Government may take measures over promise of sale agreements

The government was ready to take appropriate measures in cases of people who had already signed a promise of sale agreement on inherited property and would be suffering hardship as a result of the new capital gains tax levied on the sale of such property, Parliamentary Secretary Tony Abela said yesterday.

Speaking during the budget debate on the finance ministry, he said he had received a lot of complaints from people who had already made certain commitments on income they expected to earn from the sale of inherited property, and who would be hit negatively by the measure. He was also looking into information passed on to him in confidence by notaries in this regard.

Dr Abela made the announcement after explaining the new measure in some depth and clarifying certain misconceptions.

He stressed that the measure only applied to the sale of inherited property, and not, as some people mistakenly believed, when the property was actually inherited or divided among the heirs.

As a result of this budget, the amount declared in the causa mortis would now be more realistic, since, because of the capital gains tax just introduced, it would not pay people to do otherwise. There used to be a sector of the population who insisted that their property was only worth a small amount, even after inspections by architects.

On property inherited before November 1992, a final seven per cent would be paid on the sale price.

As for property inherited after that year, which would now be subject to capital gains tax, some people were giving the impression that 35 per cent would be paid on the sale price across the board.

He explained that the value declared on the contract causa mortis was exempt from capital gains tax. Document duty paid on the transfer of the property to an heir would also be subtracted from the amount on which the tax has to be paid. Allowance would also be made for inflation, of about three per cent a year.

He took the example of a property whose value was declared at Lm30,000 and which sold for Lm60,000. From the Lm30,000 balance must be subtracted the stamp duty already paid, and the three per cent inflation rate, resulting in a taxable amount of some Lm18,000.

Earlier in his speech, Dr Abela gave an overview of some of the work being undertaken in the Customs, VAT and Inland Revenue Departments, praising some of the officials involved in certain initiatives.

He said the government was showing its responsiblity and seriousness in the way it had tackled such thorny issues as the shipyards, Maltapost and, now, PBS.

He said people now had much more confidence in investing in the country than in the past. Two years ago, through the investments registration scheme, people had declared some Lm300 million. This year, with the extension of the scheme, about Lm130 million had been registered. Bank deposits had shot up, the property market had been regenerated, the shares of public companies being privatised were snapped up as soon as they were offered for sale, and so too were government bonds.