Selling a property in Malta can be a profitable venture, but it’s crucial to understand the taxes and fees involved to make informed decisions. In this blog, we break down the taxes that apply when selling a property in Malta, including the final withholding tax and stamp duty, and explore how they may affect your bottom line.

1. Final Withholding Tax (FWT)

The most significant tax sellers will face when selling property in Malta is the Final Withholding Tax (FWT). This tax applies to the sale price and is typically deducted at the time of the transaction. Here are the key details:

• General Rate: The standard FWT rate is 8% of the sale price.
• Reduced Rate for Sole Residence: If the property you are selling is your sole residence and you have owned it for at least five years, you can benefit from a 5% FWT rate. This reduced rate is available only if you have resided in the property for the majority of the ownership period.
• Increased Rate: For properties acquired before 2004, or properties that are inherited and sold within three years, the FWT can rise to 12%. It’s important to consult with a tax advisor in these cases to understand your specific liabilities.

The FWT is often considered a straightforward way to pay taxes on the sale, as it is withheld at the source by the notary handling the transaction. However, depending on how long you’ve owned the property and whether you’ve lived there, this rate could vary significantly.

2. Stamp Duty on Property Sale

While the final withholding tax is the responsibility of the seller, stamp duty typically falls on the buyer. However, the total cost can affect your pricing strategy. The standard stamp duty rate is 5% of the sale price. However, first-time buyers may benefit from a reduced rate of 2.5%, depending on the location and price of the property.

As a seller, it’s vital to consider the implications of stamp duty when pricing your property, as it will impact the buyer’s costs. For example, if you know your buyer is a first-time buyer, the lower stamp duty rate could make your property more appealing.

3. Exemptions and Special Cases

There are a few circumstances where tax liabilities may be reduced or waived altogether:

• Transfers Between Family Members: Properties transferred between spouses, parents and children, or other close family members can often avoid the final withholding tax or face reduced tax rates.
• Divorce Settlements: Properties transferred as part of a divorce agreement are typically exempt from certain taxes, including FWT.
• First-Time Buyers: If you are selling to a first-time buyer, they may qualify for a reduced stamp duty rate, as mentioned earlier. This can also make your property more attractive to potential buyers.

Understanding these exemptions is essential, as they can save you a significant amount of money in taxes. Be sure to consult a tax expert if you think your sale may qualify for any special conditions.

4. Other Costs to Consider

While taxes are an essential part of the sale process, there are other costs that sellers should keep in mind when preparing their property for sale:

• Notary Fees: Notary services are mandatory in Malta for property transactions. Notaries typically charge between 0.2% to 0.5% of the property’s sale price, depending on the complexity of the transaction.
• Legal Fees: While not obligatory, legal advice can be invaluable, especially for complex property transactions. The costs will depend on the services provided.
• Marketing and Staging Costs: To get the best price for your property, you might want to invest in marketing or professional staging. These costs vary depending on the strategy you choose, but they can significantly increase the appeal of your property to buyers.

5. How to Navigate Tax Complexities with Professional Help

Navigating the intricacies of Maltese property taxes can be challenging, and even small mistakes could lead to unnecessary costs. Whether you’re dealing with a standard sale or a special situation like an inheritance, working with a licensed estate agent can help ensure a smooth transaction.

At BENESTATES, our team can provide you with expert advice on how to minimize tax liabilities while ensuring compliance with local laws. We can also assist you with pricing your property competitively, marketing it to the right buyers, and managing the sale process from start to finish.

Selling a property in Malta can be a lucrative experience, but understanding the taxes involved is crucial for maximizing your profits. Whether you are dealing with final withholding tax, stamp duty, or exemptions, it’s important to plan ahead. By consulting with our professional, expert agents you can ensure that your property sale is as profitable and tax-efficient as possible.

If you’re ready to sell your property in Malta, contact us today for expert guidance and support throughout the process.