Reduced Gozo stamp duty gets eleventh-hour extension to January 31

Budgetary measure that reduced 5% stamp duty to just 2% but blamed for property rush on Gozo was expected to be terminated by end of year

The Mġarr port in Gozo. Photo: Peter Avramoski/Unsplash
The Mġarr port in Gozo. Photo: Peter Avramoski/Unsplash

The finance ministry has issued an eleventh-hour extension to the popular Gozo Property Scheme, which offers a reduced tax rate of 2%, as opposed to 5%, for individuals purchasing residential properties in Gozo.

The scheme was expected to end on 31 December. But under legal notice 316, the scheme will now be extended to 31 January, 2024, and solely for those registering a promise-of-sale, or ‘ċessjoni’ (assignment) or such promise. There is no deadline for the registration of the contract.

The reduced stamp duty rate was previously applicable only for a promise of sale is signed before the end of 2023. 

The government had said it would remove the tax incentive for property purchases in Gozo in the last Budget, in a bid to slow down the construction frenzy on the island.

The move was expected to provide rare reprieve for an island that has faced relentless construction projects in the last number of years, even sparking protests among Gozitan residents and environmentalists against the 2% stamp duty for properties purchased outside the urban conservation area.

The sale and purchase of properties inside UCAs remain tax-free.

The idea to end the reduced 2% duty had been put forward to the government ahead of the budget by an alliance of seven environmental, economic and social organisations and entities in Gozo, collectively called Għal Għawdex.

In its pre-Budget proposals, the Gozo Business Chamber spelled out the problem. “While the blanket 2% tax on the purchase of property in Gozo was beneficial at a point when the market was stagnant, such a blanket measure as it is currently formulated is incentivising the development of small apartments concentrated into massive projects, within communities that cannot currently absorb such type of development,” it said.

The scheme was first announced in 2018, slashing stamp duty on Gozo property purchases from the standard 5% to 2% to push more economic activity in Gozo. By 2019 the deeds for property in Gozo more than doubled, only slightly declining during the pandemic and then picking up pace again in the past couple of years.

The Gozo Regional Development Authority (GRDA) acknowledged the scheme increased property sales in Gozo but warned it could generate “unintended adverse consequences”, more so because it is open to all types of properties including apartments, irrespective of price, and does not distinguish between first or second-time buyers or other buyers.

The GRDA also said it could have distorted the market by “subsidising and encouraging haphazard and excessive holiday or buy-to-rent property development with possible repercussions to Gozo’s delicate environment and long-term economic consequences”.

There are over 13,000 seasonally used or vacant dwellings in Gozo, more than half of which are flats and penthouses. 45% are secondary, seasonally used, or vacant.