Malta: Extension Of Duty Schemes And Reduced VAT Rate On e-Books

Last Updated: 10 April 2019
Article by Anthony Pace

VAT on e-books has been reduced to 5% and five schemes allowing for a reduced duty rate on transfers of property have been extended to 2019.

As from 1 January 2019, the VAT rate on e-books has been reduced to 5%, thereby aligning it to the VAT rate on books on physical media.

In addition, five stamp duty incentives allowing for a reduced duty rate on the acquisition of property have been extended until the end of 2019. Such incentives are (a) the duty reduction available for first time buyers of residential property, (b) the duty reduction available on the acquisition of replacement property, (c) the duty reduction on the purchase of scheduled property or property in Urban Conservation Areas (UCAs), (d) the duty reduction on the purchase of property in Gozo, and (e) the duty reduction on the acquisition of shares and commercial tenements in family businesses.

All these measures have been announced by the Minister for Finance in his 2019 budget speech of October 2018. Hereunder is a summary of each measure.

Reduced VAT rate of 5% on e-publications

As from 1st January 2019, the reduced rate of VAT of 5% that, for years, has been applicable in Malta to supplies of audio books, books and printed matter supplied on physical means like CDs and USBs, will be extended to books supplied electronically (i.e. e-books).

In all cases, the 5% VAT rate does not apply to publications wholly or predominantly devoted to advertising or wholly or predominantly consisting of video content or audible music. Legal Notice 434 has been published on 14th December 2018 to enact the said extension in Malta. This follows on an amendment to the EU VAT Directive, published in November 2018, which made it possible for Member States to align the VAT rates for physical and electronic publications.

Part-duty exemption on acquisitions of the first immovable property

The incentive is for first time buyers of residential property. If made until the end of 2019 (formerly 2018), such acquisitions are exempt from duty on the first €150,000, or on a pro-rata portion in case of co-acquisition, of the aggregate value of the consideration paid for the acquisition of such immovable property. The incentive applies provided that:

  • This is the first immovable property acquired inter vivos by such person as evidenced thereby and declared to the notary in writing.
  • The acquisition is made for the purpose of establishing therein or constructing thereon his/her sole ordinary residence.
  • The acquirer does not require a permit in terms of Immovable Property (Acquisition by Non-Residents) Act.
  • The relevant duty form reaches the Revenue by 28th February 2020.

Part-duty exemption on acquisitions of replacement residential property

The incentive is for individuals who, during 2019 (formerly up to the end of 2018), replace their sole residential property with another within 12 months from vacating the first. Duty on the first €86,000, or the pro-rata portion in case of co-acquisition, of the value of the replacement property is refunded. Such incentive applies provided that:

  • The replaced property has been owned and occupied as own residence for a period of at least 3 consecutive years immediately preceding the date of transfer.
  • The acquirer does not require a permit in terms of Immovable Property (Acquisition by Non-Residents) Act.
  • Replaced property must have been subject to a reduced rate of duty upon acquisition for the purpose of establishing therein or constructing thereon the sole, ordinary residence of the transferor.
  • The replacement property is acquired by the transferee inter vivos for the purpose of establishing therein or constructing thereon his sole, ordinary residence but not through a donation from close relatives as defined.
  • The transferee must not own any other residential property before acquisition other than property replaced.
  • If certain duty exemptions had been availed of on the replaced property, 5 years must pass before this incentive can be availed of.
  • Whereas the relevant duty form must reach the Revenue by 28th February 2020, the claim for duty refund must be made in writing within 6 months from last contract.

Reduced duty rate of 2% on acquisitions of scheduled property or property in a UCA

The incentive is for individuals who acquire residential property situated within a UCA or of a property that is scheduled by the Planning Authority. The incentive, extended until the end of 2019, reduces the rate of duty from the standard 5% to 2% on the higher of the consideration or value of the property. The incentive shall be forfeited in case of illegal development of the property or if the property is not regenerated according to the characteristics of the area or restoration of the said property. Such incentive applies provided that:

  • The Revenue is notified by 28th February 2020 together with the submission of the relevant Planning Authority certificates.
  • No relief under the same scheme has been claimed in respect of any previous transfer of the said property.
  • The acquirer does not benefit from the part-exemption from duty available on the gratuitous transfer of property to descendants in the direct line for the purposes of establishing one's sole ordinary residence.
  • The acquirer does not require a permit in terms of Immovable Property (Acquisition by Non-Residents) Act.

Reduced duty rate of 2% on acquisitions of residential property in Gozo

The incentive is for individuals who acquire residential property situated in Gozo by the end of 2019 (formerly 2018), including a garage as defined, or land on which only one residential unit is to be built. This incentive reduces the rate of duty from the standard 5% to 2% on the higher of the consideration or value of the property. Such applies provided that:

  • The final deed is notified to the Revenue by 28th February 2020;
  • The acquirer does not benefit from the part-exemption from duty available on the gratuitous transfer of property to descendants in the direct line for the purposes of establishing one's sole ordinary residence.
  • The acquisition is not made in the course of a trade or business or for the purpose of demolition and construction of more than one unit.

Reduced Duty Rate of 1.5% on family business transfers

The incentive is intended to benefit family businesses, whereby a reduced duty rate may apply on the donation of company shares and commercial tenements to other family members. The incentive reduces the rate of duty from the standard 2% or 5% to 1.5% on the real value of the shares or commercial tenement. The incentive hasbeen extended for the third time in 2018, until the end of 2019. Such applies provided that:

  • The transfer is a donation to a 'qualifying family member'. 
  • The recipient does not transfer the marketable securities/commercial tenement within 3 years.
  • The recipient uses the commercial tenement for the purpose of the business for an additional 3 years.
  • The transfer is made by public deed.
  • The application reaches the Revenue by 31st December 2019. 
  • No other exemption from duty is availed of.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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