Property transfers tax, income tax on capital gains and the future of taxes of a similar nature

Abstract

Transfers of immovable property, including rights attached to such property, fall within the scope of the provisions of the Income Tax Acts and the Duty on Documents and Transfers Act. In some instances, transfers of immovable property may also attract Value Added Tax in terms of the Value Added Tax Act. The purpose of this study is to analyse the nature of income tax arising on capital gains on transfers of immovable property and tax on property transfers in terms of the Income Tax Acts. It is intended to examine whether the Maltese tax system is simple and efficient, and whether it provides a safeguard against tax abuse in this regard. An analysis is made both from a legal and economic aspect taking into account the effects and responses to the 2007 global recession. Reference to areas of potential conflict is made in the light of tax treaties based on the Organisation for Economic Co-operation and Development Model and a number of judgements decided in the European Court of Justice. The future of these taxes is discussed and various recommendations are made so as to ensure that the tax system is appropriate to the prevailing property market conditions.