The taxation of capital gains in Malta is primarily governed by the Income Tax Act (Chapter 123 of the Laws of Malta), particularly Article 4, which outlines the chargeable income subject to tax, including gains or profits arising from the disposal of capital assets. Specific provisions within the Income Tax Act may provide exemptions or preferential treatment for certain types of capital gains to incentivize investment, foster economic growth, and attract foreign investment into Malta's economy.
In Malta, capital gains refer to the profit realized from the sale or disposal of capital assets, including but not limited to:
- Real estate properties
- Stocks and securities
- Bonds and debentures
- Business assets
There is typically no distinction made between short-term and long-term capital gains for tax purposes.
Taxable capital gains are calculated as the difference between the selling price of the asset and its acquisition cost. The formula for calculating capital gains is as follows:
Capital Gain = Selling Price - Acquisition Cost - Expenses
Adjustments or deductions may be allowed in the calculation of the gain, including expenses related to the sale (e.g., brokerage fees, legal fees) and any improvements made to the asset during ownership.
In Malta, capital gains tax is generally levied at the standard income tax rates applicable to individuals or corporations, depending on the taxpayer's status and the nature of the asset disposed of. As of [current date], the standard income tax rates for individuals range from 0% to 35%, while for companies, the standard corporate income tax rate is 35%.
However, certain capital gains may qualify for exemptions or preferential tax treatment under specific provisions of the Income Tax Act, such as the participation exemption regime for gains derived from qualifying holdings in subsidiaries.
The rationale behind taxing capital gains is to ensure that individuals and businesses contribute their fair share of tax on profits realized from investments and asset disposals. By applying standard income tax rates to capital gains, Malta aims to maintain a neutral tax treatment across different sources of income and promote investment while generating revenue for the government.
