MDA Chairman says there is ‘no sense’ in under-declaring

The Chairman of the Malta Developers Association, Michael Falzon, said that it would not make sense for owners to under-declare the value of their property, in spite of the new budgetary measure which states that the government will no longer implement the consultation of a government-appointed architect to value a property bought. 

Property in Malta is taxed either at 35% on profit, or 12% on the final value of the sale. The 12% system was introduced by government in a bid to appease vendors who were tempted to under-declare the sale price on contract due to the 35% tax on profits. 

"The present system was introduced to punish those who under-declare the true value of the transfer of property. Since then, with the introduction of the 12% withholding tax and other measures, it did not make much sense to under-declare. In fact, it is no longer in the interests of bona fide developers to under-declare," Falzon said. 

"The system - as it stands today - brings with it uncertainty in every property transfer. This is because the purchaser, for a long time after the deed is signed, is left unaware on how much the property has actually cost since Inland Revenue can charge him or her, an unknown extra cost after the deed is already signed," he said. 

Falzon said that this uncertainty is doing a lot of harm to the property market, explaining that there were cases in which foreigners were "astounded" to discover that Inland Revenue wanted more tax than they were told by the notary at the time of contract. 

"The system was definitely doing more harm than good," he said. 

The valuations of government-appointed architects have been critisised over the years, with many people complaining that they were arbitrary. 

Furthermore, many people whose declared property value was disputed often faced a surprise tax bill on top of the taxes they would have already paid. 

Whilst Falzon believed that irresponsible architects who abuse in their declarations should be liable to disciplinary measures, he said that there should not be any difference between the architects who declare value of property when the deed of purchase is concluded and the architects sent by government to declare value of property after the deed.