Various changes have recently been made to the Tax on Property Transfers Rules (Subsidiary Legislation 123.92) (“TPTR”), through the Tax on Property Transfers (Amendment) Rules, 2017 (the “Rules”) via Legal Notice 68 of 2017. Changes have been made with regards to:
1) The transfer and acquisition value of partitioned property, whereby an owelty is now deemed to be due where the value of the total partitioned assets is higher than the value of the partitioned assets that are assigned to him.
2) Emphyteutical concessions and concessions of other rights over property, whereby the transfer value such concessions is now regarded as the higher of a) the premium payable for the concession, with new rules being introduced for calculating such a sum.
3) Reference to article 5A(5)(a) of the Income Tax Act (“ITA”), which has been replaced by mere reference to article 5A, in respect of rules relating to: i) the acquisition value of an emphyteutical concession for a period not exceeding 50 years and of a concession of any other right over that property, and ii) the cost of acquisition of property in the case of redemption of ground rent or of any right over that property, with both being deemed to be zero. In respect of the redemption of ground rent, the wording in the provision applicable to situations where the owner of directum dominium is not a person who has made an emphyteutical concession from “at the time of redemption” to “at the time immediately preceding the redemption”, and rule relating to redemption of ground rent through schedule of redemption from “equivalent to 12%” to “equivalent to 10%”. The latter change from 12% to 10% has also been applied to Schedule H of the TPTR.
4) The acquisition of property under a title of (a) perpetual emphyteusis or emphyteusis for period exceeding 50 years as well as the directum dominium perpetuum, and b) emphyteusis granted for a period of less than 50 years as well as the directum dominium and full ownership. Where the person subsequently transfers the property, in the case of (a) above, the person shall be deemed to have acquired the transferred property on the date that the emphyteusis was acquired, whereas in the case of (b), the person shall be deemed to have acquired the transferred property on the date that the directum dominium and full ownership was acquired. The final addition with regards to emphyteusis provides that the assignment of property on emphyteusis for a period of 50 years or less shall not be exempt from tax chargeable under article 5A of the ITA.
5) Onerous acquisitions inter vivos, whereby whereas previously these were deemed to have taken place more than 5 years before the transfer (unless all the acquisitions took place not more than 5 years before the transfer), now the “more than 5 years before the transfer” part of the rule has now been replaced with “before 1 January 2004”.
6) The determination of profits, in respect of which reference in the TPTR to the “Maltese Taxed Account” has been changed to the “final tax account”, whereby where property transfer tax is chargeable under ITA article 5A, the profits that a company is required to allocate to the final tax account shall now be equal to the consideration for that transfer after deducting a) the acquisition value and brokerage fees, if any, determined in accordance with the TPTAR, b) the development, administrative and other costs, and c) the tax chargeable on the property transfer in terms of ITA article 5A. A further sub-rule has been added in respect of the above, whereby in the case of a transfer of property by a listed company which gives rise to profits on which tax is chargeable, the amount that the company is required to allocate to the final tax account shall be equal to the profit on that transfer as determined in line with the above after deducting the tax chargeable on that profit. In both above sub-rules, the amount allocated to the final tax account shall never be less than zero.
7) The process regarding information which is to be given and forms which are to be submitted has been simplified, with multiple sub-rules providing for declarations and calculations that are to be made being deleted, along with Schedules A-D and F. A new requirement has been added, through which the facts that the parties to a transfer are obliged to declare to the notary publishing the deed of transfer must also now include all information that the notary is require to provide on the form provided in the First Schedule of the Duty on Documents and Transfers Act.
8) The final amendment to the TPTR provides that the provisions of rule 10 of the Capital Gains Rules (which applies to transfer of property by persons about to leave Malta) shall also apply to transfers of property to which ITA article 5A applies.
A copy of the Rules can be obtained by clicking here.