Selling a property in Malta can be a lucrative endeavor, but it’s important to understand the tax implications involved. Capital Gains Tax (CGT) is one of the key factors to consider when putting your property on the market. Here’s an overview of how it works and what you need to know to stay compliant.

What Is Capital Gains Tax?

Capital Gains Tax is a tax levied on the profit made from the sale of an asset, including property. In Malta, the rules surrounding CGT for property transactions differ based on various factors, such as how long you’ve owned the property and whether it was your primary residence.

How Is Capital Gains Tax Calculated?

When selling a property in Malta, you’re generally taxed at a flat rate of 8% of the property’s selling price. This tax is known as the final withholding tax. However, there are exceptions where different rates or exemptions may apply:

• Primary Residence Exemption: If the property was your sole and primary residence for at least three consecutive years and is sold within 12 months of vacating, you may be exempt from CGT.
• Inheritance Property: If the property was acquired through inheritance, a 12% rate may apply based on the difference between the selling price and the acquisition value.
• Properties Owned Before 2004: For properties acquired before 1 January 2004, the CGT rate is 10% of the difference between the selling price and the value of the property on 1 January 2004, plus any improvements made thereafter.

Who Pays the Tax?

The responsibility to pay the tax lies with the seller. The amount is deducted at the time of signing the final deed and is paid directly to the Inland Revenue Department through the notary overseeing the sale.

Can You Minimise Your Capital Gains Tax?

While CGT is a fixed cost in most scenarios, certain exemptions or deductions may reduce the amount owed:

• Keeping accurate records of property improvements, as these can increase the acquisition value.
• Ensuring the property qualifies for exemptions, such as the primary residence exemption.
• Consulting with a professional to verify if any specific circumstances apply to your situation.

What Happens If You Don’t Pay?

Non-payment of CGT can lead to serious legal and financial consequences, including fines and penalties. It is critical to ensure the tax is settled correctly during the sale process.

Why Understanding CGT Matters for Sellers in Malta

Being aware of Capital Gains Tax and its implications ensures you avoid surprises during the selling process. With proper planning and advice, you can maximise your profits while staying fully compliant with Maltese tax regulations.

Selling a property is a significant milestone, and it’s essential to have the right support every step of the way. At BENESTATES, we simplify the selling process and help you navigate the complexities of taxes and legal requirements. Whether you’re selling your family home or an investment property, we’re here to guide you. Contact us today to discuss how we can assist you.