Nestled in the heart of the Mediterranean, Malta stands out not just for its sun-kissed landscapes and warm, English-speaking inhabitants but also as a prime real estate destination in Europe.
For those considering an investment or a new home, Malta offers a stable real estate market with promising returns, even amidst the European property market's challenges. This stability is anchored in Malta's legal framework, which doesn't tax property ownership or wealth.
Furthermore, the high-rise policy in Malta allows additional development to existing buildings in specified areas of Malta, which extend the return on investment possibilities.
Understanding the Conditions for Property Acquisition
The Maltese government, in its bid to invigorate the property market, has introduced measures that simplify property acquisition, especially for EU citizens:
EU Citizens: Irrespective of how long you have been staying in Malta, you can buy immovable property intended to be used as your primary residence without the need of an Acquisition of Immovable Property (AIP) permit. An AIP permit is only necessary when acquiring a secondary residence if you haven't lived in Malta for more than 5 years.
Non-EU Citizens: An AIP permit is required to acquire any type of immoveable property unless it is situated in a Special Designated Area (SDA).
Companies established in and operating from an EU member states may freely acquire immoveable property in Malta required for the purpose of carrying out their economic activity as long as such companies are controlled by more than 75% by EU citizens who have resided in Malta for at least 5 years.
Other Entities will require a permit to acquire property in Malta.
Special Designated Areas
For those eyeing luxury or specific locales, Malta offers specially designated areas where property acquisition comes with zero restrictions:
Procedure to Purchase Immovable Property in Malta
Once a prospective buyer identifies a property of interest, the next step is to enter into a promise of sale agreement with the seller. This preliminary agreement requires the buyer to pay a deposit to secure the acquisition of the property and sets out a date by which the final deed fo acquisition must take place. During this time period, the notary entrusted by the buyer will conduct searches in relation to the property to ensure the vendor's ownership and right of transfer the property. If the buyer requires an AIP permit to acquire the property, an application with the respective authority must be submitted and a copy of this agreement should be attached to the AIP application form. Once the notary confirms the vendor’s ownership to the property and, if required, the AIP permit is issued, the parties can sign the final deed of sale of property.
Navigating the Property Transfer Tax System and AIP Permit Fees
One of the key attractions to the Malta property market is the simple manner in which tax is paid on transfers of immoveable property in Malta. Property transfers tax is paid at a fixed rate on the transfer value of the property. The standard rate stands at 8%, but there are variations based on specific conditions:
|
Tax Rate |
Context |
|
2% of transfer value |
Property owned by 1 or 2 persons who, at the time of acquisition had declared that such property would serve as their main residence, and sold within 3 years of purchase. |
|
5% of transfer value |
Property not part of a project, sold within 5 years of purchase. |
|
5% of transfer value |
Property in Valletta, bought before 31 December 2018, restored and certified by MEPA before 31 December 2018, and sold within 5 years of 31 December 2018. |
|
7% of transfer value |
Restored property sold without a promise of sale notice before 17 November 2014. |
|
10% of transfer value |
Property bought by the vendor before 1 January 2004. |
The sale of property which was inherited by the vendor is taxed at 12% on the difference between the selling price and the value declared at the time of the causa mortis transfer. For property inherited before 25 November 1992, the applicable tax rate is 7%. Similarly, property acquired by means of a donation by the vendor and sold after the lapse of 5 years from acquisition, is taxed at 12% on the difference between the transfer value and value declared at the time of acquisition by donation. In the event that the property acquired by donation is sold within 5 years from purchase, the normal rules apply.
The fee for an AIP Permit stands at €233, irrespective of the property's value.
Property Transfer Tax Exemptions
Certain transactions are exempt from property transfer tax. These include:
Stamp Duty applicable on the acquisition of property
Buyers are liable for stamp duty upon property acquisition. Stamp duty is typically paid at 5% of the property's value. For buyers acquiring property as their primary residence, the first €150,000 is taxed at a reduced 3.5%. Non-EU nationals, however, pay a consistent 5% on the final sale deed's value. Buyers purchasing their first property for establishing therein their primary residence are exempt from paying stamp duty on the first €200,000.
Renting in Malta
If you're considering renting out your property, the process in Malta is streamlined simple. Given certain conditions, rental income might be taxed at 15% on the gross receipts. While most property rentals are VAT-exempt, certain exceptions may apply, such as in the case of properties required to be licenced under the Malta Travel and Tourism Services Act, which attract a 7% VAT rate.
However, keep in mind that properties acquired with an AIP permit are strictly for residential use and cannot be rented out to third parties. Non-residents are typically allowed to purchase only one immovable property in Malta - although exceptions apply if the property is in Designated Special Areas.
Conclusion
Malta, with its blend of Mediterranean charm, stable real estate market, and favourable tax conditions, is undeniably a top choice for property investments. However, as with any investment, understanding the nuances of the local regulations is crucial. We at DZ Advisory are here to guide you every step of the way. If you would like to receive more information, please provide us with your contact details and one of our team members shall be in contact with you promptly.