Property transfer expenses

The sale and purchase of immovable property involves expenses which customers must take into account and budget for. These expenses usually depend on the value of the property being purchased or sold.

Apart from bank charges, which may vary from one bank to another, standard fees include stamp duty, notarial fees, recognition fees, when they apply, capital gains tax and estate agency fees, where applicable.

Property transfer expenses for purchasers

Stamp duty

The stamp duty for purchasers of new property is a standard 3.5 per cent on the first Lm20,000 of the immovable property price which appears on the final deed. This concession is only applicable to Maltese passport holders on the purchase of one's primary place of residence.

If the price of the property is higher than Lm20,000, a five per cent stamp duty is charged on the remaining balance.

If the purchaser does not hold a Maltese passport a five per cent stamp duty is applicable on the full price of the property, which appears on contract of the final deed.

If the property being purchased includes movable items such as furniture no stamp duty is applicable on these items.

Notary charges

The amount payable to the notary, who is usually chosen by the purchaser, is in the region of 1.5 per cent of the price of the immovable property. However this may vary according to the amount of public registry searches required to establish a clear title.

Recognition fee

On immovable property subject to ground-rent, a recognition fee (laudemium) equivalent to one year's ground-rent is due upon the signing of the final deed. This fee is payable just once and is due to the owner of the ground-rent within one month from the signing of the deed.

If the present vendor is imposing the ground-rent, no recognition fee is due, but as a general rule stamp duty amounting to Lm100 is due on every newly imposed ground-rent up to Lm100.

Property transfer expenses for sellers

Sellers of immovable property are subject to seven per cent provisional capital gains tax on the price of the immovable property, which appears on the final deed.

This provisional tax is always applicable except for these exemptions:

¤ If the immovable property was inherited and is being sold for the first time since it was inherited by the heirs;

¤ If the immovable property was the vendor's primary residence for the previous three years;

¤ If it can be proved that no profit is being made.

One must bear in mind that, as a provisional tax, the seven per cent forms part of the vendor's annual tax deduction and ultimately the amount to be paid can be less or greater, depending on the eventual profit.

Naturally every case must be taken on its own merits.

Estate agency fees

The agency fees paid by the seller are at five per cent excluding VAT of the final selling price and under an open agency agreement. If the property is under a sole agency (exclusive) agreement these fees are discounted to 3.5 per cent, excluding VAT.

The expenses listed here are due upon signing the final deed. Stamp duty and capital gains tax are collected by the notary in the form of bank drafts which in turn will be passed on to the respective government authorities, while the notarial and estate agency fees are settled directly.

Andrew Gatt is operations director at Dhalia Real Estate Services. For more information visit www.dhalia.com