Tax on the assignment of the rights on a Promise of Sale

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Through the publication on 24 December 2021 of Legal Notice 490, the 15% tax rate on profits derived upon the assignment of rights on a promise of sale of immovable property situated in Malta has been extended by another year, until the end of 2022. The extended scheme does not impose any capping on the amount that is to be taxed at the rate of 15% and hence, this applies on all the proceeds derived from valid assignments.

It is important to keep in mind that for the Assignor to avail himself of the 15% tax rate the following conditions must be complied with:

  1. The Assignment must be in writing, signed by the assignor and assignee and authenticated by a notary/advocate;
  2. The Assignment must be notified to the Commissioner for Revenue through a notice of assignment within 21 days from the date of the agreement and in respect of which tax is paid according to the Assignment of Rights Acquired under a Promise of Sale Agreement Rules (‘the Rules’);
  3. The 15% tax and is paid by the assignor to the Notary/Advocate who authenticates the agreement;
  4. Said Notary/Advocate must remit the tax to the Revenue within 21 days of the relative assignment.

One must keep in must that the said tax is a final tax. Yet brokerage fees (where the assignor was not a party to the promise of sale in question but had acquired its rights from another person in terms of a previous valid assignment) may be deducted (if backed up by the relevant documentation as prescribed by the Rules).

The Rules include an anti-abuse provision which imposes a 35% tax rate when income from assignments, or transactions intending to be an assignment of rights under a promise of sale agreement, is not reported or is not reported fully and correctly.