Income Tax Act (Cap. 123), article 5A

5A. (1) Notwithstanding any other provision of the Income Tax Acts, tax shall be chargeable and payable on any transfer t o which this article applies in such amount, at such rate and in such manner as provided herein. (2) ( a) In this article, unless the context otherwise requires - "own residence" has the meaning assigned to it in article 5(5)( c); "project" means property t hat has been developed by the owner into more than one transferable unit or divided for transfer into more than one transferable portion: Provided that it shall not include land acquired by the owner and divided for transfer into more than one transferable portion, where the land is transferred by the owner in the same state as when acquired (i.e. no excavation or any other works whatsoever have been carried out on the property) and no permit has been issued by the Planning Authority during the period of ownership by the owner sanctioning the development of the land into more than one transferable unit. "property" means any immovable property situated in Malta and any right over such property; INCOME TAX [CAP. 123. 43 " t r a n s f e r " h a s t h e m e a n i n g a s s i g n e d t o i t i n a r t i c l e 5(1)( b) and includes any assignment or cession of any rights over property, and an y occurrence that is deemed to be a transfer in terms of sub-article (12A) of this article and any provision of article 5. Except as provided in sub-article (7A), it shall not include a partition of property where no owelty is due. When property is transferred by means of a deed of exchange the parties shall be deemed to have made two separate deeds of transfer. (b) Saving the provisions of sub-article (7), property assigned to a co-partitioner under a deed of partition shall be deemed to have been acquired by that co- partitioner at the time that he had acquired his undivided share before that partition and by virtue of the same transfer causa mortis o r inter vivos under which he had acquired that undivided share. (c) In determining whether an owelty is due on a contract of partition, the provisions of article 5(2)( d) shall apply mutatis mutandis . (d) The assignment of any right obtained in terms of a promise of sale of immovable property (konvenju), including a promise to alienate immovable property in any manner and a promise of an emphyteutical grant, shall not be treated as a transfer of property to which this article applies: Provided that the Minister may, by rules, prescribe: (i) the conditions for the validity of any such assignment; (ii) the deductions that may be allowed for the purpose of determining the income resulting from any such assignment; ( i i i ) t h e t a x c h a r g e a b l e o n t h e i n c o m e determined as aforesaid; (iv) the time within which and the manner in which the tax so chargeable shall be paid. (3) Saving the other provisions of this article, this article applies to any transfer of property made on or after the 1st November, 2005, excluding: (a) a transfer in respect of which all the following conditions are satisfied: Cap. 364. (i) a notice of a promise of sale or transfer relating to that transfer has been given to the Commissioner in accordan ce with the provisions o f a r t i c l e 3 ( 6 ) o f t h e Duty on Documents and Transfers Act or of rules made under that Act by 44 CAP. 123.] INCOME TAX not later than the 22nd November, 2005; (ii) the transfer is made on or after the 1st November, 2005 but not later than the 31st March, 2006 and is made pursuant to and for the consideration and at the same terms provided for in that promise of sale or transfer; (iii) a notice of that transfer is given to the Commissioner in accordance with the said Act by not later t han the 15th May, 2006; (iv) the transferor elects, by means of a declaration made to the notary at the time of the publication o f t h e d e e d o f t h e t r a n s f e r a n d r e c o r d e d i n t h e said deed, to exclude that transfer from the scope of this article; (b) a transfer of property that is made not later than twelve years after the date of the acquisition thereof if the transferor elects, by mean s of a declaration made to the notary at the time of the publication of the deed of the transfer and recorded i n the said deed, to exclude that transfer from the scope of this article: Provided that, where a transfer of property made not later than twelve years after the date of the acquisition thereof is made on or after the 1st January , 2015, an election as aforesaid, to exclude that transfer from the scope of this article, may only be made if the following conditions are satisfied: (i) a notice of a promise of sale or transfer relating to that property has been given to the Commissioner before the 17th November, 2014; (ii) the said property is transferred to the same person or persons appearing on the said promise of sale agreement; and (iii) the said property is transferred before the 1st January, 2016: Provided also that i n the case of a tra nsfer that is made on or after the 1st March, 2006, of property that forms part of a project: (i) an election as aforesaid may only be made if the transfer is the first tr ansfer made by the said transferor, on or after the said date but before the 1st January, 2015, of property forming part of that project; and (ii) when an election as aforesaid has been made it shall also apply to all subsequent transfers of property forming part of that project made by the said transferor not later than twelve years from the date of the acquisition thereof, and all such transfers shall accordingly be transfers to which this article shall not apply; INCOME TAX [CAP. 123. 45 Cap. 364. (iii) notwithstanding the previous sub-paragraph (ii) when an election as aforesaid has been made it shall not apply to transfers of property forming part of that project mad e by the said transferor on or after the 1st January, 2015 in respect of which a notice of a promise of sale or transfer relating to that property has not been given to the Commissioner in accordance with the provisions of article 3(6) of the Duty on Documents and Transfers Act o r o f r u l e s m a d e under that Act before the 17th November, 2014: (iv) notwithstanding the provisions of sub-paragraph (i) of this proviso, in the case of a transfer of property that forms part of a project made on or after 1st January, 2015, where the first transfer of property forming part of such project is made on or after 1st January, 2015, an election as aforesaid may be m a d e i f a n o t i c e o f a p r o m i s e o f s a l e o r t r a n s f e r relating to that property has been given to the Commissioner before the 17th November, 2014, so however that the provisions of sub-paragraph (ii) of this proviso shall not apply where the first transfer of property forming part of a project is made on or after 1st January, 2015: Provided further that, for the purposes of determining whether the property has been transferred not later than twelve years from the date of its acquisition, where the transferor is a company that had acquired the property by means of a transfer that qualified for an exemption in terms of sub-article (4)(f) or article 5(9) ("intra-group exemption"), it shall be deemed to have acquired the property on the date on which the property had previously last been acquired by a company by means of a transfer that did not qualify for the intra-group exemption; Cap. 246. (c) a transfer of property situated within a special designated area, as defined in the Immovable Property (Acquisition by Non-Residents) Act , if it is made by the person who was the owner of that property on the date when that area first became a special designated area and if the transferor elects, by means of a declaration made to the notary at the time of the publication of the deed of the transfer and recorded in the said deed, to exclude that transfer from the scope of this article: Provided that an election as aforesaid, to exclude that transfer of property s ituated within a special designated area from the scope of this article, may only be made in the case of a transfer that is made before the 1st January, 2015: Provided also that - (i) in a transfer that is made on or after the 1st 46 CAP. 123.] INCOME TAX March, 2006, an election as aforesaid may only b e m a d e i f t h e t r a n s f e r i s t h e f i r s t t r a n s f e r o f property situated within that special designated area made by the said transferor on or after the said date but before the 1st January, 2015; and (ii) when an election as aforesaid has been made it shall also apply to all subsequent transfers of property situated within that special designated area, made at any date by the said transferor, and all such transfers shall accordingly be transfers to which this article shall not apply; Cap. 364. (iii) notwithstanding the previous sub-paragraph (ii) when an election as aforesaid has been made it shall not apply to transfers of property situated within that special designated area made by the said transferor on or after the 1st January, 2015 in respect of which a notice of a promise of sale or transfer relating to that property has not been given to the Commissioner in accordance with the provisions of article 3(6) of the Duty on Documents and Transfers Act or of rules made under that Act before th e 17th November, 2014; (d) a transfer in respect of which all the following conditions are satisfied: (i) the property was, immediately before the transfer, co-owned by two individuals and the transfer is made by one o f the co-owners to the other; Cap. 364. (ii) the co-owners had, for the purposes of article 32(4)( a) of the Duty on Documents and Transfers Act , declared in the deed of the acquisition of that property that they had acquired it for the purpose of establishing therein or constructing thereon their sole ordinary residence; (iii) the transferor elects, by means of a declaration made to the notary at the time of the publication o f t h e d e e d o f t h e t r a n s f e r a n d r e c o r d e d i n t h e said deed, to exclude that transfer from the scope of this article; (e) a transfer in respect of which all the following conditions are satisfied: Cap. 88. (i) it is a transfer of property to the Government of Malta made pursuant to an acquisition of that property in terms of the Land Acquisition (Public Purposes) Ordinance ; (ii) the Government had taken possession of that property, or an Order of the President has been issued in respect thereof, before the 1st November, 2005 and this fact is evidenced by a letter signed by the Commissioner of Land and INCOME TAX [CAP. 123. 47 attached to the deed of transfer. The transferor shall produce that letter to the notary publishing the deed. The notary shall attach that letter to the deed of the transfer and shall deliver a certified copy thereof to the Commissioner in such manner as may be prescribed; (iii) the transferor elects, by means of a declaration made to the notary at the time of the publication of the deed of the transfer and recorded in the said deed, to exclude that transfer from the scope of this article; (f) a transfer made by means of a judicial sale by auction or in the course of a winding up by the Court except for a transfer to wh ich sub-article (5)( c)(ii) applies; (g) a transfer of property that had been used in a business for a period of at least three years and that is replaced within one year by property ("the new property") used solely for a similar pu rpose of the business: Provided that: (i) this paragraph shall onl y apply, and accordingly article 5(8) shall apply, i f the transferor so elects by means of a declaration made to the notary at t h e t i m e o f t h e p u b l i c a t i o n o f t h e d e e d o f t h e transfer and recorded in the said deed; (ii) when, subsequent to a transfer to which article 5(8) applied, including a transfer made before 1st November, 2005, the new property is disposed of and that disposal does not qualify for the tax relief under ar ticle 5(8), that disposal shall also be a transfer to which this article 5A does not apply, and the income, whether chargeable under article 4(1)(a) or under article 5, derived therefrom shall be determined as provided in article 5(8); (iii) this paragraph shall not apply, and accordingly article 5(8) shall not apply, if the replacement property is disposed of or ceases to be used in such business, within a period of two years starting from the date the replacement property was acquired or such shorter period as the Commissioner may determine; (h) a transfer of property by a person who is not resident i n M a l t a a n d w h o i s r e s i d e n t f o r t a x p u r p o s e s i n another country if that person produces to the notary who publishes the deed of transfer a statement signed by the tax authorities of the country of that person’s residence that confirms that person’s residence in that country and that certifies that that person is subject to tax in that country on gains or profits derived from the transfer of immovable property situated in Malta. The notary shall attach that statement to the deed and shall 48 CAP. 123.] INCOME TAX deliver an authenticated copy thereof to the Commissioner in such manne r as may be prescribed: Provided that such person is not owned or controlled by, directly or indirectly , nor acts on behalf of, an individual or individuals who is or are resident in Malta: Cap. 372. Provided also that, notwithstanding anything said in the Income tax Acts provisional tax paid relating to the transfer of such property made on or after the 1st January, 2015, under the provisions of article 43(1)( b) of the Income Tax Management Act s h a l l n o t b e available for refund under article 48 of the said Act and the provisions of article 43(4)( b) of the said Act shall not apply to such transfer; (i) a transfer of property pursuant to a lease agreement that included the option of purchase of the property at an agreed price, where the s aid arrangements had been made prior to, but the transfer occurs after, the 1st November 2005; (j) a transfer of property forming part of a project made by a company which has issued debt securities to the public and such debt securities are listed on a stock exchange recognised, and if the transferor elects, by means of a declaration made to the notary at the time of the publication of the deed of the transfer and recorded in the said deed, to exclude that transfer from the scope of this article: Provided that: (i) an election as aforesaid may only be made if the transfer is the first transfer made by the said transferor, on or after 1st April, 2015, of property forming part of that project; and (ii) when an election as aforesaid has been made it shall also apply to all subsequent transfers of property forming part of that project made by the said transferor and all such transfers shall accordingly be transfers to which this article shall not apply: Provided also that this paragraph shall only apply where the reason for the offer and use of proceeds, as disclosed in the prospectus published when the debt securities are offered to the public, is solely to develop and construct the said project. (4) No tax shall be chargeable on a transfer to which this artic le applies where that transfer is: (a) a donation made by a person: (i) to his spouse, to his descendant or ascendant in the direct line, or to the spouse of any such descendant or ascendant, or, in the absence of any descendants in the direct line, to his brother INCOME TAX [CAP. 123. 49 or sister or to a descendant of his brother or sister, (ii) to a philanthropic institution approved for the purposes of article 12(1)( e): Provided that on a subsequent transfer of the property by any person mentioned in sub- paragraph (i), the date of acquisition of the property shall be considered to be the date of the original acquisition of the property by the person who had made the original donation; (b) a donation deemed to ha ve been made in terms of article 5(18)( b) or 5(21)( b)(ii) by a person to a person or institution mentioned in paragraph ( a); (c) a transfer of property not forming part of a project, consisting of a dwelling house, that has been owned and occupied by the transfer or as his own residence for a period of at least three consecutive years immediately preceding the date of transfer and provided that the property is disposed of within twelve months of vacating the premises or such other period or condition as may be prescribed and provided that such property is declared by the transferor to be his main residence through an election made to the Commissioner in such manner and subject to such rules as may be prescribed: Provided that: (i) any period during which the transferor has occupied the property as his own residence with the permission of the Housing Authority pursuant to a promise of sale ( konvenju ) by that Authority shall be deemed to be a period during which the transferor o wned that property; (ii) where the property was inherited by the transferor from a direct ascendant, the period during which the said ascendant had owned and occupied the property as his own residence shall be deemed to be a period during which the property had been owned by the transferor; (iii) where the transferor had acquired the property under an assignment to which paragraph ( d) or (e) refers, the period during which the person making that assignment had owned the property and used it as his own r esidence shall be deemed to be a period during which the property had been owned by the transferor; (iv) where any condition for the exemption under this paragraph is satisfied in respect only of an undivided part of the property the exemption shall be restricted proportionately; (v) where the property was inherited by the t r a n s f e r o r f r o m h i s o r h e r s p o u s e , t h e p e r i o d 50 CAP. 123.] INCOME TAX during which the said spouse had owned and occupied the property as his or her own residence shall be deemed to be a period during which the property had been owned by the transferor; (vi) where at any time in the period of ownership there is a change in the dwelling house or the part of it which is occupied as the individual’s residence, whether on account of a reconstruction or conversion of a building or for any other reason, or there have been changes as regards the use of part of the dwelling house for the purpose of a trade, business or profession or for any other purpose, the relief given by this sub-article may be adjusted in such manner as the Commissioner may determine in an assessment; (vii) where the property has been owned and occupied by the transferor and his spouse as their residence for a period of at least three (3) years and, as a consequence of a divorce or a de jure or de facto separation, one (1) of the spouses ceases to occupy the property, the property shall only be treated as having been vacated if and when the other spouse also ceases to occupy the property as his sole ordinary residence; (d) the assignment of property between spouses consequent to a judicial or consensual separation or a divorce: Provided that the provisions of this paragraph shall also apply where the property to be assigned is owned by a company which is fully owned by any or both spouses; (e) the assignment of property that formed part of the community of acquests between the spouses or was otherwise owned in common between them, to one of the spouses on the dissolution of the community, or the partition of such property between the spouses or the surviving spouse and the heirs of the deceased spouse: Provided that on a subsequent transfer of the said property, the date of acquisition of the share assigned as aforesaid shall be the original date when the property was acquired by the two spouses; (f) a transfer of property from one company to another which, would qualify for tax relief under article 5(9) but for the provisions of this article: Provided that the provisions o f article 5(9)(ii) and (iv) shall also apply to t he said transfer: Provided further that if such transfer does not qualify for tax relief under article 5(9) solely for the reason that it is not a transfer of a capital asset, such transfer shall be exempt from tax under the provisions of this INCOME TAX [CAP. 123. 51 paragraph if the said transfer is part of a restructuring, involving the transfer o f the whole or part of a company’s business to another company: Provided also that on a subsequent transfer of the said property made within a perio d of twelve years after the date of the acquisition th ereof as determined in accordance with the second proviso to sub-article (3)(b), the cost and date of acquisition of the said property shall, where the transferor elects to exclude the transfer from the scop e of this article, be the original cost and the date referred to in article 5(9)(i). (g) the transfer of property upon the incorporation of a business or a partnership en nom collectif as a going concern into a limited liability company that satisfies the conditions laid down in article 5(15): Provided that this paragraph shall not apply, and accordingly articl e 5(15) is not applicable, if the business is disposed of or ceases to exist, within a period of two years starting from the date the business is transferred to the said company or such shorter period as the Commissi oner may determine: Provided further that, for the purposes of determining whether the property has been transferred not later than twelve years from the date of its acquisition, under sub-article (3)( b), where the transferor is a company that had acquired the property by means of a transfer that qualified for a n exemption in terms of this sub-article or article 5(15) , it shall be deemed to have acquired the property on the date on which the property had previously been acquired by the person transferring the property to the said company; (h) the settlement of property on trust, or the distribution or reversion of property settl ed on trust, or the transfer of all the property of a trust involving only a change in the trustee of a trust and where there is no change in the beneficiaries or in the beneficial interest: Provided that for the purposes of the provisions of article 5(18) to (25), it i s d e e m e d t h a t i n s u c h instances, no transfer has taken place, or that no loss or gain has arisen; (i) except as may be otherwise prescribed, the transfer of property by a person whos e income or capital gains from the transfer of that property is exempt from tax in terms of article 12(1), or an exemption order made under article 12(2), or any other provision of the Income Tax Acts or any other law; (j) A transfer of property by a company to its shareholder or to an individual related to its shareholder in the course of winding up or in the course of a distribution of assets pursuant to a scheme of distribution, where the said shareholder is an individual or his spouse, 52 CAP. 123.] INCOME TAX who owns or own, directly or indirectly, not less than 95% of the share capital and voting rights of the said company transferring the property as aforesaid. For the purpose of this paragraph an individual is related to the said shareholder if such individual is his spouse, his descendant or ascendant in the direct line, or the spouse of any such descendant or ascendant, or, in the absence of any descendants in the direct line, his brother or sister or a descendant of his brother or sister: Provided that this paragraph shall only apply where all the following conditions have been satisfied: (i) the said shareholder held, directly or indirectly, not less than 95% of the share capital and voting rights of the company transferring the property for a period exceeding five years immediately preceding the date of the transfer of the property as aforesaid; (ii) the said property consists of any immovable property, including land; (iii) the said property is held as a capital asset by the company and has been so held for a period exceeding five years im mediately preceding the date of the transfer of the property as aforesaid: Provided further that, on a subsequent transfer of the said property by the said shareholder or related individual, the provisions of sub-article (3)( b) shall not apply: Provided also that on a subsequent transfer of the said property, the date of acquisition of the property shall be considered to be the date of the original acquisition of the property by the company: Provided also that where the said property is subsequently transferred by the said shareholder or related individual, as the case may be, to a person referred to in sub-article (4)( a)(i), and such person subsequently transfers the said property within a period of five years from the date of its acquisition the provisions of sub-article (3)( b) shall not apply: Provided also that every company resident in Malta shall allocate the distributable profits derived from a transfer to which this paragraph applies, and on which no tax is payable in accordance with thi s paragraph, to the final tax account. (5) ( a) Subject to the other provisions of this sub-article, the tax on a transfer to which this article applies shall be chargeable at the rate of 12% of the transfer value: INCOME TAX [CAP. 123. 53 Cap. 364. Provided that in the case of transfers of property made on or after the 1st January , 2015, other than property forming part of a project as referred to in the second proviso to sub-article (3)( b) of this article and property situated within a special designated area as referred to in sub-article (3)( c) of this article in respect of which a notice of a promise of sale or transfer relating to the said property forming part of a project or situated within a special designated area has been given to the Commissioner in accordance with the provisions of article 3(6) of the Duty on Documents and Transfers Act or of rules made under that Act before the 17th November, 2014, the tax on a transfer to which this article applies shall be chargeable at the rate of 8% of the transfer value: Cap. 364. Provided that where a notice of a promise of sale or transfer relating to a property given to the Commissioner in accordance with the provisions of article 3(6) of the Duty on Documents and Transfers Act o r o f r u l e s m a d e under that Act before the 17th November, 2014 is either cancelled after the said date or expired and, either the said property is transferred to the same person or persons appearing on the said promise of sale which has been cancelled or, another property forming part of the same project or situated within the same special designated area is transferred to the same person or persons appearing on the said promise of sale which has been cancelled or has expired, any of such transfers shall for the purpose of this article be deemed to be transfers in respect of which a notice of a promise of sale or transfer has been given to the Commissioner in accordance with the provisions of article 3(6) of the Duty on Documents and Transfers Act or of rules made under that Act before the 17th November, 2014; (b) When a transfer to which this article applies is a transfer of property - (i) that was acquired by the transferor in terms of a transfer causa mortis that happened after the 24th November, 1992; or (ii) that was acquired by the transferor in terms of a donation made more than five years before the date of the transf er in question, the tax thereon shall be chargeable at 12% of the excess, if any, of the transfer value over its acquisition value: Provided that this paragraph ( b) shall not apply where the property transferred consists of a transfer of a property forming part of a project. For the purpose of this proviso ''project'' means property that was acquired by the transferor in the circumstances referred to in sub- paragraph (ii) above and which has been developed by the said transferor into more than one transferable property: 54 CAP. 123.] INCOME TAX Provided also that this paragraph (b) shall not apply if the transferor so elects by means of a declaration made to the notary at the time of the publication of the deed of the transfer and recorded in the said deed: Provided also that when a transfer to which this article applies is a transfer of property that was acquired by the transferor in terms of a donation made five years or less before the date of the transfer in question, the transferor shall be deemed for all the purposes of this sub-article (5) to have acquired such property on the date such property was previously acquired in an acquisition preceding the date of the donation: Provided further that this paragraph (b) shall not apply to a transfer referred to in paragraph (c). (c) When a transfer to which this article applies is a transfer of pr operty that was acquir ed by the transferor in terms of a transfer causa mortis and - (i) the said acquisition causa mortis happened before the 25th November 1992; or (ii) the said acquisition causa mortis happened on or after the 25th November 1992, and the property is transferred by means of a judicial sale by auction, the tax thereon shall be chargeable at the rate of 7% of the transfer value. (d) Subject to the provisions of paragraphs ( b) and ( c), when a transfer to which this article applies is a transfer of property in the circumstances referred to in a r t i c l e 3 1 C ( 1 ) , t h e t a x t h e r e o n s h a l l b e c h a r g e a b l e a t the rate of 10% of the transfer value: Cap. 364. Provided that in the case of transfers of property referred to in this paragraph made on or after the 1st January 2015 and before the 1st January 2016 in r e s p e c t o f w h i c h a n o t i c e o f a p r o m i s e o f s a l e o r transfer relating to that property has not been given to the Commissioner in accordan ce with the provisions of article 3(6) of the Duty on Documents and Transfers Act or of rules made under that Act before the 17th November, 2014 the tax thereon shall be chargeable at the rate of 7% of the transfer value. The second proviso to paragraph (a) of this sub-article shall apply accordingly. (e) When a transfer to which this article applies, made on or after the 1st January, 2015, is a transfer of property not forming part of a project that is made not later than five years after the date of the acquisition thereof, the tax thereon shall be chargeable at the rate of 5% of the transfer value: Provided that, for the purposes of determining whether the property has been transferred not later than five INCOME TAX [CAP. 123. 55 years from the date of its acquisition, where the transferor is a company that had acquired the property by means of a transfer that qualified for an exemption in terms of sub-article (4)(f) or article 5(9) ("intra- group exemption"), it shall be deemed to have acquired the property on the date on which the property had previously last been acquired by a company by means of a transfer that did not qualify for the intra-group exemption: Provided also that this paragraph ( e) shall not apply where the said property was, at any time within the period of five years preceding the transfer, owned by a person related to the transferor and the property formed part of a project at such time: Cap. 364 Cap. 356. Provided further that, unless the transferor had acquired the property for the purpose of establishing therein or constructing thereon his sole ordinary residence and declared such intention in t he deed of acquisition for the purposes of article 32(4)(a) of the Duty on Documents and Transfers Act , this paragraph (e) shall not apply if, at any time during the period of f ive (5) years preceding the transfer, the transferor, or a person related to the transferor, carried out on that property any works for which a development permission was required in terms of the Development Planning Act but excluding any works for which a permission is granted without the need for an application in terms of an order made under that Act. For the purpose of these provisos - (i) an individual is deemed to be related to the transferor if the transferor is a body of persons of which the said individual is, directly or indirectly , a shareholder, partner or member; and (ii) two bodies of persons are deemed to be related persons if they are, directly or indirectly, controlled o r b e n e f i c i a l l y o w n e d a s t o m o r e t h a n t w e n t y - f i v e percent by the same persons. Cap. 364. (f) Notwithstanding the previous paragraphs ( a), ( d) and (e) when a transfer to which this article applies, made on or after the 1st January, 2015, is a transfer of property that was acquired by the transferor before the 1st January, 2004 and in respect of which a notice of a promise of sale or transfer relating to that property has not been given to the Commissioner in accordance w i t h t h e p r o v i s i o n s o f a r t i c l e 3 ( 6 ) o f t h e Duty on Documents and Transfers Act or of rules made under that Act before the 17th Nov ember, 2014, the tax on a transfer to which this article applies shall be chargeable at the rate of 10% of the transfer value. The second proviso to paragraph ( a) of this sub-article shall apply accordingly. In the case where such notice of promise of sale has been given before the 17th November, 2014, the tax chargeable shall be at the rate 56 CAP. 123.] INCOME TAX of 12% of the tr ansfer value: Provided that, for the purposes of determining whether the property has been acquired by the transferor before the 1st January, 2004, where the transferor is a company that had acquired the property by means of a transfer that qualified for an exemption in terms of sub-article (4)( f) or article 5(9) ("intra-group exemption"), it shall be deemed to have acquired the property on the date on which the property had previously last been acquired by a company by means of a transfer that did not qualify for the intra-group exemption. Cap. 364. (g) When a transfer to which this article applies, made on or after the 1st January , 2015, is a transfer of property that was immediately before the transfer owned by an individual, or co-owned by two individuals, who had for the purposes of article 32(4)( a) of the Duty on Documents and Transfers Act declared in the deed of the acquisition of that property that the said property had been acquired for the purpose of establishing therein or constructing thereon his or their sole ordinary residence, and the transfer is made not later t h a n t h r e e y e a r s a f t e r t h e d a t e o f t h e a c q u i s i t i o n thereof, the tax thereon shall be chargeable at the rate of 2% of the transfer value: Provided that this paragraph shall only apply where the said individual does not own any other residential property at the time of the transfer. The notary who receives any deed of such a transfer shall record in the deed a written declaration by the individual so transferring that he does not own any other residential property at the time of the transfer and the notary shall warn the said individual of the importance of the truthfulness of such declaration. Cap. 504. (h) Notwithstanding paragraphs ( a), ( e) and ( f), when a transfer to which this article applies is a transfer of property situated in an urban conservation area or scheduled by the Malta Environment and Planning Authority (MEPA) in terms of article 81 of the Environment and Development Planning Act , and the transferor declares to the notary receiving the deed of the transfer that he has carried out works on that property in compliance with a permit issued by MEPA providing for the restoration and, or rehabilitation of that property upon an application for that purpose that was filed with MEPA on or after 1 January 2015, the tax on the transfer shall be chargeable at the rate of 5% of the transfer value if the following conditions are satisfied: (i) the transfer is made on or after the 1st January 2016; (ii) the provisions of this paragraph or of paragraph INCOME TAX [CAP. 123. 57 (d) were not applied in respect of any previous transfer of the same property; (iii) the restoration and, or rehabilitation works have been certified by MEPA as having been completed in compliance with the relative permit; Cap. 364 (iv) the certificate referred to in sub-paragraph (iii) is produced to the notary who receives the deed of the transfer and the notary produces a certified copy of the certificate to the Commissioner together w ith the notice required by article 51 of the Duty on Documents and Transfers Act ; (v) the person who transfers the property submits any forms and documentation that the Commissioner may require in connection with the said works and with the transfer. *†(i)(i) When a transfer that is made on or after 1 January 2022 is a transfer of property that had been leased for a period of at least ten (10) years ending on the date of the transfer, and during that whole period of ten (10) years the tenant was entitled to a benefit in respect of that lease under the Private Rent Housing Benefit Scheme, the Nikru Biex Nassistu Scheme or the Rehabilitation of Vacant Dwellings for Rent Scheme administered by the Housing Authority, and that transfer is made to the tenant of that property, no tax shall be chargeable on the first two hundred thousand euro (€200,000) of the transfer value and the tax on the excess, if any, shall be char geable at the normal rate. (ii)When a transfer satisfies the conditions of sub- paragraph (i) except only that it is not made to the tenant but to another person, the tax on the first two hundred thousand euro (€200,000) of the transfer value shall be chargeable at the rate of one half of the normal rate and the tax on the excess, if any , shall be chargeable at the normal rate. (iii)When a transfer satisfies the conditions of sub- paragraph (i) except only th at the period of the lease and, or the period during which the tenant was entitled to the said benefit was less than ten (10) years but not less than three (3) years, the tax on the first two hundred thousand euro (€200,000) of the transfer value shall be chargeable at the rate of one half of the normal rate and the tax on the excess, if any , shall be chargeable at the normal rate. *Applicable from year of assessment 2023. †Applicable from year of assessment 2025. Vide Regulation 8 (2) (a) of Act XIII of 2024. 58 CAP. 123.] INCOME TAX Cap. 364. (iv) * This paragraph shall apply only if the parties to the transfer or any of them produces to the notary who publishes the deed of the transfer a document issued by the Housing Authority certifying the period during which the tenant of the lease of the property had been entitled to a benefit in respect of that lease under the Private Rent Housing Benefit Scheme, the Nikru Biex Nassistu Scheme, or the Rehabilitation of Vacant Dwellings for Rent Scheme, as the case may be. The notary shall make a referen ce to that document in that deed and shall produce that document to the Commissioner together with the notice of the transfer referred to in article 51 of the Duty on Documents and Transfers Act . (v) For the purpose of this paragraph, "normal rate" means the rate of tax that would be chargeable on the relevant value of the transfer in terms o f this article were it not for the provisions of this paragraph. (6) ( a) The transfer value of property is the higher of the market value of that property and the consideration paid or payable for the transfer. In a contract of emphyteusis and in any transfer of property where the consideration consists of or i ncludes periodical payments to which article 4(1)(d) or (e) applies, the ground rent or any such other periodical payment payable shall be chargeable as income in accordance with the provisions of article 4 and shall not be included in the transfer value of a transfer t o which this article applies. (b) The acquisition value of property shall be determined in such manner as may be prescribed. (7) Saving the provisions of sub-article (7A), in a partition of property where an owelty is paid - (a) any person to whom an owelty is due shall be deemed to have sold part of the property assigned to him. That sale shall be deemed to be made on the date of the partition for a consideration equivalent to the owelty; and (b) any person by whom an owelty is due shall be deemed to have bought part of the property assigned to him. That purchase shall be deemed to be made on the date of the partition for a consideration equivalent to the owelty. (7A) (a) When the property that is partitioned consists of or includes property that was acquired by the partitioners from a person ("the original owner") who was, in respect of that trans fer, exempt from tax in terms of sub-article (4)(c) or of article 5( 5)(b), each of the partitione rs shall be deemed t o transfer a portion of that property equivalent to his undivided share in that property. *Applicable from year of assessment 2025. Vide Regulation 8 (2) (a) of Act XIII of 2024 . INCOME TAX [CAP. 123. 59 (b)For the purposes of this article , the transfer that is deemed to take place upon a partition in accordance with paragraph (a) shall be deemed to be a sale of property for its market value and the tr ansferor shall be deemed to have acquired that property on the date on w hich it had been acquired by the original owner. Any subsequent transfe r shall be deemed to be a transfer of property that had been purchased on the date of the partition. (8) ( a) When a transfer is a transfer of property that was acquired under more than one acquisition, and the tax chargeable on the transfers of the parts so acquired or on the gains or profits derived therefrom would fall, if those parts were transferred separately, to be determined in accordance wit h different provisions of the Income Tax Acts, those provisions shall apply as if more than one transfer has taken place and the transfer value of each such trans fer shall be determined separately and in such ma nner as may be prescribed. (b) When property is transferred in part the acquisition value of the part that i s transferred shall be a proportion of the acquisition value of the whole determined in such manne r as may be prescribed. (9) ( a) Except as may be prescribed , the amount on which tax is chargeable in accordance with this article shall not be reduced by any deduction whatsoever. (b) No losses or bad debts arising from, or expenditure incurred in respect of, a transfer to which this article applies shall be allowable as a deduction against any income or capital gains. Cap. 372. (10) ( a) Tax payable on a transfer to which this article applies shall be final and shall be s eparate and distinct from that paid or payable under any other provisions of this Act or of the Income Tax Management Act . It shall not be available as a credit again st the tax liability of any person or taken into account for the purpose of determining the amount of any refund payable under the said Acts. No provisional tax shall be payable under article 43 of the Income Tax Management Act in respect of any transfer to which this article applies. (b) Saving the other provisions of this article, no tax shall be chargeable in terms of any provision of the Income Tax Acts on gains or profits derived from any transfer to which this article applies to the extent that they are attributable to a transfer w hose transfer value has been correctly declared in the d eed of the transfer or a transfer which has been correctly declared to be exempt or out of the scope of this article, or determined by means of an order in writing that is made under sub-article (12)( c) and that has become final and conclusive. (c) Any person who owns immovable property situated in Malta shall keep an account in such manner as may be 60 CAP. 123.] INCOME TAX prescribed of all proceeds and expenditure relating to transfers to which this article applies in addition to any other accounts and records that he is required to keep in accordance with the other provisions of the Income Tax Acts. (d) Every company resident in Malta shall allocate the distributable profits deriv ed from transfers to which this article applies, and on which tax is payable in accordance with this article , to the final tax account. The said distributable profits shall be determined in such manner as may be prescribed. (e) Any party to a transfer to which this article applies or t o a p r o m i s e o f s a l e r e l a t i n g t o s u c h a t r a n s f e r s h a l l furnish the Commissioner with such particulars relating to that transfer as the Commissioner may require or as may be prescribed. (11) Tax chargeable under this article shall be due by the transferor and shall be remitted to the Commissioner within fif teen working days of the relative transfer. Except where the Commissioner orders otherwise, either in a general manner or in respect of particular cases, this payment is to be made by the notary who publishes the transfer deed by means of a bank draft or a cheque drawn on that notary’s personal bank account, payable to the Commissioner. (12) ( a) The parties to any transfer of property shall be obliged to declare to the notary publ ishing the deed of transfer all the facts that determine if the transfer is one to which this article applies and that are relevant for ascertaining the proper amount of tax chargeable or any exemption, including the value which, in their opinion, reasonably reflects the market value of the said property, if this value is higher than the consideration for the transfer. (b) The notary publishing a deed o f transfer shall warn the parties about the importance of the truthfulness of declarations made therein a nd shall record in the deed the fact that he has g iven the said warning. (c) Where it appears to the Commissioner that - (i) tax is chargeable on a transfer which is declared in the deed to be a transfer on which no tax is payable; or (ii) the tax chargeable on a transfer is, for any reason, more than that declared to be payable in the deed, h e m a y i s s u e a n o r d e r i n w r i t i n g t o t h e t r a n s f e r o r stating therein the tax which in his opinion is properly chargeable in the circumstan ces and the additional tax as specified in paragraph ( e). (d) An order under this sub-article may be made not later than six years from the end of the year in which the INCOME TAX [CAP. 123. 61 transfer is notified to the Commissioner: Provided that an order that is made solely on account of the fact that the market value of the property in question is higher than the transfer value declared in the deed - (i) may only be made if the declared transfer value i s l e s s t h a n e i g h t y - f i v e p e r c e n t o f t h e m a r k e t value; and (ii) may not be made later than twelve months after the date on which the tran sfer is notified to the Commissioner. (e) The additional tax referred to in paragraph ( c) shall be equivalent to the difference between the amount of tax payable as declared in the deed and the amount of tax payable in accordance with the order referred to in paragraph ( c). (f) The additional tax referred to in paragraphs ( c) and ( e) shall be payable by the tran sferor in addition to the tax which is payable on the tran sfer value of the property in accordance with the other p rovisions of t his article. (g) If any amount of tax due in accordance with this article is not remitted to the Commissioner within the time set out in sub-article (11), interest shall be charged thereon at the rate of one per cent per month or part thereof for the period ending on the day on which that amount is remitted: Provided that, for any period or part thereof commencing on or after 1st January 2009, interest shall be calculated at the rate of point seven five percent (0.75%) per month or part thereof and the total interest shall not exceed the said amount of tax: Cap. 372. Provided further that for any period or part thereof commencing on or after 1st January 2014 interest shall be calculated at the rate established by the provisions of article 44(2A) of the Income Tax Management Act and the total interest s hall not exceed the said amount of tax. (h) Saving the other provisions of this article, the provisions of the Income Tax Acts relating to the collection and remission of the tax, interest and additional tax shall apply to any tax, interest and a d d i t i o n a l t a x d u e u n d e r t h i s a r t i c l e a s i f t h e t a x , interest and additional tax referred to in the said provisions included also the tax, interest and additional tax chargeable and payable under this article. Cap. 372. (i) A transferor who disagrees with an order served upon him under paragraph ( c) shall have the same rights to object to that order and to appeal from a decision of the Commissioner refusing that objection as if that order were an assessment issued under the Income Tax 62 CAP. 123.] INCOME TAX Management Act and the relevant provisions of that Act relating to objections and appeals shall apply mutatis mutandis . (12A)( a) If a company ("the chargeable company") owns property which had been acquired from another company and such acquisition was exempt from tax under sub-article (4)( f) or article 5(9), this sub-article shall apply if the chargeab le company ceases to be a member of the original group before the lapse of six years from the date of the said acquisition. References in this sub-article to a company ceasing to be a member of a group of companies do not apply to cases where a company ceases to be a me mber of a group by being wound up or dissolved or in consequence of another member of the group being wound up or dissolved: Provided that where a company ceases to be a member of the original group by being wound up or dissolved, for the purpose of determi ning whether the chargeable company ceases to be a member of the original group under paragraph (b), such company sh all be deemed to have remained in existence. (b) The chargeable company shall cease to be a member of the original group, if such company and the company from which it had acquired the property referred to in paragraph ( a) no longer satisfy the provisions of article 5(9)(i) and (iii) and such determination shall be made by reference to the same individuals referred to in paragraph (iii) of the said article taken into account in determining whether the two companies referred to in this paragraph satisfied the provisions of article 5(9)(i) and (iii) on the date of the acquisition referred to in paragraph ( a): Provided that where the acquisition referred to in paragraph ( a) took place before the 1st January 2010, article 5(9)(iii) shall be disregarded for the purpose of determining whether a company ceases to be a member of a group: Provided further that wher e the chargeable company ceases to be a member of the original group, solely as a result of a change in the direct or indirect individual shareholders of the company from which it had acquired the property referred to in paragraph ( a), the chargeable company shall, f o r t h e p u r p o s e o f t h i s paragraph, not be treated as ceasing to be a member of the original group as a result of such change, so however that for the purpose of determining whether the chargeable company ceases to be a member of the original group it shall be deemed that such change had not taken place and such determination shall be made by reference to the same i ndividuals referred to in article 5(9)(iii) taken int o account in determining whether the chargeable company and the company INCOME TAX [CAP. 123. 63 from which it had acquired the property satisfied the provisions of article 5(9)(i) and (iii) on the date of the acquisition referred to in paragraph ( a). (c) For the purpose of this sub-article the term "original group" shall mean the two companies referred to in paragraph ( b) , a n d t h e i n d i v i d u a l d i r e c t o r i n d i r e c t beneficial owners of the said companies who were taken into account in determining whether the provisions of article 5(9)(i) and (iii) had been satisfied on the date of the acquisition referred to in paragraph (a): Provided that where the two companies referred to in paragraph ( b) are directly or in directly owned as to eighty percent or more by a company whose securities are listed on a stock exchange recognised by the Commissioner for the purpose of this provision, the term "original group" shall mean the two companies referred to above and the company whose securities are listed on the said stock exchange as existing on the date of the acquisition ref erred to in paragraph ( a): Provided also that where an individual acquires shares consequent to a judicial or consensual separation, in terms of a donation, exempt from tax under the provisions of article 5(2)( e), or a transfer causa mortis such individual shall be deemed for all the purposes of this sub-article to have held such shares from the date such shares were previously acquired in an acquisition preceding the date of the judicial or consensual separation, donation or the transfer causa mortis . (d) When the chargeable company ceases to be a member of the group it shall be treated for all the purposes of this article as if, immediately after its acquisition of the property referred to in paragraph ( a), it had transferred and immediatel y re-acquired the property at that time and the transfer value to be taken into account is the value at which the chargeable company had acquired the said property from the group company in an acquisition to which sub-article (4)( f) applies. (e) The tax on a transfer to which this sub-article applies shall be charged at the rate of eight percent (8%) of the transfer value as established in paragraph ( d): provided that the said rate shall be ten percent (10%) if the acquisition of property referred to in paragraph (c) occurred before the 1st January, 2004. (f) Tax chargeable under this sub-article shall be due by the chargeable company and shall be remitted to the Commissioner within fifteen working days from the date on which such company ceases to be a member of the group as provided in paragraph ( b). (g) Where in accordance with paragraph ( d) the 64 CAP. 123.] INCOME TAX chargeable company is treated as having transferred and immediately reacquired the property, the tax chargeable on the deemed transfer in accordance with paragraph (f) shall be treated as being due not by the chargeable company but by a related company ("company A") if: (i) company A is inco rporated in Malta; (ii) a joint election under this paragraph is made by the chargeable company and company A to treat the tax chargeable on the deemed transfer as being due by company A; (iii) such joint election is made by notice given to the Commissioner not later than fifteen working days from the date on which the chargeable company ceases to be a member of the group as provided in paragraph (b); and (iv) the tax chargeable referred to in paragraph ( f) is paid by company A within the period referred to in the said paragraph. For the purpose of this para graph company A is related to the chargeable company if both companies form a group for the purposes of article 5(9) at the time the original group ceases to exist. Cap.372. (12B) Where, under the provisions of article 14(1)(f) and (j) a ny deduction has been allowed in any year of assessment in respect of any property in ascertaining the total income of any person, and before the source of income in respect of which the deduction has been allowed has ceased to belong to the said person, any of the events set out in article 24(1) occurs in the year immediately preceding the year of assessment in the case of any such property in respect of which any deduct ion has been allowed as aforesaid, notwithstanding any other provision of this Act, such person shall render to the Commissioner at the same time as he renders his tax return under article 10 of the Income Tax Management Act , a balancing statement in respect of the property in question in the manner set out in article 24(1) and the other sub-articles of article 24 shall apply accordingly in respect of such balancing statement. For the avoidance of doubt, any balancing charge resulting from the balancing statement shall be charged to tax at the rates applicable to the particular person in terms of article 56. (13) The Minister may make rule s for the better implementation of the provisions of this article and, without prejudice to the generality of the foregoing, such rules may provide for: (a) the manner in which the value of any property or of any part of property to which this article applies is to be determined; (b) the manner in which the tax due under this article is to be paid and collected and the obligations of any person INCOME TAX [CAP. 123. 65 in respect of the payment of such tax; (c) the manner in which any apportionment of tax due is to be made for the purposes of this article; and (d) any matter that may be prescribed under this article. Investment Services and Insurance Expatriate. Added by: XVII. 1994.8. Amended by: XVII. 1998.70; L.N. 409 of 2007; I. 2010.14; V . 2012.12; XIII. 2015.46. Cap. 370.