The Maltese real estate market has strengthened its value, earning itself a coveted reputation of being stable and highly lucrative.
Buying property in Malta is one of the safest real estate transactions in Europe. In recent years, the Maltese Islands have received an even more significant boost, reaffirming it as one of Europe’s highly lucrative property investment propositions.
The Maltese legal system supports immovable property in Malta, which does not enforce a levy on ownership or wealth. This fact has been a catalyst for attracting many foreigners to a residence on one of the Maltese islands.
A new high-rise policy has fueled further growth in the property sector, giving rise to multi-story, large-scale developments.
In this article, we will provide some guidelines for those interested in living and buying property in Malta but not quite sure how to go about it.
What to Consider in Buying Property in Malta?
When investing in property in Malta, you should keep in mind two key points: location and profitability.
Even on an island as small as Malta, location is critical. To maximise profitability, you should ensure that your investment is located in a popular area, which will attract potential tenants.
The island is incredibly diverse, so researching different localities will help you decide.
Where to Buy Property in Malta?
The most popular areas for buying a property in Malta provide stunning sea views close to all essential amenities and benefit from local transport routes. Purchasing an apartment or house in the following areas is a fantastic investment:
- St. Julians
- San Pawl tat-Targa
It is also worth mentioning the sister island Gozo. Buying a property in Gozo could prove to be highly profitable in a few years, with the prices for real estate showing a steady rise.
What are the usual types of properties in Malta?
Your choice of property would depend on the lifestyle you want.
Apartment living in Malta is trendy, particularly with foreign nationals. Properties on the Maltese Islands come in all shapes and sizes, but apartments are usually the most affordable option. There are plenty of apartment complexes to choose from, and each has a unique character. A smaller complex might be the best option if you’re looking for a cosy bolt hole. However, if you’re hoping to find an apartment with sweeping sea views, you’ll need to look for a property on a high-rise block.
If you’re considering purchasing a property in Malta, villas are a great option. Usually with their private pools and gardens and often located near some of Malta’s most popular attractions, villas in Malta offer the perfect blend of relaxation and exploration.
Maisonettes are a property in Malta typically consisting of two or more floors. They are a popular choice for buyers looking for more space and privacy than apartments. Maisonettes usually have their entrance and outdoor area and often come with a small garden or terrace.
Buying a period house in Malta is a great way to invest in a piece of the country’s history and culture while also enjoying all the island’s modern amenities. They may also be located in prime real estate locations, making them ideal for living in and renting out. If you’re looking for a unique property with plenty of charm, a period house in Malta could be the perfect option.
What are the Benefits of Buying Property in Malta?
Malta boasts a stable and profitable property market. Investing in property in Malta has proven to be a profitable venture in a consistent market.
Below are just some of the benefits of buying a property in Malta:
- Proven Return on Investment;
- No Ownership or Wealth Tax;
- Simple 5%-8% Final Withholding Tax on Sale (No further Capital Gains Tax);
- 5% Stamp Duty;
- Flat 15% Tax on Rental Income; and
- No VAT on the Transfer of Immovable Property.
Rental income in Malta may opt to be taxed at a flat rate of 15% on the gross rental income.
What are the Conditions for Buying Immovable Property in Malta?
To increase the mobility of the property market and incite further investment, the Maltese government has set several measures which have boosted the market to even higher levels.
Buying a Property in Malta as an EU Resident
Suppose you are an EU citizen who has resided continuously on the island for at least five years. In that case, you don’t need to apply for an Acquisition of Immovable Property (AIP) Permit to acquire immovable property as your primary residence or for business activities.
EU citizens who have not resided in Malta continuously for at least five years require an AIP permit to purchase immovable property as a secondary residence.
Buying a Property in Malta as a Non-EU Resident
As a Non-EU Resident, acquiring immovable property in Malta through an AIP Permit as a primary residence is still possible.
A body of persons (excluding that of a commercial partnership) established and operating in the EU may freely obtain immovable property required for the purpose for which the said group has been set up, as long as its beneficiaries are EU citizens.
In the instance of commercial partnerships established and operating in an EU member state, an immovable property may be acquired for the commercial partnership. EU citizens must own a minimum of 75% of their share capital.
In any other case, a permit will be granted only for an industrial or touristic project or as a contributor to the development of the Maltese economy.
Special Designated Areas in Malta
Specially Designated Areas are zones which have no restrictions on acquiring property. The high-end areas include:
- 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, Mellieħa, Malta
- Southridge, Mellieħa, Malta.
- Madliena Village Complex, Malta
- Smart City, Malta
- Fort Cambridge Zone, Tignè, Malta
- Ta’ Monita Residence, Marsascala, Malta
- Pender Place and Mercury House Site, Paceville, Malta
- Metropolis Plaza, Gzira, Malta
- Quad Business Towers, Mrieħel, Malta
- Pender Place and Mercury House Site, Extensions I, II, III, IV and V, Paceville, Malta
- Fort Chambray, Ghajnsielem, Gozo
- Kempinski Residences, San Lawrenz, Gozo
- Vista Point, Marsalforn, Gozo
- Mistra Heights
Malta Property Transfer Tax System
One of the main reasons which draw foreigners to relocate to Malta is the favourable tax rates. These tax rates extend to the transfer of property to the new buyer at the transfer time.
The final tax rule dictates all transfers of Immovable Property in Malta under article 5A of the Income Tax Act. By default, a rate of 8% final withholding tax is set on transfers of Immovable Property in Malta.
Different tax rates apply to the following situations:
2% of the transfer value
Property transferred, which, immediately before the transfer was owned by an individual or two co-owners who had declared in the deed of acquisition that such property had been acquired for the purpose of establishing therein, or constructing thereon, his/her or their sole ordinary residence, and the transfer is made not later than three years from the date of acquisition.
5% of the transfer value
Where the property being transferred does not form part of a project, as defined, and the property is transferred within five years from the date of acquisition.
5% of the transfer value
Transfer of property situated in Valletta, acquired before the 31st December 2018, and where such property has been restored and/or rehabilitated and works are certified by the Malta Environment and Planning Authority (MEPA) before the 31st December 2018. Such transfer must not be made more than five years from the 31st December 2018.
7% of the transfer value
The restored property where a notice of promise of sale has not been given prior to the 17th November 2014.
10% of the transfer value
Property acquired prior to the 1st January 2004 and for which a transfer of promise of sale has not been presented to the Commissioner of Revenue before the 17th November 2014.
A final tax of 12% applies to the difference between the transfer value and the acquisition cost for the transfer of inherited immovable property, or 7% final tax on the consideration if inherited before the 25th November 1992.
In the transfer of immovable property acquired through donation, 12% tax on the profits made also applies where the transfer is made more than five years after the date of donation.
Which Transactions are Exemptions from Property Transfer Tax?
Certain transactions are exempt from property transfer tax. These include:
- Donations made by an individual to specific family members or philanthropic institutions.
- Transfer of property that had been owned and occupied by the transferee or if the property was used as the individual’s primary residence for three consecutive years immediately following the date of transfer.
- Assignment of property between spouses ensuing a judicial or consensual separation or divorce.
- Assignment of property constituted part of the acquisitions between the spouses or jointly owned.
- Transfer property from one company to another where the companies meet the requirements, such as forming part of the same group.
- Transfer of property by a company to its shareholder in the course of its liquidation or distribution of assets, provided certain conditions are met.
What is the Rate of Stamp Duty in Malta?
The rate of stamp duty which is due from the buyer upon the acquisition of immovable property in Malta, is set at 5% of the property’s value.
If the individual is buying his first residence, then a reduced rate of 3.5% on the first €150,000 is applied. A condition to benefit from this reduced rate outlines that the buyer must intend to establish the property as the primary residence.
The reduced stamp duty, at 3.5%, is only applicable to persons who do not need to obtain an AIP permit.
After amendments to the Maltese tax legislation, provided that the buyer does not own any other immovable property around the world, the first €150,000 value of the property is exempt from stamp duty.
One of the highlights of the Malta Budget 2022 is that the stamp duty exemption for first-time buyers who are exempted from stamp duty on the first €200,000 of the consideration for the property has been extended.
The purchase of residential properties in Gozo and Urban Conservation Areas is also subject to a reduction in stamp duty, from 5% to 2%.
Regarding payments for stamp duty in Malta, 1% is payable upon signing the promise of the sale agreement, and the remainder of the balance is due on the deed or purchase.
Non-EU nationals must pay 5% in stamp duty on the value declared in the final deed.
What is the Procedure to Purchase Immovable Property in Malta?
Once the individual decides on a property they would like to invest in, the buyer and seller will enter into a written agreement, also referred to as a convenium (preliminary agreement). A copy of this agreement must be submitted along with the AIP application form.
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