The Maltese Inland Revenue Department has issued a guideline on the amendment to Article 5(5)(c) of the Income Tax Act made through Act XIII of 2015
This provision introduced some limitations in respect of the exemption from tax on capital gains as set out in that sub-article relative to the transfer of an individual’s only or main residence. This provision now limits the exemption to “the owner’s only or main residence, including land which the individual has for his own occupation and enjoyment with that residence as its garden or grounds up to an area (exclusive of the site of the dwelling house) not exceeding two times the area of the house.”
The Inland Revenue Department emphasized that the said garden or grounds must be for the owner’s occupation and enjoyment with that residence and transferred through the same deed with the principal residence.
However, although the amendment refers to the particular garden or grounds having an area (exclusive of the site of the dwelling house) not exceeding two times the area of the house, this should be interpreted to mean that the said garden or grounds should consist of an area which, regard being had to the size and character of the dwelling house, is required for the reasonable enjoyment of it as a residence, irrespective of the proportion that the area of the said garden or grounds bears to the particular house.