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Julian Manduca
An extension has been announced to extend the time allowed for the final contracts on pre-budget konvenji for the sale of property without incurring full capital gains tax on inherited property, MaltaToday has learned.
The November budget had decreed that people who signed promises of sale before the budget were to be stung with up to 35 percent tax on their final contracts when the sale was of a property inherited since 1992.
Following complaints by parties to contracts who could not have been aware of the budget plans, the government decided that only 5 percent tax should be paid, provided the konvenji were registered with government. A deadline was later stipulated to sign the final contracts by 31 March, but now that deadline has been extended to 31 October, 2004.
While the extension has been welcomed by some, others have complained to MaltaToday that the lack of certainty about property deals is causing confusion and upsetting financial plans.
Notaries have been informed by Parliamentary Secretary Tony Abela who told MaltaToday the reason for the extension was related to complications that arose with certain contracts which made it impossible for them to be signed by 31 March, the previous deadline.
“There were complications especially with regard to minors and the sale of property where the lands department was involved,” Abela said.
In all 1,400 sets of contracting parties registered their konvenji as having been signed before the budget, but now the number has whittled down to a few hundred, Abela added.
Asked whether these complications could not have been predicted when the decision was made to set a deadline at 31 March, Abela said that the previous decision was a “quick” one to rectify a difficult situation that had been created.
In the budget last November minister John Dalli had announced that sales of property inherited after 1992 would be subject to the normal rate of capital gains on other property, meaning that a tax rate of 35 percent will be likely.
Following the budget and the realisation made only later that many people would suffer from the measure especially those that had already entered into a contractual agreement, the government gave the possibility for people to register konvenji signed pre-budget by 21 December 2003 and apply to pay only 5 percent tax.
Given that there was no public discussion on the matter prior to the budget announcement, the move was welcomed. It was then announced that all the final contracts were to be signed by 31 March 2004.
It is clear that the change to tax on inherited property was not well thought out prior to the measure announced in the budget.
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