with site-plans (where these are necessary), the duty (due by the buyer) and the capital gains tax (due by the seller). The relative receipts are normally issued within 3 weeks from the date of submission of the contract at the department.
At this stage, an internal departmental board will decide whether to send an architect to inspect the property and establish the market value of the property. The market value is not necessarily the same as the price declared on contract.
Since valuations, although professionally done, remain subjective, the law allows for a 15% variance. But if the difference between the market value as established by the architect is more than 15% of the price declared on deed, the department issues a claim (assessment) on the buyer and on the seller accordingly.
What happens after an Assessment
In the case of the buyer, the claim issued will include the duty due together with the additional duty (penalty). In the case of the vendor only the additional duty (penalty) is charged. The duty is calculated on the value added by the architect; the additional duty (penalty) is equal to the amount of the duty due.
However the additional duty (penalty) is reduced to 10% if the claim is paid within 90 days from the date of the claim. If no payment is effected within 90 days, the additional duty will increase at the rate of 10% every 30 days. After a whole year, the additional duty (penalty) becomes equivalent to the duty.
An objection against such claim or assessment is to be submitted within 30 days from the date of issue of the assessment. An objection will be treated only if a valid reason is brought forward. If no agreement is reached at objection stage, the objection will be officially refused by the department.
A Refusal may be appealed within 30 days before the Administrative Review Tribunal.
Legal Action for Collection by the department
If a claim is not settled or not objected, the Department may start legal action for collection of the duty. At this stage, the department will collect the duty due together with the relative legal fees.