PROPERTY MALTA - Property in Malta, Malta Real Estate, Malta Property, Relocate to Malta

Buying Property in Malta

Purchase of Property in Malta by Non–residents
Stamp Duty and Other Considerations
Income Tax / Tax on Capital Gains
Necessary Permits
Conditions for Purchasing Property in Malta
Benefits of Purchasing Property in Malta

Purchase of Property in Malta by Non-residents

Okay, so you've earmarked the property of your dreams, made an offer, said goodbye to your friends and have actually started packing your bags on your way to sunny Malta . The Promise Of Sale contract has been duly signed and both yourself (as the buyer) and the vendor are now bound to go ahead with the contract and to adhere to the terms and conditions set therein. Yes, the real estate market in Malta is very advantageous and buying property in Malta is hardly a complicated exercise!

But what does all this entail, in legal parlance?

Stamp Duty and Other Considerations

Buying property in Malta ? First thing to get out of the way is the Provisional Stamp Duty, a fee of 5% of the amount agreed upon (or 5% of the real value of the property, whichever is the higher) that is payable by yourself as the purchaser.

The second step is to put the time in between the signing of the preliminary agreement and that of the contract of sale to good use. This is where your trusted notary enters the scene. The notary will carry out all the necessary legal researches in order confirm the following:
• That there is good title to the property (ie that the property actually belongs to the person who is trying to sell it to you!),
• That the property comes with vacant possession (ie that it's not currently being occupied by anyone else), and,
• A host of other legal niceties that you don't really need to worry about.

Your notary will also direct you regarding payment of Stamp Duty – the sale of every immovable property triggers a charge of 5% on the sale price (or the real value of the property, whichever is the higher). As the buyer, you will need to pay this amount upon signing the final deed of sale. Naturally, the 1% Provisional Stamp Duty that you will have already paid when you signed the Promise Of Sale Agreement will be deducted from this amount.

On the other hand, should the Promise of Sale Agreement lapse or otherwise get cancelled, the Provisional Stamp Duty paid will be refunded in full.

Income Tax / Tax on Capital Gains

The good news regarding real estate in Malta is that our legal system does not impose wealth or property taxes, making it very advantageous to buy property in Malta . The way real estate in Malta works, the only scenario in which you will be expected to pay income tax in Malta with respect to the buying of immovable property is if you decide to rent out or sell this property, thus making a profit.

The taxable amount on such rent/sale profit is calculated as follows: by taking the sale price/rental fee and deducting all allowable costs and expenditure. Allowable deductions include the cost of acquisition (adjusted for inflation), maintenance and improvement costs and so forth. The resulting amount is then taxable in Malta at the following progressive rates:

Up to Lm300	0%
Lm301 – Lm1,300	20%
Lm1,301 – Lm3,300	30%
Lm3,301 and over	35%

Even in this case, no tax will be charged if all the following conditions are met:

• The property was sold within twelve months of vacating the premises; and
• It was owned and occupied for a period of at least three years by the seller as his/her own residence up to the day of the sale. In this case, ‘own residence' has a very precise meaning: the property much be a dwelling house and must be the only or the main residence of the seller. Which basically means that you are not eligible for the exemption if the house in question was secondary to your residence abroad.

Necessary Permits

Do you need to get any permits prior to buying your house in Malta ? If you are not a citizen of any EU Member State, then the answer is yes, unless that property is situated in what is referred to as a ‘special designated area' AND its value exceeds Lm75,000 (if a house) or Lm42,100 (if an apartment).

So what does it take for a non-Maltese to be granted an AIP (Acquisition of Immovable Property, for those not in the know) Permit? First of all, the property must be worth at least Lm75,000 (if a house or villa) or Lm42,100. If the property is still in shell form, the costs to finish it can be added on to its value. Secondly, the property must be purchased for one of the following reasons:

• With the intention of living in it as your own main residence, or,
• For another purpose, either touristic or industrial, which is approved by the Government as helping Maltese economy

If the house is of historical interest or situated in a historical area (as declared by an architect) no permit can be given. Finally, before actually signing the contract of sale you must produce documentary evidence that is satisfactory to the Central Bank of Malta regarding the origin of the foreign funds transferred to a Maltese bank account.

Conditions for Purchasing Property in Malta

An AIP Permit for the Acquisition of Immovable Property will be granted subject to the following conditions:
1. Minimum value of property: - Villa or house: Lm75,000
- Apartment, flat, maisonette: Lm42,100
- if in shell form / unconverted, finish costs included in total amount.
(Lm 1 = approx. Euro 2.41 = approx. USD 2.38)

2. Property of historical interest or situated in historical area cannot be bought. - Architect to inspect property and decide whether of historical importance or not. (does not apply to Houses of Character or Farmhouses, which can be bought).
3. Property purchased must be destined: - for personal residential use of applicant only
(private guests may stay when the owner is present)
- for other purposes approved by Government,
- for an approved industrial or touristic project, or
- for any other project or purpose which is considered to contribute to the development of Maltese economy.
4. Documentary evidence of foreign origin of funds transferred to Maltese bank account, satisfactory to the Central Bank of Malta, must be produced before signing the final contract.
5. Maximum property that can be purchased in Malta and Gozo: 1
Except in Special Designated Areas e.g. Portomaso (St. Julian's), Chambray (Gozo), Tigné, Manoel Island and Cottonera – property purchased by company or trust.

Purchasing Property in Malta – The Benefits

• Resale of property is allowed.
• Repatriation of full resale price, including profits, is allowed without complications.
• Mortgages are available for property purchase by non-residents or non-Maltese citizens residing in the islands: - if permission is granted by Central Bank of Malta , you can borrow as much as you wish from the local banks under normal commercial conditions.
• You can rent out your property to third parties
• AIP is granted easily, usually within 2-3 months

Citizens of an EU Member State have an advantage, as they can buy their first property in Malta without restriction. They would only need a permit if the property will be used as a secondary residence – unless, of course, they have already been resident in Malta for a minimum continuous period of five years.