The exemption applies when you use the property as your sole ordinary residence for an uninterrupted period of three years.
What are the tax implications of selling my purchased property after the five-year retention period in the Malta Individual Investor Program?
Under the Malta Individual Investor Program, I understand that after the obligatory five-year retention period, I have the right to sell my purchased property. I heard that it is possible to do this with no tax obligations. Is this true? Under what circumstances would I be exempt from tax responsibilities if I sell the property purchased for MIIP purpose after five years?
The tax on sale of your property will be determined on the date of the sale. Therefore it is impossible to state what would be the tax implications in five years' time. At the moment, if the property is your main worldwide residence and you have it for more than three years, no taxes are applicable on the sale of this property.
There are different rates for the tax charged on the sale of immovable property in Malta which depend on a number of factors: transfers made not later than five years after the date of acquisition will be subject to a 5 percent final tax; transfers of property which was acquired before Jan. 1, 2004, will be subject to a 10 percent final tax; and other transfers will be subject to a 8 percent final tax. There is an exemption from tax which would apply if an individual sells property which was used as his residence for a period of three consecutive years. Therefore, if you sell your property after the five-year retention period and the property was owned and occupied by you for that period (or at least three years) as your residence, no tax will be due on the transfer. This exemption will come into effect if the property is disposed of within 12 months from the date on which the seller has vacated the premises.
The property tax for persons who are selling a property which they had acquired is as follows. Sale of property is not subject to the normal taxation of capital gains but is subject to a special property tax regime. Under this regime, upon an eventual sale of the property that had been acquired, the sale will be taxed as follows: If the property is sold within the first five years, the vendor pays a final tax on the sale of 5 percent on the value of the property at the time of transfer; if the property is sold after 10 years, the vendor pays a final tax on the sale of 10 percent on the value of the property at the time of transfer; in all other cases (i.e. sale done between the fifth and 10th Year) the vendor pays a final tax on the sale of 8 percent on the value of the property at the time of transfer; lastly, there is an exemption from tax on the vendor in a sale of property where the vendor is transferring his own residence which he used as his sole and ordinary residence, subject to having lived in it for at least three consecutive years immediately preceding the date of transfer and has been disposed of within one year of vacating the property.