Property Transfer Tax (Article 5A) and Stamp Duty on Immovable Property in Malta
The taxation of immovable property in Malta is primarily regulated through two distinct frameworks:
(1) Property Transfer Tax (PTT) under Article 5A of the Income Tax Act, and
(2) Stamp Duty regulated under the Duty on Documents and Transfers Act.
Both regimes apply independently, yet together they form the backbone of property taxation in Malta, ensuring an orderly, transparent, and equitable transfer system.
This article provides clarity on the normal rates, exemptions, reductions, and special rules that underpin the Maltese property taxation landscape.
1. Understanding PPT under Article 5A
Article 5A replaces traditional capital gains tax in most property transactions and is designed to deliver certainty to taxpayers and ensure swift tax collection.
PPT is a special tax on transfers of immovable property situated in Malta. It is final and separate from income and capital tax gains.
It is a tax on transfer value which is defined as the higher of the market value of that property and the consideration paid or payable for the transfer.
1.1 Rates of Property Transfer Tax
The default tax rate on transfers of immovable property in Malta is that of 8%. However, there are instances where a different tax rate shall be applied.
1.2 Special Rates under Article 5A
Malta’s taxation system recognises that certain transfers deserve special treatment due to social, economic, or historical factors.
i. 10% rate – transfers of properties which were acquired before 1st January 2024 are taxed at the rate of 10% on the transfer value.
ii. 2% reduced rate – The transfer of properties within 3 years by individuals who on the deed of acquisition had declared that the property was acquired to establish their sole residence, the reduced rate of 2% on the transfer value shall be applied.
iii. 5% reduced rate – Transfer of property not forming part of a project, the applicable final withholding tax rate shall be 5% on the transfer value if the property is transferred before 5 years from the date of acquisition.
iv. 5% reduced rate – If the transfer relates to immovable property which has been restored in accordance with any scheme issued by MEPA or properties situated in an Urban Conservation Area (UCA), the reduced rate of 5% shall be applicable.
Temporary measure – Properties situated in an UCA
The first €750,000 are exempt from both PPT and stamp duty if the said property is situated in an UCA
This incentive encourages preservation of Malta’s architectural heritage and revitalization of older towns.
v. Transfer of Property acquired by causa mortis
- If the transfer relates to property that was acquired by the transferor in terms of a transfer causa mortis that happened before 25 November 1992, tax shall be chargeable at the rate of 7% on the transfer value.
- If the transfer relates to property that was acquired by the transferor in terms of a transfer causa mortis that happened after 24 November 1992, and the property is transferred by means of a judicial sale, tax shall be chargeable at the rate of 7% on the transfer value.
- If the transfer relates to property that was acquired by the transferor in terms of a transfer causa mortis that happened after 24 November 1992, and the property is transferred by normal means, tax shall be chargeable at the rate of 12% on the difference between the transfer value and the value declared on the causa mortis. However, one can still elect for normal Art 5A taxation and the transfer will be taxed at the default rate of 8% on the transfer value, whichever will be the most beneficial.
vi. Transfer of Property acquired by donation
- Properties acquired by the transferor by means of donation and the property is then transferred within 5 years from the date of donation, the transfer is subject to the 5% tax rate on the transfer value.
- If the transfer relates to property that was acquired by the transferor by way of a donation and the transferor is transferring the property after 5 years from the date of donation, tax shall be chargeable at the rate of 12% on the difference between the transfer value and the value declared on the deed of donation. However, one can still elect for normal Art 5A taxation and the transfer will be taxed at the default rate of 8% on the transfer value, whichever will be the most beneficial.
Exempt transfers of immovable property
Certain transfers enjoy a full exemption under Article 5A due to their social importance, family relevance, or economic purpose.
- Exemption for Transfer of One’s Own Residence
A complete exemption applies when:
• The property was owned and occupied for at least three years.
• It was not used for commercial purposes during the last two years.
• It is transferred within 12 months of the owner vacating the residence.
• A garage qualifies if it is underlying, attached, or within 500m² and under 70m².
This exemption promotes mobility and supports families upgrading or downsizing their homes. - The property is assigned between spouses consequent to a judicial or consensual separation or a divorce.
- The property formed part of the community of acquests between the spouses or was otherwise owned in common between them and is assigned to one of the spouses on the dissolution of the community or is partitioned between the spouses, or the surviving spouse and the heirs of the deceased spouse.
- The property is assigned on emphyteusis for fifty years or less.
- Roll over Relief – Where the immovable property is used in a business for a period of at least 3 years is transferred and replaced within one year by an asset used solely for a similar purpose in the business.
- Immovable property either held as a fixed or current asset which is transferred from one company to another company – subject to certain conditions
- When a business or a partnership en nom collectif, as a going concern is transferred incorporated into a limited liability company, it will be exempt from PPT provided the transferor maintains at least 75% ownership in the company. This exemption will no longer apply if the business is disposed or cease to exist within a period of 2 years from the date of the transfer.
- Transfers made through a deed of donation to the following persons are exempt from PTT:
• Spouse
• Descendants and ascendants in the direct line or their spouses
• Brothers or sisters and their descendants (in the absence of descendants)
• Philanthropic institutions
This exemption recognizes the importance of transferring wealth within families. - Transfer of Immovable Property to Sole Shareholder upon Winding Up – A transfer of property by a company to its shareholder or his/her spouse in the course of winding up – subject to certain conditions.
2. Stamp Duty on Immovable Property
Stamp Duty is chargeable on any transfer of immovable property or any transfer of a real right over such property.
Duty is chargeable on the higher of the market value or the consideration declared.
2.1 Normal Stamp Duty Rate
The duty rate applicable on transfers of immovable property 5% on transfer value.
20% of this amount is payable to the Commissioner on the date of the promise of sale (POS) otherwise the POA shall not be valid.
However, there are certain exemptions that if the criteria attached to them are satisfied, no duty shall be chargeable or is charged at a lower rate.
2.2 Stamp Duty Reductions and Exemptions
2.2.1 First 250,000 Exempt + 3.5% Duty in the remainder
This powerful incentive applies to donations made from parent to direct descendant where the property will be used as the descendant’s sole ordinary residence. The market value of the property is reduced to 80% and:
• The first €250,000 will be exempt from stamp duty
• Any remaining value is taxed at 3.5%.
This incentive is designed to support younger generations in securing property.
2.2.2. Exemption on Inherited Residences
When a property consists of the ordinary residence from whom the causa mortis originates, and such residence is also occupied by the transferee causa mortis, the first €35,000 are exempt from duty. On the part that exceeds the €35,000 up to €200,000 duty is charged at 3.5%.
2.2.3. Duty Exemptions
- the property transferred causa mortis was the ordinary residence of the person from whom the transfer causa mortis originates and is transferred to his/her descendants in the direct line.
- the transferee causa mortis is a is a person who is on the Register of Persons with Disability, and the person from whom the transfer causa mortis originates was the parent or the legal guardian of the transferee
- transfer causa mortis of qualifying agricultural land
- transfers of property within a group of companies subject to certain conditions
- in the case of winding up, the transfer of immovable property by a company to its shareholder who owns not less than 95% of the share capital and voting rights, subject to certain conditions.
No duty shall be payable on the transfer of immovable property under the above circumstances.
2.3 Conclusion
Malta’s tax and duty systems for immovable property are designed to be socially considerate, economically rational, and legally coherent.
The system rewards family transfers, protects the inheritance of family homes, and supports legitimate commercial restructuring.
Understanding these rules allows individuals and businesses to plan property transactions confidently and in full compliance with the law.
If you are an individual who are planning to acquire immovable property in Malta or owns immovable property and planning to transfer such immovable property, get in touch and we will guide you by providing you with the most tax efficient options.
