The taxation of transfers of immovable property under Maltese law

Abstract

Transfers of immovable property may fall within the scope of the charging provisions of the Income Tax Act, the Income Tax Management Act and the Duty on Documents and Transfers Act. The thesis contains an overview of the relevant provisions under these laws. For this purpose it will examine briefly the tax base and the territorial application of each law. It will also compare and contrast meaning of "transfer" under each law and identify the different types of transactions that involve taxable transfers of immovable property, such as an outright sale, a donation, an inheritance and an emphyteutical grant. The thesis includes a detailed analysis of the main provisions that determine the taxation of transfers of property under each law. This analysis concentrates on the Duty on Documents and Transfers Act and the Income Tax Act. In the discussion on the Duty on Documents and Transfers Act, the thesis examines the different rules that apply to transfers inter vivas and transmissions causa mortis. It also distinguishes between the transfer of the full ownership and the transfer of rights over property, such as the creation of a usufruct, the transfer of the directum or of the utile dominium, emphyteutical grants and the redemption of the ground rent. The thesis similarly examines the different consequences that arise from the various types of property transfers under the provisions of the Income Tax Act. It also distinguishes between transfers of property that produce a capital gain within the scope of Article 5 and those that produce a trading profit within the meaning of Article 4(1)(a). The thesis exammes the exceptions and exemptions that apply in different circumstances under the two laws. These include exemptions and reduced rates that apply to the transfer or inheritance of dwelling houses, exemptions on partitions and exemptions on intra-group transfers. Reference is also made to tax exemptions regulated by other laws, such as the exemptions relevant to divisions of companies under the Companies Act. Emphasis is made on the obligations imposed by the two laws on Notaries Public for the protection of the revenue. These include the obligation to collect from the parties to a deed both the duty on documents as well as the provisional tax on capital gains.