Duty is chargeable in accordance with the provisions of the Duty on Documents and Transfers Act [CAP 364], hereinafter referred to as the ‘Act’, and its subsidiary legislation. Stamp duty falls due upon the transfer of immovable property from one person to another and must be paid on the final deed of acquisition of the property. However, a promise of sale agreement is not valid unless a provisional payment equivalent to 20% of the stamp duty is paid to the Commissioner for Inland Revenue. The amount of duty to be paid is calculated on the value of the consideration for the transfer of the immovable, or on the value of the immovable, whichever is higher.
Article 311 of the Civil Code defines what is meant by the term ‘immovable property’, and includes both immovables by their nature (e.g. lands and buildings) as well as immovables by reason of the object to which they refer (e.g. the rights of usufruct or easements). The Act then specifies the types of transfers of immovable property which are subject to stamp duty, and these include; any assignment, conveyance, sale, partition, donation, settlement of dowry, sale by instalments, redemption of ground rent and any acquisition under any other title.
A party to the deed of transfer may be an individual or a body of persons, which includes any company, partnership, fellowship, society of persons, or other association of persons, and whether vested with legal personality or not. Furthermore, the residence, nationality or domicile of the person transferring or acquiring the property is immaterial except for the purposes of reduction of duty due when the transferee acquires a property to establish his ordinary residence.
The default rate of duty applicable to the transfer of any immovable property or any real right over an immovable property, is of €5 for every €100 or part thereof, of the amount or value of the consideration for the transfer of such thing or of the value of such thing, whichever is the higher. According to the subsidiary legislation, the value of any property subject to duty transferred inter vivos shall be the value of such property on the date of transfer and such value shall be established in accordance with the provisions of Rule 3 of the Duty on Documents and Transfer Rules [S.L.364.06].
A contract of exchange, where one immovable property is exchanged for another, is deemed to constitute one transfer and duty chargeable thereon shall be assessed on the higher of the values of the things transferred. If different rates apply, duty shall be charged on the value of either of the things transferred at the rate which attract the higher amount of duty.
Besides the default rate, the Act provides for situations where the rate of duty is reduced. When the person acquiring the property does not require a permit in terms of the Immovable Property (Acquisition by Non-Residents) Act, and acquires the immovable property or any real right over such property for the purpose of establishing therein or constructing thereon his sole ordinary residence, the duty charged is reduced to €3.50 per every €100 or part thereof on the first €150,000 paid. The value in excess of the first €150,000 is subject to the default duty rate of €5 for every €100 or part thereof.
The term ‘ordinary residence’ is defined as the principal residence, being a dwelling house which is the only or main residence of a person. Any part of the residence which is used exclusively for commercial purposes shall not be considered as ‘ordinary residence’. The term includes any garage acquired on the same deed as the ordinary residence, which is attached to or underlying such residence or situated in the same block of residential apartments or a garage of not more than 30 square metres situated within 500 metres of such residence or block of apartments. It also incorporates any land which the owner has for his own occupation and enjoyment with that residence as its garden, or grounds consisting of an area which, regard being had to the size and character of the dwelling house, is required for the reasonable enjoyment of it as a residence.
A declaration stating that the person is acquiring the property to establish therein his sole ordinary residence must be recorded by the notary in the deed of acquisition for the reduced rate of duty to apply.
With effect from 1st January 2013, when immovable property is transferred by a gratuitous title (e.g. a donation) by a person to his descendants in the direct line who acquire such property for the purpose of establishing therein or constructing thereon their sole ordinary residence, no account shall be taken of the first €200,000 when assessing the duty to be charged. The remaining value shall be charged at the rate of €3.50 per €100 or part thereof. For such an exemption to apply, it must be the first transfer by such a person to the descendant for the purpose of establishing sole ordinary residence. Provided that, if such immovable property or part thereof is transferred inter vivos by the said descendant during the first 5 years from the date of the transfer by a gratuitous title, the duty which would have been payable on the transfer by a gratuitous title of the property or part thereof that is so transferred, but for the relief granted under this last provision, shall be levied on the said amount not taken into account at the rate of €3.50 per every €100 or part thereof at the time of the subsequent transfer inter vivos.
The Maltese Government has implemented a scheme for the relief from duty for First Time Buyers. Under this scheme, individuals who had never owned an immovable property in Malta, and who acquired property by the 30th of June 2015 with the intention of establishing therein their sole ordinary residence, would benefit from an exemption on stamp duty on the first €150,000. The notary who receives any deed of such a transfer, must include in the deed a written declaration proving that the property in question is the first immovable property acquired inter vivos by the purchasers. The Maltese Government has been extending this scheme for the past few years and the latest cutoff date has been set for 31st December 2017. Therefore, the final deed of purchase must be signed by no later than the 31st December 2017. The scheme also applies retrospectively, and purchasers who entered into contracts as of 1 January 2015 onwards will be eligible to apply for a refund of the duty paid in excess.
Furthermore, the Act provides for transfers of immovable property which are completely exempt from duty. These include:
No duty is charged on the assignment of immovable property between persons who are married or who were formerly married to each other, consequent to a consensual or judicial separation or to a divorce between such persons, or on the dissolution of the community of acquests existing between them, or on any partition of any property held in common between spouses, on the death of one spouse, between the surviving spouse and the heirs of the deceased spouse.
Moreover, where any duty chargeable in respect of any immovable property transferred causa mortis has been paid, or no duty is payable on such transfer, and the notary declares on the relative deed that the property in question came to the co-owners through a transfer causa mortis and that a complete declaration, including the property to which the partition refers, has been duly made, no duty shall be chargeable on deeds partitioning such immovable property between co-owners.
No duty shall be chargeable on a transfer of an undivided share of a dwelling house, where the dwelling house was, immediately before the transfer, co-owned by two individuals and the transfer is made by one of the co-owners to the other, where the co-owners had declared in the deed of the acquisition of that property that they had acquired it for the purpose of establishing therein or constructing thereon their sole ordinary residence.
No stamp duty will be payable on a deed of partition of immovable property which is held in common, where the value of the share of the property assigned to each co-owner is equal to the value of the undivided share held by each co-owner before the partition. Where the two values are not equal, duty is only paid on the excess.
The Act also provides for an exemption from stamp duty in the case of Disability Trusts and Foundations. No stamp duty is payable by such trusts or foundations upon the acquisition of immovable property as long as the main beneficiary is a disabled person and such immovable property is held solely for the benefit of this person. Similarly, no stamp duty is payable when the immovable property is transferred by the trust or foundation to other beneficiaries or heirs of the disabled person, where the property was the ordinary residence of the parents of the disabled person and the disabled person resided in that property during his lifetime up to his death.