By means of LN 191 of 2020, new rules have been introduced with effect from 1st January 2020 with respect to the assignments of rights acquired on or after this date in terms of a promise of sale agreement of immovable property situated in Malta.
For an assignment to be valid, it must be made in writing, signed by the assignor and assignee and authenticated by a notary or an advocate
The following expenses are the only deductible expenses in ascertaining the chargeable income derived by the assignor, to the extent that such expenses were incurred by the assignor and have not been reimbursed by any other person.
- Brokerage fees
- The consideration paid, if any, by the assignor if he was not a party to the promise of sale agreement but had acquired the rights through another person.
The taxation on income derived from the assignment of such rights shall be calculated as follows:
The income derived from an assignment (after deducting the allowable expenses as described below) which does not exceed Eur 100,000 shall be subject to tax at the rate of EUR 0.15 for every euro or part thereof. This will be considered to be a final tax which cannot be available as a credit against the tax liability of any other person or as a refund. Such income shall not form part of the total income of the assignor. If a loss is incurred, it shall not be available as a deduction or set off against any other income. Where the assignor is an individual, he will not be required to declare such income in his personal income tax return. In the case of a company resident in Malta, it shall allocate such profits to its Final Tax Account.
Where the income derived from an assignment (after deducting the allowable expenses) exceeds Eur100,000, the first Eur100,000 shall be taxed as mentioned above, while the excess over Eur100,000 will be added to the individual’s other income and be subject to the standard tax rates as applicable to that particular individual (parent, married or single rates). In the case of company, the tax rate is 35%.
The allowable deductions on the first Eur 100,000 shall be calculated as follows:
The deductions allowed against the income, which is in excess of Eur100,000 is equivalent to the difference between the total allowable deductions and the deductions allowed against the first Eur100,000 derived from such assignments.
The assignor will be required to pay a 7% provisional tax on account of the gain derived which is in excess of the above-mentioned Eur100,000.
When rights are assigned to two or more persons conjointly or in undivided parts, the value of the consideration shall be deemed to be the total consideration paid or payable by all those persons. When rights are assigned by two or more persons conjointly or in undivided parts, the value of the consideration shall be deemed to be the total consideration paid or payable to all those persons. When rights acquired under a promise of sale are assigned by means of more than one transaction entered into between the same parties, the said rights shall be deemed to have been assigned by means of one assignment for the total consideration paid or payable in terms of all the transactions.
When income derived from an assignment is not reported fully and correctly for income tax purposes, the full income shall be chargeable to tax at the rate of 35%. Interest on late payment of tax will also be due.