Buying Property in Malta and Gozo

The terms and conditions are generally agreed upon beforehand and the sale would typically be subject to good title and issue of all relative development permits (should any be required). Customarily the promise of sale agreement has a term of validity of three (3) months; however, the parties are free to agree on a shorter or longer period. If no time frame is indicated, the promise of sale agreement has a validity of ninety (90) days. During this period, all conditions in the promise of sale agreement on which the final deed rests must be fulfilled.

Upon the signing of the promise of a sale agreement the purchaser would provide a deposit of 10% of the property price. This deposit is left in escrow with the Notary for safe keeping. The promise of sale agreement must be registered and provisional duty amounting to 20% of the total stamp duty payable must be paid by the prospective purchaser.

Subsequently to the signing of the agreement but before entering into a final deed of sale, a notary would be engaged by the purchaser to carry out the necessary researches into the property to confirm that the vendor has a good title into the property and vacant possession, amongst other.

In practice, the notary who drafts the promise of sale agreement would be responsible for such searches.

Within three weeks from when the promise of sale is signed, the deed needs to be registered by the notary and the stamp duty of 20% of the total stamp duty payable on completion of the transfer is paid to the Government. The amount for the duty would be either given to the notary by the purchaser or alternatively given the notary by means of a cheque payable to the Department.

Obtaining a Home Loan

For non-residents looking to purchase a home in Malta, a home loan can typically be for up to 70% of the value of the property and this can vary depending on circumstances.

Monthly loan repayments generally should not exceed 30% of your gross income and may be repaid over a maximum of 40 years (up until age 65).

Documentation generally required when applying for a home loan:

• Evidence of income (such as payslips);
• Passport;
• Promise of Sale agreement;
• Architect’s property valuation report;
• A Banker’s reference;
• A Character Reference (unless already an account holder of that Bank);
• Bank statements, other loans, deposits, current accounts; and
• Additional documentation may be required.

A life assurance and building insurance policy to cover the replacement value of the property would also be required.

Deed of Sale

The final deed is entered into by the parties before the promise of sale agreement lapses.

The remaining 4% of the stamp duty is also paid upon the signature of the final deed.

In cases where a bank loan is taken out for the acquisition of the property, bank representatives also appear on the final deed of sale in order to sign the relevant documentation.

The deed of sale is read out to the parties by the notary and if the parties agree to the final terms and conditions the contract will be signed. The balance due is paid to the vendor, together with the remaining tax and stamp duty and the keys of the property are then handed over to the purchaser. In the case where a bank loan has been obtained by the purchaser, the balance is paid to the vendor by the bank on account of the loan granted to the purchaser.

The notary will then register the contract at the public registry.

Disbursements

• Government Stamp Duty – The standard rate of government stamp duty is 5% of the value of the property. The stamp duty is lowered to a rate of 3.5% on the first €150,000 of the immovable property price when one purchases a property subject to having the intention to establish ordinary residence within the property. (This does not apply for non-EU nationals). EU nationals taking up permanent residence in Malta and who have sold their overseas properties and plan to use the Maltese home as their primary ordinary residence also qualify to pay 3.5% on the first €150,000. Stamp duty is payable in 2 instalments, 20% of the total duty due is paid on the preliminary agreement and the remaining is due upon the final deed of purchase;
• Approximately 1.5%  to 2.5% of the purchase price of the property is charged by the notary;
• Approximately €582 due as disbursement for the researches into title, liabilities amongst other – depending on the nature of the property and when it was built;
• €233 as a fee for an AIP permit (if required);
• Legal fees (where applicable) paid by the party engaging such services;
• Agency fees due are usually borne by the vendor.

Condominium

A Condominium is a building or complex in which units of property, such as apartments, are owned by individuals and common parts of the property, such as the grounds, lifts and building structure, are owned jointly by the unit owners.

The law requires that every block is registered as a condominium and administered by an administrator. An administrator should be appointed by a majority during a condominium meeting and the maintenance of the common areas should then be administered by the appointed administrator.

You should ensure that you have a full understanding of the condominium changes and also have a copy of the condominium statute when acquiring a property having parts of condominium ownership.

AIP Permit

*A permit will not be granted if applicant has already acquired immovable property in Malta – an exception however lies with ‘Special Designated Areas’

** The Special Designated Areas are the following:

• Portomaso Development, St. Julian’s, Malta
• Portomaso Extension I, St Julian’s, Malta
• Cottonera Development, Cottonera, Malta
• Manoel Island / Tigne Point, Tigne/ Gzira, Malta
• Tas-Sellum Residence, Mellieha, Malta
• Madliena Village Complex, Malta
• Smartcity, Malta
• Fort Cambridge Zone, Tignè, Malta
• Ta’ Monita Residence, Marsascala, Malta
• Pender Place and Mercury House Site, Malta
• Metropolis Plaza, Gzira, Malta
• Fort Chambray, Ghajnsielem, Gozo
• Kempinski Residences, San Lawrenz, Gozo
• Pender Place and Mercury House Site, Extensions I, II, III, IV and V, Malta
• Vista Point, Marsalforn, Gozo

The purchased property must be intended for one of the following:

• Personal residential use of the applicant exclusively;
• Other purposes approved by Government;
• An approved industrial or touristic project;
• Any other project or purpose which is considered to contribute to the development of the Maltese economy.

Final Withholding Tax (FWT)

With effect from 1st January, 2015 the system consisting of both a 12% final withholding tax on the transfer value or 35% tax on the profit or gain has been replaced by one final withholding tax of 8% on the value of the property transferred.

Nevertheless, there are four main exceptions to this rule:

• On a transfer of property not forming part of a project, the applicable final withholding tax rate shall be 5% on the value of the property transferred if the property is transferred before five (5) years from the date of its acquisition. This rate will not apply where the said property was at any time within the period of five (5) years preceding the transfer, owned by a person related to the transferor and the property formed part of a project at such time.
• In the case of properties acquired before the 1st January 2004 in respect of which a notice of a promise of sale or transfer relating to that property had not been given to the Commissioner before the 17th November, 2014, the applicable final withholding tax rate shall be 10% of the value of the property transferred.
• 2% final withholding tax applies on a transfer of property that was immediately before the transfer owned by an individual, or co-owned by two individuals, who had declared in the deed of the acquisition of that property that the said property had been acquired for the purpose of establishing therein or constructing thereon his or their sole ordinary residence, and the transfer is made not later than three (3) years after the date of the acquisition thereof. This shall only apply where the said individual does not own any other residential property at the time of the transfer.
• 5% final withholding tax applies when it is a transfer of property situated in Valletta, that was acquired by the transferor before the 31st December 2018, and such property has been restored and/or rehabilitated after the date of acquisition in accordance with any planning permit issued for this purpose by the Malta Environment and Planning Authority (MEPA), and on completion of such restoration and/or rehabilitation works are certified as satisfactory by MEPA before the 31st December 2018. The said transfer of property has to be made not later than five (5) years from the 31st December 2018.

Persons selling the property in which they have resided for at least three (3) years are still exempt completely from tax.

The Residence Programme

The fact that you are an EU/ EEA/ Swiss national and acquiring property in Malta could serve as one of the criteria for acquiring the status of The Residence Programme (TRPs).

TRPs taking up residence in Malta may benefit from a special and favourable Malta tax status and treatment as follows:

• income arising outside Malta which is received in Malta would be chargeable to tax in Malta at the flat rate of 15%;
• income arising in Malta and capital gains realised in Malta would be taxable in Malta at the higher rate of 35%;
• no Malta tax would be chargeable on income arising outside Malta which is not received in Malta;
• no Malta tax would be chargeable on capital gains realised outside Malta even if these are received in Malta.

A TRP would also be entitled to relief of double taxation otherwise suffered on income arising outside Malta which is received in Malta. Such relief would be available in the form of unilateral relief (in terms of the Malta Income Tax Act) or, alternatively, under a treaty in force between Malta and the country of source of the relevant income.

However, after taking any double tax relief claimed into account, an EU/ EEA/ Swiss national TRP would be required to make an annual tax payment of at least €15,000.

A TRP must hold a qualifying property, of a value of not less than €275,000 in Malta and €220,000 in the South of Malta or in Gozo. The TRP and his family must have their habitual residence in such property as their principal place of residence.

The Residence Progamme Rules may be summarised as follows:

Global Residence Programme Rules

These Rules are similar to the above mentioned TRP Rules, but applicable to non-Maltese, non-EEA and non-Swiss nationals – therefore only to third country nationals. The Global Residence Programme Rules may be summarised as follows:

In terms of these Rules, the localities in the south of Malta are the following, Birzebbugia, Cospicua, Fgura, Ghaxaq, Gudja, Kalkara, Kirkop, Luqa, Marsascala, Marsaxlokk, Mqabba, Paola, Qrendi, Safi, Santa Lucija, Senglea, Siggiewi, Tarxien, Vittoriosa, Xghajra, Zabbar, Zejtun and Zurrieq.

The Global Residence Programme Rules establish that on income arising outside of Malta but brought into Malta, the minimum tax payable is €15,000, with further income arising outside of Malta but brought into Malta to be taxed at a flat rate of 15%. The minimum tax payable, must be paid fully and yearly in advance and any other income will be taxed at the rate of 35%.

The Malta Retirement Programme Rules

After buying a property in Malta of at least €275,000 or €250,000 in Gozo you may avail of the Malta Retirement Programme Rules, when satisfying the following:

• You cannot be in employment;
• You may hold a non-executive post on the board of a company resident in Malta or partake in activities related to any institution, trust or foundation of a public character and of any other similar organisation or body of persons, also of a public character, which is engaged in philanthropic, educational, or research and development work in Malta;
• Your pension which is received in Malta, must constitute at least 75% of your chargeable income. Conversely, you may only generate up to 25% of the total chargeable income from any non-executive posts as referred to above;

If you satisfy the above (and other conditions) a fixed tax rate of 15% will be due on the pension remitted into Malta, and the minimum tax payable shall be of €7,500 per annum for the beneficiary and €500 for every dependant (if any).