Property Purchase in Malta - Some Basics Most people purchase a property only once or twice during their lifetime. We know that this can be a strenuous procedure, so we have put together a few guidelines as to the basics of buying property in Malta . Once you have chosen the property you would like to purchase, and feel that it fits your requirements, in terms of size, space, location (proximity to amenities etc.) and price, it is time to sit down and finalise. Agree the following items with the owner of the property: final price, mode of delivery (i.e. whether the property will be finished or in shell form, what the finishes comprise of), when it will be finished/delivery date. At that point, the buyer and seller sit down together in front of a notary to put the agreement on paper and give it legal validity. This agreement is called a Promise of Sale agreement.
Terms of the Promise of Sale agreement
After the above points are clear and agreed upon to your satisfaction, a notary public has to be appointed and the promise of sale agreement can be drawn up. The promise of sale agreement will contain all the relevant points that were previously agreed upon.
As from 1 st January 2004, promise of sale agreements have to be registered with the Inland Revenue Department and a 1% provisional duty is payable on the contract value of the property being transferred. The provisional duty will be set-off against the final duty due on the contract sale, or refunded should the deal fail to materialise. The notary drafts the final deed, prepares it for signature and notifies the parties concerned. Once every condition of the promise of sale agreement is complete and all duties fulfilled, all parties get together to sign the final deed. The normal procedure is the following:
Expenses Incurred Upon Buying Immovable Property
Upon the transfer of immovable property the following expenses must be taken into consideration as the purchaser: Stamp duty - 5% on the immovable property purchase price on contract. This is payable to the Commissioner of Inland Revenue as follows: 1/5 upon signing of Promise of Sale Agreement, 4/5 upon signing of the final deed. A concession exists for Citizens of a Member State of the European Union who would have their permanent residence in Malta or who would be establishing their permanent residence in Malta and who would be purchasing their sole and ordinary residence. In this case only 3.5% stamp duty is paid on the first € 117,000.00 (one hundred thousand Euro) of the immovable property contract price. Notary – The notary is normally chosen by the purchaser and the notarial fees, including the legal searches, are approximately 1.5% of the immovable property price.
Points for non-Residents of Malta Conditions for Property Purchase
Non-residents may purchase a holiday home in Malta under the following terms and conditions:
• EU Citizens (including Maltese Citizens) who would be purchasing their primary residence (therefore becoming Permanent Residents of Malta) who not need to obtain an AIP Permit prior to purchasing the property, irrespective how long they have resided in Malta . • EU Citizens (including Maltese Citizens) who would have resided in Malta for a continuous period of 5 years through-out his lifetime would not need to obtain an AIP to purchase their secondary residence or any other immovable property. • EU Citizen (including Maltese Citizens) who would not have resided in Malta for a continuous period of at least 5 years would need to obtain an AIP Permit to purchase their secondary residence or any other immovable property. It is to be noted that when referring to ‘secondary residence'', it does not only mean the second property in Malta but it also means another residence apart from the primary residence which could be situated in any other Member State of the EU. Therefore in the case of an EU Citizen who would be a permanent resident of another EU State, thus having his primary residence in such other EU State, who would be acquiring his first property in Malta, such property in Malta would be considered as a ‘secondary residence''.
Conditions for Property Sale
When non-Residents of Malta or else residents of Malta who would intend not to remain so, would be selling their property in Malta , prior authorization is need from the Inland Revenue Department for the sale to take place. This authorization is merely required for tax purposes. Once a preliminary agreement is signed, the Notary taking care of the deed would have to send a copy of the agreement to the Inland Revenue Department so that the final Capital Gains Tax is computed. The Notary would then be informed in the Authorization, the amount of Capital Gains Tax to be collected from the vendor on the signing of the final deed.
Many overseas buyers looking for a second home opt to purchase property under the above classification and may reside on the Island for up to 3 month intervals without the necessity of obtaining visas. Extensions of stay are usually approved with the minimum of inconvenience, each case being treated on its own merits.
Main Advantages - Funds plus profits may be repatriated using both country and currency of choice;
Local mortgage facilities are available up to 80% of the purchase price;
Deeds and documents are read and published in English;
Special concessions on the importation of personal effects and pets;
Properties with swimming pools may be rented out;
No rates or local council taxes;
Multiple property purchase permitted in special designated areas.
Conditions of Temporary Residency - Proof of income is required by the authorities to ensure the resident will not be a burden on the country. Local income tax payable is limited to funds imported into the country. (If resident in Malta for less than 6 months per calendar year no tax whatsoever is due).
Permanent Residents A stable and democratic political situation, together with a warm climate, rich culture and a relatively low crime rate provide a rare and irresistible combination for many people intending to settle or retire on our Archipelago as permanent residents. Provided all requirements are met, the holder will enjoy complete freedom of movement once the permit is issued. No minimum or maximum lengths of stay are imposed. Such permits do not require renewal but are merely monitored annually by the Office of the Prime Minister, and can only be revoked for extremely serious reasons. Of course, our company can handle all paperwork on behalf of the client, either on a personal level or simply via correspondence.
Main Advantages - Flat rate of only 15% income tax on imported funds; Speedy repatriation of capital, profits and income; Multiple property purchase permitted in special designated areas; Special concessions on the importation of personal effects and pets; Local mortgage facilities are available up to 80% of the purchase price; Deeds and documents are read and published in English; No local or council taxes are payable.
Conditions of Permanent Residency - Capital or income requirements: Applicants must produce evidence of an annual income of Lm10,000 (ten thousand Maltese liri) or over, or capital assets of Lm150,000 (one hundred fifty Maltese liri) or over. In either case, the whole amount is not required to be brought into the country. Also, the value of the property purchased locally is considered as forming part of this capital requirement.
Rental of property : An applicant may opt to rent or lease a property for not less than Lm1,800 (one thousand eight hundred Maltese liri) per annum. Owners of Properties having or enjoying the use of swimming pools are permitted to rent them out provided that such Properties are licensed as holiday accommodation by the Malta Tourism Authority. Such rental income is of course subject to the flat rate of 15% tax outlined previously.
Remittance of annual income: An applicant must import a minimum of Lm6,000 (six thousand Maltese liri) per annum, with an additional Lm1,000 (one thousand Maltese liri) for each dependant. Taxation on this income is dealt with in the following section.
Taxation: All income remitted to Malta or generated locally is subject to a flat tax rate or only 15% (less any personal allowances). The minimum tax payable is Lm1,800 per annum. Overseas capital funds invested locally are, of course, only taxed locally on any interest or dividends paid thereon. Some permanent residents also benefit from double taxation agreements which exist between Malta , most European countries, Canada and Australia , thus ensuring that taxes are never paid twice.
Capital Gains Tax Exemption: Should an EU Citizen whilst being a permanent resident of Malta use a property of his ordinary residence for over 3 years, he would not be liable to pay Capital Gains Tax when selling such property after the said 3 year period.
Death and Donation duties : If a property is purchased in one name, the heirs of the deceased are liable to pay 5% duty on the value of the property in question. This valuation is carried out by an architect appointed by the authorities. In the case of joint ownership, and one of the title holders passes away, provisional tax of 5% is paid on only 50% of the local estate