While everybody hammers on about tax evasion, nobody has the real will to control property deals,
Dr Victor Bisazza, the President of the Notarial Council told MaltaToday.
While notaries are now obliged to report to the Finance Intelligence Analysis Unit, if they suspect money laundering, they still ‘see’ precious tax dues being avoided when the value of a property deal is under-declared.
Notaries are obliged to register a promise of sale (konvenju) twenty-one days after its signature, and this could lead to abuse. The konvenju could be agreed at a certain price and by agreement between the two parties the price would be reviewed downwards before registration. The purchaser would pass on the price difference to the vendor without any public documents being signed.
One partial solution, according to Notary Bisazza, could be to have the government architect visiting the property soon after the signing of the konvenju and prior to the date of the contract.
While it has been noted that some notaries may be advising their clients not to sign a konvenju at all, with all the risks that that may imply, Bisazza counters: “generally it is the clients that come up with such ideas, and not the notaries.”
By not signing a konvenju, the parties to a property deal could agree on a lower than purchase price – in order to avoid tax – and in the case of inherited property, where 35 percent tax could be due, other loopholes are being explored.
One legal way of avoiding tax would be to make an adjustment to the value of property when declared cause mortis. If a correction is made to that value, and it is increased, the seller would have to pay a 5 percent tax on the difference in the value plus 8 percent interest on the years to date.
That may still work out cheaper than paying the 35 percent tax.
Prior to the budget the Notarial Council had been led to believe that a 7 percent across the board tax could be introduced on inherited property. Up until the few days prior to the budget, the council had assumed a 7 percent flat rate and no effort was made on the government’s part to inform the council of a change of plans.
Bisazza was upset that prior to the budget, finance minister John Dalli found time to meet the Estate Agents, but did not meet the Notarial Council.
“It is difficult for us to believe that there was a last minute change of plans, as only a few days after the budget a printed publication was already available that included the changes announced in the budget. Normally, following the budget day the decisions are passed on the Attorney General who has to consider how the changes to laws are formulated and refer his opinion back to the ministry.
“It is obvious that there must have some discussion behind our back and that it must have taken place prior to the budget.”