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Capital Gains Tax in Malta

Capital Gains Tax in Malta

Malta’s taxation system resembles that of other European countries, as it is made of several taxes. Among these, the capital gains tax in Malta is one of the most important as it is imposed on the disposal of various types of assets held here.

The levy is applied to both companies and natural persons in the insular state, however, it is important to note that in some cases it is applied as a withholding tax. Below, our accountants in Malta explain the main rules under which the capital gains tax is imposed. We also explain the capital gains rules in Malta and how you can obtain the advantages offered by this country from a taxation point of view.

What are capital gains?

Over time, both individuals and companies in Malta obtain various assets. The value of the respective assets can increase or decrease over time. Taxation in the case of such assets occurs when they are sold.

 Quick Facts  
Applicability  Capital gains tax in Malta is applicable on the transfer of assets and certain specified financial instruments. 

Capital gains tax rate in Malta 

15% to 35%. 

Exemption 

Immovable property sales in Malta can be exempt from capital gains tax if the property served as the taxpayer’s sole residency for at least 3 years. 

 Holding period Capital gains tax may be reduced for properties held for more than 3 years, encouraging long-term investments. 
 Calculation basis

The capital gain is calculated as the difference between the transfer value and the acquisition cost, adjusted for certain expenses. 

Intellectual property 

Under Maltese tax laws, capital gains tax applies to static intellectual property when authority is transferred, making them taxable. 

Resident vs. non-resident 

 Residents are subject to capital gains tax on worldwide gains, while non-residents are generally taxed on gains from Malta-situated assets.

Tax payment deadline 

Capital gains tax is payable within 30 days from the date of transfer, and late payments may incur penalties and interest. 

Property valuation 

The value of the property for tax purposes is generally the higher of the transfer value or the market value at the time of transfer. 

 Foreign investment Gains derived from the disposal of shares in companies owning immovable property in Malta are subject to capital gains tax. 
Compliance requirements 

Taxpayers are required to submit a capital gains tax return, providing details of the transfer and supporting documentation. 

 Double taxation treaties

Malta has an extensive network of double taxation treaties that may impact the taxation of capital gains for non-resident taxpayers. 

 Joint ownership

 Jointly owned property may be eligible for a double threshold, effectively increasing the exemption for each joint owner.

 Renovation and improvement

Expenses related to the renovation or improvement of the property can be included in the acquisition cost, reducing the capital gain. 

Professional advice   Due to the complexity of Maltese capital gains tax regulations, seeking professional advice is advisable for accurate compliance and optimization of tax liabilities. Our accountants in Malta offer detailed assistance in this regard.

In Malta, capital gains are considered investments, thus, taxed accordingly. In most cases, individuals are subject to the capital gains tax. However, an important aspect to consider is that the levy is imposed when the asset is sold at a higher price than bought.

Capital gains are treated differently based on the residency of the payer, which is why when dealing which such particularities, you can rely on our accountants in Malta.

The types of assets for which the capital gains tax is levied are explicitly defined by Maltese law. The tax generally applies to intellectual property, securities, and associated instruments. Such gains are often factored into the company’s or person’s taxable income for determining the tax rate. It is important to note that capital gains made outside of Malta are only subject to taxation in Malta if they accrue to taxpayers who are citizens or have their primary residence there.

You can also rely on our auditors in Malta for support with your company. We remind you that companies in this country must comply with specific regulations with respect to audit requirements. These usually depend on the size of the enterprise. Contact us for detailed information on the conditions to be met.

Malta’s capital gain tax and its appliance

In order to establish how the capital gains tax in Malta is levied, you should first know the types of assets that can be imposed with this levy. These are:

  1. immovable property, out of which real estate is the best known;
  2. shares and other financial instruments held by companies and natural persons;
  3. income derived from intellectual property rights (copyrights, patents, trademarks, etc.);
  4. interests in partnerships or trusts held in Malta.

An important aspect to consider according to the capital gains rules in Malta is that in the case of companies that are not domiciled or tax residents here and obtain capital gains outside the country exemptions apply. In other words, such entities are not subject to the capital gains tax.

Our accounting firm in Malta is at the service of local and foreign companies with activities here and can help them obtain all the benefits that come with doing business in this country, including applying for various tax incentives.

Particularities of capital gains in Malta

Capital gains have a few particularities and can be recognized after the following:

  • they represent the increase in value and are realized when the asset is sold;
  • they cover various types of assets, among which goods bought for personal use or for investment purposes;
  • they are purchased on a short or long term and must be declared when filing the income tax returns.

Our accounting firm in Malta offers tax filing services and can advise on whether you must pay the capital gains tax or not.

We also offer payroll services in Malta. Our local accounting firm is at the service of business owners who need a steady approach to what employment regulations imply. Get in touch with us and rely on our specialists for dedicated services related to employees’ wages and taxes. Contact us and find out how we can help you.

How is the capital gains tax established in Malta?

Taxation in Malta is based on residency, therefore, in order to pay the capital gains tax, one must be registered for taxation here. This principle applies to both individuals and companies. Non-residents may also be subject to taxation here provided that they spend a certain number of days per year in this country and they make taxable activities.

Special attention is paid to real estate property that is taxed in Malta (the country it is built in) no matter if the owner is a Maltese citizen/resident or a non-resident.

As an individual, you should note that capital gains that are not subject to the final income tax must be reported with the entire income levy. This way, the whole amount can be taxed at once. It is also possible to obtain capital gains tax exemptions in Malta. For example, the sale of real estate or any other type of immovable property can be exempt from this levy if it was owned/used as the sole residency of the taxpayer for a minimum period of 3 years.

However, it is also worth noting that the sale and transfer of immovable property are treated differently from a taxation point of view. Instead of capital gains tax, Malta applies the property transfer tax to the transfer of immovable property. This tax is not one levied on the element of gain, but rather a cost of the transaction.

Even if they are transferred to a Maltese bank account, capital gains from overseas sources are exempt from the income tax in Malta. According to the Maltese legislation, capital gains from selling or buying shares on international stock exchanges are not subject to the income tax, which makes the country very appealing for foreign citizens and investors.

Filing tax returns in Malta can be difficult if you are not a resident or you are not acquainted with the tax system here. For this purpose, you can rely on our local accountants who provide such services.

The payment of the capital gains tax in Malta

Compared to the corporate tax or personal income tax in Malta, the capital gains levy is imposed after the sale or disposal of the assets qualifying for it.

In the case of Maltese companies, the transfer of assets is added to the other income of the business and the total amount of the tax will be charged at once. This implies a simplified taxation regime so that companies do not have to pay levies several times.

Foreign businesspersons interested in setting up businesses here can rely on our accountants and auditors in Malta for personalized assistance in taxation matters. An audit in Malta makes it possible for us to advise ways to strengthen the accounting processes and help your company to detect its flaws. Directors who are not regularly involved in accounting tasks might be reassured by an audit that the company is operating in accordance with the information provided to them.

Capital gains taxation in respect to real estate assets

Malta is one of the most appealing countries in Europe to own a property in. In the past few years, the possibility of acquiring a property through special programs that come with Maltese passports has led to the development of the real market and the disposal of such an asset will attract the payment of a transfer tax.

Malta’s capital gains tax when it comes to the transfer of a property is known as the Property Transfer Tax and it implies the payment of a fee related to the transaction and not the asset that was obtained from the transfer.  This levy is imposed at different rates, depending on the time of the acquisition.

The capital gains tax in Malta must be carefully considered which is why if you need guidance, our accounting firm can offer tailored services related to the transfer of assets.

This is the most challenging period in history for running a business. Enterprises typically distinguish between strategic and non-strategic activities. For example, outsourcing payroll is simple and won’t harm business operations. Using payroll services in Malta boosts productivity while reducing costs and time.

The Maltese capital gains tax imposed on other assets

Intellectual property such as copyrights, trademark utilization, patents is some of the most transactions assets nowadays, as research and development activities have reached a peak. Such assets usually enter the portfolio of holding companies which from a capital gains tax point of view can benefit from the participation exemption.

When it comes to natural persons, it should be noted that the capital tax gains tax in Malta is also levied on the transfer of assets such as jewelry.

In order to pay this tax in Malta, a person or company must be registered for taxation with the Commissioner for Revenue.

Rates of the capital gains tax

The capital gains rules in Malta provide for different levies of this tax, as it depends on the types of assets transferred and the best example in this sense is real estate.

Here are the main aspects to consider about the imposition of Malta’s capital gains tax:

  • the withholding tax rate applicable in Malta is set at 15%, however, lower rates may apply;
  • in the case of property transfer, the rate of the tax starts at 8%, however, lower rates of 2%, 5%, 7%, 10% and 12% are also in place;
  • these rates are also influenced by Malta’s double tax treaties that are more than 70 at the moment.

If you need assistance with respect to the capital gains tax in Malta, feel free to approach our accounting firm. Contact us for tailored accounting services in accordance with your needs.