Malta - British Expat Forum

Can anyone please help me with the tax that I would have to pay now that we have found a buyer for our house. We purchased the property over three and a half years ago. We own the property with my wifes brother. I have been to the inland revenue office and they have said that because both my wife and I are residents and have filled in tax returns for the last three years we will not have to pay any tax. However my wifes brother lives in the uk (not a resident) so he will.

I have heard 3 different versions as to how much tax he will pay etc and to be honest the chap at the inland revenue was equally very vague. My wifes brother is asking for a ball park figure and to be honest I cant tell him because I have no idea. Can anyone please bring some clarity to this. Thank you in advance. Duncan

Hi dunc and welcome to the forum

As owned for less than 7 years he can choose between a capital gains tax (I think 35%) or a withholding tax of 12% on the sale price (or in this case his share)

If go for the former, there a certain allowances eg capital improvements to reduce the CGT, and its probably worth consulting an accountant on this if his tax bill runs into the thousands.

If owned for more than 7 years you have to go with the 12% withholding tax.

As you and your wife owned for more than 3 years and it was your primary residence, you have no tax to pay (as long as it hasn't been vacant for more than 12 months)

Its covered on the IRS website - the old system is the capital gains tax

http://www.ird.gov.mt/faq/cgt/cgtfaq_i.aspx#Q44

it gives a list of the allowances which I've cut and pasted below - you can see why the IRS couldn't give a definitive answer to the tax payable - there is an example on the website as well

"What deductions can I claim to calculate the capital gain under the old system?

To calculate the capital gain under the old system you can claim the following deductions:

the price at which the property was acquired;
the inflation element;
any ground-rent paid on the property and for which a deduction has not been already claimed in any other way;
a maintenance allowance at the rate of 0.4% for every year that you owned the property;
improvements carried out;
any duty paid on acquisition;
notary's fees;
brokerage fees;
other expenses directly related to the transfer but not exceeding 5% of the selling price."