Budget 2024: Stamp duty in Gozo up from 2% to 5%

In a bid to control the construction frenzy in Gozo, the budget envisages the elimination of a tax incentive that had allowed property buyers in Gozo to pay a reduced 2% stamp duty rate, instead of the standard 5% rate applied to the rest of the country.

This tax incentive scheme was initially introduced in the 2017 budget speech with the aim of boosting economic activity in Gozo. Although it was meant to be temporary, it has been extended annually since then. The Finance Minister describes this decision as a way to maintain Gozo as an "island of villages."  But all those who sign a promise of sale agreement by the end of December will still be eligible for the reduced stamp duty rate.

A staggering 7,447 new dwellings were approved in Gozo between 2018 and 2022. In 2022 alone, a record-breaking 1,885 dwellings were approved, signifying an average of five new dwellings approved every day. Data from the National Statistics Office (NSO) indicates that property transactions in Gozo more than doubled by 2019, only experiencing a minor dip during the pandemic and then steadily recovering in recent years.

The proposal to eliminate this fiscal incentive was initially presented by a coalition of seven organizations known as "Għal Għawdex." The Gozo Regional Development Authority (GRDA) acknowledged the scheme's success in boosting property sales but also cautioned about potential unintended consequences on the island's property market and community dynamics.

Despite the increase in stamp duty, property buyers in Gozo will continue to benefit from other incentives designed to promote the restoration of buildings in the Urban Conservation Area and the purchase of properties built over 20 years ago, which have remained vacant for the past seven years. Furthermore, the budget will raise grants for first-time buyers of these properties in Gozo from the current €30,000 to €40,000. The 2021 census data revealed that 45% of Gozo's dwellings are either secondary homes or vacant properties.

Continuation of national property incentives

On a national level, the budget outlines the continuation of fiscal incentives for both property buyers and sellers in urban conservation areas and properties that were built over 20 years ago and have remained vacant for more than seven years. This initiative, introduced in 2021, offers first-time buyers a €15,000 grant when purchasing a property in the Urban Conservation Area (UCA). Moreover, it considers the complete removal of capital gains tax and stamp duties on the first €750,000 of the property's price in these areas.

The budget also includes plans for the abolition of the tax on the sale and purchase of properties used for social accommodation. This tax, which is limited to the first €200,000 of the total property price, applies to properties that have been rented at an affordable rate in previous years. The removal of this tax will be applicable both when the property is sold to the tenant and when it is sold to third parties.