Removal of final withholding on property could reduce tax revenues

De Marco calls for re-introduction of final withholding tax • Video Ray Attard

The Opposition’s shadow ministers for finance and economy, Mario de Marco and Claudio Grech respectively, have called on the government to reintroduce the option of choosing capital gains tax, or a 12% final withholding tax on the sale value of the property, that was abolished in the last Budget.

Property sellers were able to choose between a top capital gains tax on their property sale, or a 12% tax if it was sold within a short number of years from acquisition.

“The Opposition is not against the drop of the final withholding tax from 12% to 10% or 8%. This drop could very well be beneficial, but we believe there should be an option for capital gains tax,” de Marco said.

“The Opposition is also against the way the decision for this measure was taken which is without any consultation.”

De Marco said organisations such as the Federation of Estate Agents, the Chamber of Commerce and the Notarial Council had expressed disappointment at the measure.

“One of the most important things in property is stability. This measure, which was introduced suddenly, and without a consultation process, does not constitute to the stability required by the property market,” de Marco, said quoting the FEA’s statement at the time.

“The removal of this measure also goes against the government’s desire to implement pro-business measures, as the government would be potentially taxing a loss, rather than a gain,” De Marco continued.

De Marco said less foreign buyers would invest in property in Malta, as they would have to pay a capital gains tax in their country of residence and the final withdrawing tax in Malta to boot.

On his part, Claudio Grech said the new measure will also be a disincentive for people keeping a receipt of the works they do, so ultimately this will lead to a loss in potential tax revenue for the government.

“The government should follow the precedent the PN set by listening to the complaints of the various stakeholders and acting accordingly,” De Marco said.

“We feel the removal of the tax option will lead to increased uncertainty, and we hope the government will follow what happened in the past,” Claudio Grech said.