Estate agents still unhappy with capital gains tax system

The amendment to the changes in capital gains tax announced in the last budget did not go far enough, the Federation of Estate Agents said yesterday.

The budget had laid down a final withholding tax of 12 per cent on the value of the property without allowing for expenses and other related exemptions that used to apply under the old tax regime. The amendment now allows sellers the option of the new or old system in relation to properties being sold within five years of the purchase.

But the federation argued that the choice should be available to everyone irrespective of the length of time the property has been owned. One should be able to choose between a final withholding tax and the tax of up to 35 per cent on profits at the promise of sale stage, it proposed.

"This way, any hoarded properties may come on the market and use be made of the final withholding tax, and anyone who stands not to make a profit will not be penalised," the federation said.

The federation also feels that a withholding tax should be extended to income derived from the rental of property, the returns on which are lower than European standards.

This would surely encourage a release of more property onto the rental market at a time when an increased need for it is being felt particularly in the local market, according to the federation.

The federation also commented about recent exchange of correspondence in The Times relating to the rental of property owned by non-Maltese.

It said it was correct to say that a foreigner purchasing a property in Malta purely as a rental business did not require an Acquisition of Immovable Property (AIP) permit and therefore there would be no rental restriction.

The same was not true for an EU citizen purchasing a holiday home which they would like to rent out for a short period of time. In this case, an AIP permit is required and one of the conditions is that the purchaser can only make personal use of the property unless it is an individual dwelling unit with a pool or happens to be in a Special Designated Area.

The federation added that the problem lay with the serious lack of coordination between the authorities. The government accepted that EU citizens should be allowed to rent out their holiday homes, but the licence is not issued if the purchaser has applied for an AIP permit, which has the restriction clause in it. It appeared this clause could not be deleted from the AIP permit.

The federation said it was trying to clear up these issues with the authorities concerned.

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