The Inland Revenue Department has uploaded a section with frequently asked questions about a Budget 2015 measure on property that has caused widespread confusion.

Commission of Revenue Marvin Gaerty said that a number of websites belonging to professional firms as well as some media reports had not grasped the concept behind the new system.

The change announced last Monday has its roots in legislation introduced in 2006 which gave those selling property the choice between a flat-rate withholding tax of 12 per cent on the transfer price or 35 per cent capital gains tax on the profit.

This has now been replaced by a final withholding tax of eight per cent on the transfer price for individuals and developers alike, although individuals who sell before they have held the property for five years will pay just five per cent.

“The 2006 changes were made at a time when the property market was very buoyant and we needed to reflect the more subdued situation at present,” Mr Gaerty said.

The new system, which comes into force on January 1, eliminates another draconian measure: When a developer sold the first unit in a project, they would have to choose between the capital gains option and the final withholding tax – and it would apply to all the units in that block, no matter when they were sold.

They now have to abide by the option chosen for any properties where the promise of sale was concluded by November 17 – but for other units, the new eight per cent withholding tax will apply.

There are other finer details which also caused confusion.

For example, properties held since January 2004 will be subject to a 10 per cent final withholding tax.

The change does not affect property transactions which were previously exempt, such as the sale of one’s main residence when one has lived in it for over three years.

The FAQs also tackle other contexts, such as donations to children, expropriations, judicial sales by auction and so on.