| Property in Malta |
Procedure of Property Purchase in Malta
A local estate agent will typically accompany clients to visit all properties selected by themselves or the agent.
Once a property to the liking of a client is identified and an offer is made and accepted, as well as terms and conditions are agreed upon - then a preliminary agreement (convenju) is signed. This is an agreement whereby the vendor and the purchaser bind themselves to sell or to buy the property at an agreed price and within an agreed timeframe.
A deposit (typically but not specifically 10%) is paid and is held by the notary, estate agent or vendor depending on what has been agreed.
The preliminary agreement (convenju) is usually written by and signed in front of a notary - being the only official allowed at law to publish deeds.
The agreement may be subject to some conditions (eg loan, architects approval etc.,) as agreed by the parties, but a time frame is usually given within which these are valid so as not to leave the vendor in uncertainty for too long.
Once the notary has carried out the searches on the title of the property, and bank loans are approved - then the contract can be signed.
A loan would involve a sanction letter and it is important that all insurances are taken out and conditions of sanction are met well before contract due date to avoid last minute hiccups.
A typical time frame between preliminary agreement (convenju) and contract is 3 - 6 months. This time frame can be much longer or shorter as part of negotiations.
If a bank hypothec needs to be cleared on contract, then the contract will usually be held at a bank - although the notary might collect funds due to the bank him/ herself, in which case this would not be necessary.
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Purchase Expenses
1. Stamp Duty as per table below:
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Local First Time Buyers
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5% less € 1,048 (this is equivalent to 3.5% on first €116,469 and 5% on remainder)
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EU citizen taking up residence in Malta, having sold overseas properties and having
Malta Property as sole residence
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5% less € 1,048
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Local second time buyer who has sold first residence and is buying as primary residence.
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5% less € 1,048
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All other cases
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5%
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Causa Mortis
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5% |
2. Notary Fees
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Selling Expenses
1. Agency Fees as agreed
2. Capital Gains if applicable as per table below:
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Title of Transferor
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Provisional Tax on Capital Gains
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Final Witholding Tax
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Deriving from Inheritance prior to 25th November, 1992
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7%
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Deriving from Inheritance after 24th November, 1992
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12% on difference between value declared in causa mortis and deed of sale.
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Deriving from Partition of property which itself related to inheritance prior to
25th November, 1992
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Vide Category 1
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Deriving from Partition of property which itself related to inheritance after 24th
November, 1992
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Vide Category 2 |
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Deriving from Donation over 5 years prior to deed of sale
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Deriving from Donation less than 5 years prior to deed of sale
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12% of sale price less value of donation
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12% of sale price
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Property regarding which konvenju registered prior to 22nd November, 2005
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7% provisional as long as deed published prior to 31st March, 2006
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Else 12% of sale price
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Property owned less than 5 years prior to deed of sale
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either 7% provisional
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or 12% of sale price
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Property located in a specially designated area, regarding its first transfer.
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either 7% provisional
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or 12% of sale price
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a) Exemption issued by CIR ;
b) Donation by family to family members;
c) Ownership and residence for over 3 years;
d) Transfer by engaged couples of ½ share to the other party;
e) Property assigned in a separation agreement.
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nil
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nil
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All other categories
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12% of sale price
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Acquisition of Immovable Property Permit
Foreign purchasers might or might not need permission from the Ministry of Finance (AIP Permit). See table below:
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AIP
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Required or Not
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Number of properties allowed
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EU citizen buying a holiday home
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AIP Required
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1
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EU citizen buying home as full time residence in Malta and registering for NI, tax etc in Malta.
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NO AIP Required
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1
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EU citizen having lived in Malta for a period of over five years and registered for NI, tax etc., in Malta.
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NO AIP Required
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unlimited
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Non-EU citizen buying property in Malta for whatever reason.
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AIP Required
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1 |
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Maltese citizen or passport holder having lived here for a period of five consecutive years.
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NO AIP Required
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unlimited
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Maltese citizen or passport holder having lived for less than five years.
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AIP Required
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1
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After five years living in Malta
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NO AIP Required
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unlimited
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Special Designated Areas
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Maltese or EU citizens irrespective of number of years in Malta, whether living permanently or not.
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NO AIP Required
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unlimited
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Non-EU citizens
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NO AIP Required
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unlimited
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Income Tax Implications
• Income derived from the letting of immovable property can be of two types – investment income and income derived from a trading. Typically, the difference between the two is distinguished by whether the rental agreement is for short periods (usually for furnished premises for a few weeks or months) or for long periods.
• The tax deductions taken against these two types of rental income are different. Any expense incurred in the production of income derived from trading rental income is an allowable tax deduction, given that upon demand, the taxpayer would be in a position to present to the Inland Revenue Authorities supporting documentation.
• In the case of rental income derived from long lets where the rental activity is not a trade, the allowable deductions are (1) the MTA (formerly HCEB) licence fees if any, (2) ground rent and rents payable on property rented out, (3) any interest incurred on a loan specifically taken to finance the purchase (and perhaps the renovation) of the property from which rental income is derived, and (4) a further deduction equal to 20% of the rental income received less rents and ground rents payable and less the MTA licence fees.
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Commission rates payable to estate agents
Sale of property under sole agency agreement:
• 3.5% sale value + 18% VAT payable by vendor
Sale of property not under sole agency agreement:
• 5% sale value + 18% VAT payable by vendor
Commercial lets:
• 10% of one years rent + 18% VAT payable by lessor, and
• 10% of one years rent + 18% VAT payable by lessee
• In case of premium, 5% of premium + 18% VAT payable by lessor
Long term residential lets (6 months and over):
• Half one months rent + 18%VAT payable by lessor
• Half one months rent + 18%VAT payable by lessee
Short term residential lets (less than 6 months):
• 10% of total rent + 18% VAT payable by lessor, and
• 10% of total rent + 18% VAT payable by lessee
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