In the weeks leading up to Budget 2004, The Malta Financial and Business Times will applying a focus on the issues related to the budget and the expectations from the different sectors. This week Julian Manduca focuses on property
Victor Bisazza agrees that rented property should not be passed on
Notary Victor Bisazza, the President of the Notarial Council, told The Malta Financial and Business Times yesterday that the rent laws need to be reformed, including a decree that tenants, of both private and commercial premises should not be able to pass on their properties to family members or third parties once the rental period is over.
Bisazza does not expect that the government will be consulting the Notarial Council prior to the budget because: “there is no election or referendum round the corner,” but is hoping the budget will streamline the laws related to the property market making them less complicated.
Last year Bisazza was upset to be led down the garden path by the government at the time of budget consultation when the Council was led to believe that a 7 per cent across the board tax was to be introduced on inherited property, but instead a 35 per cent rate was introduced on property inherited after 1992. Bisazza had then gone on record stating: “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.”
That change caused much consternation to property owners and Bisazza told this newspaper that notaries “are constantly being reminded the unfairness of the succession laws as they now stand.” Asked whether he was hoping for some change to the succession laws, he was not optimistic: “We are resigned to the situation. From a political perspective it is not the appropriate moment.”
The Malta Financial and Business Times asked Bisazza what he was expecting from the budget and he replied: “the government should take care of the property market and make it attractive for investment. We need more streamlined laws and less complications.
“For example, people come to us to fill in tax returns asking what would be acceptable to deduct as costs on the sale of a property when declaring the profit. Much remains unclear and is based on hearsay. Also on property prior to 1995 any receipt is acceptable and after 1995 it has to be strictly a VAT receipt. This is causing confusion.
“Inflation is another grey area as the value of property has risen at a much higher rate that that of other goods. We need a proper property inflation rate.”
Asked about his ideas on a hoarding tax on vacant property, Bisazza said he would agree provided it is accompanied by a revision of the rent laws. “The idea that a relative can move in to become the new tenant of a property should be stopped. Also nobody should be able to lease commercial properties to others if that is not allowed in the contract. If there are management agreements being made, as has recently been suggested in the media, the laws should be changed to disallow them.”
Bisazza said he is all in favour of a certain amount of liberalisation, but not for a free for all situation. “Social justice has to be respected so liberalisation should come gradually. Government should control the rental market to ensure that justice is served to both landlord and tenant.”
The estate agents: on incentives for first time buyers and less tax on inherited property
Given the recent demise of the Association of Estate Agents (see below), The Malta Financial and Business Times spoke to its last president, Michael De Maria about what estate agents could be expecting from the upcoming budget.
“I hope that we can see incentives for first time buyers. The Lm450 saving on the difference in stamp duty on the first Lm30,000 is not enough. Also in the last budget time apportionment for Capital Gains tax was
abolished. This is unfair for purchasers who bought their property prior to 1992 and I hope this decision is reversed. I would also like to see total revision of the Capital Gains Tax because as it stands today it is just additional income tax. Perhaps Capital Gains Tax can be capped at a rate substantially lower than the maximum of 35 per cent, similar to the 15 per cent withholding tax on interest earned.”
While Demaria is hoping for change he would not like to see any changes related to property buying or selling which he said “are already high enough.”
Asked whether he supported the oft mentioned idea of a hoarding tax, De Maria told this newspaper: “In the last budget we saw the exemption from Capital Gains Tax on the transfer of immovable property acquired ‘causa mortis’ abolished. This has created a certain amount of hoarding therefore an additional tax on vacant properties, I feel, will be unjust. I would rather see incentives to urge vacant property owners to put their properties on the market, especially when these properties are in town and village cores.” De Maria would like to see changes to the rent laws and said he “totally agree that tenants should not be allowed to pass on their property to others on death. This, hopefully will be a start to rent reforms that are long overdue.”
Focusing on the problems related to inherited property De Maria has a concrete suggestion to make: “In the last budget, on sale, properties that were acquired ‘Causa Mortis’ (inherited) were to be charged 7 percent on the proceeds if they were acquired prior to 25 November 1992 and Capital Gains Tax was to be charged on the difference between the value declared for succession purposes and the selling price on properties inherited between 1992 and 2003.
“This measure has obviously kept a number of properties vacant and off the market. Since this was retroactive properties valued at under market value for succession between 1992 and 2003 were adversely hit. Perhaps a straight 7 percent tax on the proceeds of a sale acquired ‘Causa Morti’ till 31 December 2004 and Capital Gains Tax on any properties inherited after 1 January 2005 would be fairer.”