Stamp Duty in Malta

What is Stamp Duty?

Stamp duty plainly put, is a tax levied on legal documents and transactions and one of the most significant transactions that fall under this is the sale, leasing or transfer of property. It is usually calculated as a percentage of the value of the property being leased, sold or transferred.

The value of the property is deemed to be the market value of the property and not what the buyer or seller thinks it is worth. This market value is determined by a government-appointed assessor who will value the property based on several factors such as location, condition, size and other relevant factors which may be regarded as important.

How much is the stamp duty?

Stamp duty payable on the transfer of a property into another person’s name, therefore ownership, is set at a flat rate of 5%. Here’s an example: if a property is sold say for €500,000, the stamp duty will be €25,000 or 5% of the market related value of the property.

Who pays the stamp duty?

The stamp duty is always payable by the buyer of the property and it is important to fathom this amount in when you are budgeting and looking at buying a property. It is also the buyer’s responsibility to ensure that the stamp duty is paid to the government and failure to do so can have legal consequences.

Stamp Duty Exemptions

Exemption 1 – First-time buyers: No stamp duty on the first €200,000

There are certain exemptions and reductions that currently apply to stamp duty on property sales in Malta. For example, first-time buyers of property in Malta have been eligible for some time now for a reduction in stamp duty as levied by the government: as a first-time Buyer (if you purchase a property till the end of 2023), NO STAMP DUTY WILL BE DUE on the first €200,000 of the property price. This can amount to savings of up to €10,000 (based on standard rate of 5%). To qualify as a first-time buyer, an individual must not have owned or acquired any immovable property in Malta or Gozo before the date of the promise of sale agreement. The individual must also declare that the property being purchased will be used as their sole residence.

Exemption 2 – Stamp Duty in the case of Causa Mortis property inheritance

When inheriting a property Causa Mortis, the basic duty will be 5% of the market value of the property as per the date of death but a reduced rate of 3.5% will apply on the first €175,000 of the value of the property if those that are inheriting it already use the property as their primary residence. Exemptions are when a spouse inherits the share of their deceased spouse and already use it as a sole residence and children are exempt when they inherit a property from their parents and are using it as their primary residence.

Exemption 3 – Second-time buyers

When a seller transfers his property and buys another as a primary residence within 12 months, the duty paid on the first €86,000 of the value of the replacement property will be refunded. This applies to properties bought between 10 October 2017 up to 31 December 2023.

Exemption 3 – Persons with disabilities

This applies to properties bought between 1 January 2017 up to 31 December 2023 as follows:

Individuals registered on the Register of Persons with Disabilities and have an official ID card issued by the Commission for the Right of a Person with a Disability and who benefit from assistance according to the applicable law, will see duty on the first €150,000 of the replacement property refunded. The same applies to guardians of such persons who reside in the same household who are registered and who benefit from Disability Assistance or from a Disabled Child Allowance according to the law.

Requested refunds for these cases need to be accompanied by an occupational therapist’s report that the new property is not adequate for the disabled person in question.

Stamp duty when renting a property

Stamp duty is also payable on property leases in Malta, although the rates of stamp duty are different from those for property sales. Stamp duty is payable by the tenant and it is the tenant’s duty to ensure that this is paid to the government. Failing to do so can result in legal consequences and penalties for the tenant.

When it comes to tax payable on income generated from property leases, there are two options available to the landlord, but the taxes on the rental of immovable property in Malta are always paid by the lessor or landlord.

Here’s the two options open to the landord:

  • They can either choose to pay a flat rate of 15% on gross rent received in which case this tax is final, meaning the rental income does not need to be declared in the annual income tax return because it is not subject to further tax; or
  • The landlord can report the rental income in their tax return and pay tax on applicable amounts according to a progressive tax rate as determined by the government.

Stamp Duty in Malta

Stamp duty in Malta, like in every other country is an important tax that is payable on the sale or transfer of property, as well as on property leases or rentals. As we have seen, the rates of stamp duty vary depending on the type of transaction involved with some handsome exemptions and reductions that may apply in certain circumstances or from time to time. Professional advice should always be sought to ensure compliance with current stamp duty regulations and one’s best is to speak to a professional and reliable real estate professional or notary in order to determine the exact amount of stamp duty that will be payable.

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