A number of schemes are in place to assist developers, property owners and buyers
Tax incentive for ‘Older’ type properties and property in Urban Conservation Areas
Malta Budget 2022 introduced an interesting tax benefit for those looking to purchase property in Urban Conservation areas (UCA) and older type properties. This incentive seeks to encourage people to embrace older buildings and restore and renew.
People who purchase property built more than 20 years ago and which have also been vacant for seven years, as well as, properties in Urban Conservation Areas (UCA) will be entitled to tax waivers both in the form of stamp duties for the buyer and sales tax for the sellers. The same applies for new properties built in ‘typical Maltese Style’.
The scheme will be capped up to the first €750,000 of the value of the properties. Up to this figure no duties or capital gains tax will be charged and this measure will also apply for properties which are still under promise of sale agreements.
In addition, first-time buyers of such properties will also receive a grant of €15,000 which increases to €30,000 for Gozitan couples who wish to buy such properties in Gozo, thereby encouraging young people to continue to live in Gozo but more importantly to maintain its heritage.
These measures are effective as from 12 October 2021, for a period of three years.
Property developed in accordance with approved criteria
This measure, effective from 12 October 2021, provides an exemption from duty on the first €750,000 of the higher of the value and consideration of a property that is developed subsequent to the date of the transfer in conformity with certain criteria, as approved by the competent authority. Such authority, comprising of a board or any other entity that will be designated for the purpose may publish guidelines relating to procedure, terms and conditions and architecture / design requirements.
The incentive operates as a refund scheme with the duty being refunded to the payor of the duty upon application and after fulfilment of all conditions.
The incentive applies provided that:
• The approval of the competent authority is filed with the Revenue within 3 months from the date of its issue together with any other required evidence.
• At any point after the transfer, but until the date when the property is transferred again inter vivos or causa mortis, the property is neither demolished nor subjected to structural alterations or additions as a result of material changes to the approved architectural design, nor divided into more transferable units, unless expressly allowed by the competent authority.
• Should the latter conditions be breached, the duty benefit would become refundable to the Revenue by the owner of the property at the time the approval was granted, due on the date of the breach.
For all three schemes:
• The transfer must be made by the end of 2024.
• When the transfer value is higher than €750,000, the excess is taxed and/or dutiable at the normal rates. • The transfer must be one whereby the acquirer does not require a permit in terms of Immovable Property (Acquisition by Non-Residents) Act or, if the property is situated in a Special Designated Area (‘SDA’), the acquirer would not have required such permit had the property been located in a non-SDA.
• The relevant notice of transfer is filed with the Revenue by not later than 31 January 2025. • There shall be communication between Commissioner for Revenue, the Planning Authority and the competent authority in connection with properties benefiting from the schemes. Additional provisions in the Rules cover, amongst others, intra-group transfers of properties falling within these schemes and the interaction of these schemes with other property schemes.
Old and Vacant Property Scheme and Urban Conservation Area Property Scheme II
These schemes, effective from 12 October 2021, provide an exemption from income tax and duty on the first €750,000 of the higher of the value and consideration of buildings which either:
• had their construction completed at least 20 years before the date of the transfer, are vacant on the transfer date and have been so vacant for a period of 7 continuous years immediately preceding transfer date; or
• are located in a UCA.
The incentives apply provided that:
• The conditions relating to completion and vacancy of the building are confirmed by an architect’s report and a report issued by ARMS Ltd [this being the company that manages water and electricity billing in Malta] and/or other evidence as may be determined by Commissioner for Revenue .
• All the prescribed documents and declarations are duly supplied.
• The UCA status is confirmed by a certificate issued by the Planning Authority and/or other evidence as may be determined by Commissioner for Revenue.
• At any point after the transfer but until the date when the property is transferred again inter vivos or causa mortis;
• The building is neither demolished nor subjected to structural alterations or additions as a result of which it is divided into more transferable units than the number of transferable units that comprised the property at the time of the transfer. In addition, no permit for such demolition or works must be issued to the owner who benefited from the exemption.
• No transfer is made of any divided part of the property.
Should the latter conditions be breached within the said timeframe, the relevant tax and duty would become payable to the Revenue by the acquirer of the property at the time of relief, due on the date of the breach.
When there is a transfer that benefitted from one of these schemes followed by a subsequent transfer of a divided part of the same property, the latter transfer cannot benefit from these schemes.
VAT refund on renovation works
Government introduced a VAT refund up to €54,000 on the first €300,000 spent on renovation works for specific types of properties and those in Urban Conservation Aareas. Details of this scheme have still to be issued however, this measure is set to improve the overall environment in Village Cores.
In an attempt to avoid property speculation, such properties cannot be divided (as is the case when they are split up into a number of apartments) if they are to benefit from such schemes.
COVID – Economic stimulus package
The reduction of the rate of stamp duty to 1.5% on the first €400,000 of the transfer value, and the reduction of income tax on capital gains to 5% on the first €400,000 of the transfer value will not be renewed and therefore all Promise of Sale Agreements (POS) will need to be signed by the 31st December 2021 to avail oneself of these reductions. Final deeds will need to be signed by June 2022.
Sale of rented property to existing tenants
Tax and stamp duty on transfers and acquisitions of property that was previously being rented to tenants eligible for any schemes administered by the Housing Authority shall be reduced by half on the first €200,000 of the value of the property. No tax and stamp duty shall be levied in the case of a transfer of the said property to the previous tenants.
Equity Share scheme extended
The ‘Equity Sharing Plus’ scheme has been extended to persons over 30 years old and provide security for up to 50% of the value of the property. The Equity Sharing Scheme previously applied to persons over the age of 40, who intend to buy their residence by purchasing at least fifty per cent of the property whilst the rest will have to be purchased by them at later stage.
On the other side, the Housing Authority will purchase itself the remaining portion not purchased by the applicants which should not be more than fifty percent of the property. After 20 years, the applicants will be obliged to purchase the Housing Authority’s share by paying the same price paid by the Housing Authority.
Grant to assist owners in the construction and/or completion or rehabilitation of their first home
Grants under this scheme are intended as part compensation of expenditure in respect of the cost of construction and/or completion or rehabilitation works on first dwelling house.
The owners of first residences, who due to an increase in the number of family members they require to construct additional rooms or carry out various alterations to their premises, are entitled for a grant under this scheme.
Applicants of properties built prior to 1990 can benefit from a grant amounting to between €3,495 – €6,989, whilst properties built after 1990 can be granted the amount of up to a maximum of €5,824.
The grant is also given according to the status of the applicants. Applicants should not possess other property, and the property on which the grant is requested should be their first residence. Grant is given upon presentation of invoices and fiscal receipts. The property should be the applicants’ first residence.
