Developers want change in capital gains tax rules

Developers are calling for a change in the capital gains tax regime to kick-start the property market. They are insisting that a 12 per cent withholding tax introduced several years ago as an incentive to encourage property sales has become counterproductive. Property sold within seven years of being bought incurs a charge of 12 per cent tax on the sale price but the seller also has the option to declare the profit in his income tax and be charged at 35 per cent instead. After seven years, the seller has no choice but to pay the withholding tax. Michael Falzon, president of the Malta Developers Association, said the seven-year timeframe and the choice of preferred taxation were introduced at a time when property prices were galloping ahead. It made sense to pay a one-off withholding tax on the sale price even after the seven-year timeframe, he added. But in a stagnant market the withholding tax has boomeranged. “Today, with property prices not appreciating as they used to, the withholding tax is preventing developers from selling property at a lower profit,” he added. The lobby group wants the option to choose the tax regime best suited for the particular sale to extend beyond the...