The government will next year roll out changes to the capital gains tax to eliminate loopholes which have led to abuse, Finance Minister Edward Scicluna said in the Budget speech this evening.

To date, he said, people could pay 12% on the value of their property or 35% on the profit. There had been people, however, who were transferring the profit to loss-making companies as an offset. As from next year, a final withholding tax system will be introduced based on the value of the property.

There will be different rates for those selling a property they had built or used for their residence and those who built a property for business purposes.

Those who sell a property used or intended as a residence after two years will pay 3%, those selling after five years will pay 5% of the value. Properties built by contractors for business will carry a tax of 8%, down from the current 12%. The tax will not be charged in the case of couples, engaged, married or divorced, who break up and one of them buys the property . Pre-2004 property tax will be 10 per cent.

The changes will apply from contracts signed next year.