The president of the Malta Developers Association asserted that government-appointed architects are “guided” by the Home Office on the “discerned” market value of properties, resulting in higher tax claims on properties purchased.

Michael Falzon, a former nationalist minister, has suggested that buyers and sellers who find bargain properties in the currently weakened market are taxed on the difference between the bargain price and the discerned market price.

“Although the government officially declares that the Inland Revenue does not educate these architects on appraisals, I know for a fact that the department informally gives them guidelines on the discerned market value, for example of a garage or an apartment. , should be …

“It’s like buying a costume at a sale and the customer has to pay VAT on the original price of the costume and not the discounted price,” Falzon said.

Appraisal by government architects is performed when the Inland Revenue has reason to believe that the price stated on a contract does not reflect market value. Falzon argues that market value is “a subjective matter” and accused government architects of not realistically reducing their positions in line with falling prices.

“There is no point in saying that the market value of something is an amount x euros when no one is willing to buy it at that price.

“If the market price exceeds the declared price by more than 15%, the buyer is required to pay a stamp duty on the difference, and a fine, and possibly the buyer may also be asked to pay 12% on this difference.

The MDA is leading a public offensive on the high final 12% withholding tax on property sales, saying the rate does not reflect the state of property values ​​in the current state of depreciated prices in Malta.

Ownership in Malta is taxed either at 35% on profits or 12% on the final sale value. The 12% system was introduced by the government in an attempt to appease sellers who were tempted to underreport the contract selling price due to the 35% profit tax – but that’s up to at that time the cost of land and property in Malta was rising sharply. , almost every day.

“The 12% tax was therefore introduced. The sellers paid 12% of the sale price with no questions about the actual costs. % tax or go for the old capital gains tax, ”Falzon said.

After seven years, real estate sales are taxed at 12%.

But now he says the problem is that property hasn’t appreciated at the rate that led to the adoption of the system.

“Today, 12% of the sale price could, in some cases, be more than the actual profit made in the transaction. Developers pressured by banks to liquidate their assets cannot sell at a discount – with little or no no profit – because that would mean heavy losses. ”

Falzon says developers should be given the choice to go with the old system, where only real profits are taxed.

“The situation would be different. In this case, the system now becomes an obstacle to lowering prices.”