Buyers Guide
Local estate agent will typically accompany clients to visit all properties selected by themselves or the agent. Once the purchaser selects the property of his choice, a preliminary agreement is signed between the purchaser and the vendor. This agreement is (locally) known as a kunvenju. This is a binding agreement whereby both parties bind themselves to buy or sell the property at the price and conditions agreed upon.
A deposit of 10% is usually paid and is held by the notary, estate agent or vendor depending on what has been agreed. The preliminary agreement (konvenju) is either written in Maltese or English and is signed in front of a notary - being the only official allowed at law to publish deeds. Within 3 weeks of signing the promise of sale agreement, the Notary will register the said agreement with the Commissioner of Inland Revenue and pay 1% of the sale price on account of Stamp Duty due by the purchaser on the final deed of sale. A typical time frame between preliminary agreement and the final contract is between 3 and 6 months. The agreement could be subject to some conditions normally including Bank loan, architects approval, building permits, as agreed by the parties. (A time frame is usually given within which these are valid so as not to leave the vendor in uncertainty for too long. A Bank loan would involve a sanction letter. If a loan is to taken out to purchase the property, then the contract will normally be held at the issuing bank Once the notary has carried out the searches on the title of the property, bank loan approved, any hypothecs or outstanding debts cleared - then the final contract can be signed. At this stage the balance of the purchase price, the Stamp Duty and all legal expenses are paid on the signing of the contract.
Buying Expenses:
Stamp Duty 3.5% on the first €69,881 of the immovable property price. The remaining balance is paid at 5%. This applies only on the purchase of one’s main ordinary residence (and subject to the purchaser having only one property in his name.) For any other property purchase, Stamp Duty is charged at 5% on the total value of the property. No Stamp Duty is charged on the value of the movable property (furniture and fittings) being transferred with the immovable property
Legal Fees:
Notarial fees are approximately 1% of the selling price .This does not normally include the searches and registration approx € 465.
N.B. The above expenses are the liability of the purchaser, while brokerage fees due to the estate agency are borne by the vendor.
Individuals who are NOT citizens of a European Member State may acquire immovable property after they obtain the relative permit in terms of Chapter 246 of the Laws of Malta from the Ministry of Finance.
Citizens of all European Union member states, including Maltese citizens, who have not resided continuously in Malta for a minimum period of five years, require a permit under chapter 246 of the laws of Malta to acquire immovable property for secondary residence purposes i.e. holiday homes.
The relative permit known as an A.I.P. (Acquisition of Immovable Property) will be issued usually within 6 weeks, under the following terms and conditions:
The value of the property purchased must be above €104,510 in case of Apartments/ Maisonettes and €174,132 in case of houses/villas.
The property has to be used solely as a residence by the applicant and his family. The immovable property purchased may not be sold or otherwise converted into more than one dwelling house.
The above-mentioned individuals may only own one property in Malta and Gozo (except in special designated areas where one may purchase more than one property). Eg. Portomaso (St. Julians), Tigne Point in Sliema , Cottonera Waterfront, Metropolis, Chambray (Gozo),
Once these applicants have purchased a property in Malta and wish to acquire another one after having sold the first one, they may do so after obtaining permission from the Ministry of Finance. Applications for permission to acquire another property are normally favourably considered. Permission will be granted subject to the first property being sold.
Citizens of all European Union member states, who have resided in Malta continuously for a minimum period of five years at any time preceding the date of acquisition, may freely acquire more than one immovable property without the necessity of obtaining a permit.
EU citizens, who have NOT resided in Malta for at least five years, but have the intention of purchasing their primary residence i.e. take up residence in Malta, do not require a permit, under chapter 246. Nor do they require such a permit to purchase immovable property required for their business activities or supply of services.
Acquisition by Bodies of Persons
A body of persons, other than a commercial partnership, established in and operating from a European Union member state may freely acquire immovable property that is required for the purpose for which it has been set up as long as it is directly controlled by citizens of a European Union member state who have resided in Malta continuously for five years.
A commercial partnership established in and operating from a European Union member state (therefore including Malta) may freely acquire immovable property that is required for the purpose for which it has been set up as long as such partnership is controlled by and at least 75% of its share capital is held by a person (or persons) who is a European Union member state citizen and who has resided in Malta continuously for five years.
Any other body of persons will require a permit, which is only granted if the property is required for an industrial or touristic project or as a contributor to the development of the economy of Malta.
Permission may be refused for the purchasing of a property, which is considered to be of historical interest.
Repatriation of Capital and Income
Any amount of capital brought to Malta and any income there from accumulated during resident’s stay may be repatriated. Proceeds from sale of residence may also be repatriated. For tax purposes an individual is normally regarded as being resident in Malta for a particular year if, in that year, his stay in Malta exceeds 183 days. As already noted, however, foreigners residing in Malta are not taxed on their worldwide income, but only on Maltese source income and capital gains and on foreign source income remitted to Malta. Foreign source capital gains are not taxed even if remitted to Malta. The applicable income tax rates are, however, the normal rates of income tax applicable to residents, which are as follows: Inheritance Tax There is no inheritance tax in Malta. However, in the event of death, the beneficiary is liable to 5% transfer tax on the value of the immovable property, as at time of death. If the property is jointly owned and one of the spouses passes away, the 5% is levied on half the value of the property. This tax is not payable upon the transfer of the residential home to the surviving spouse, provided that the surviving spouse does not sell the home during his/her lifetime.
Exemptions from customs Duty and Vat
The following items may be imported free to duty and vat within six months from the date of arrival in Malta. No import licenses are required in such circumstances: Household and personal effects Furniture and other domestic articles
Expenses on selling Immovable Property in Malta :
Capital Gains Tax The following could be taken as a general guideline, since every case must be taken under its own merits. At the time of signing of the Final Deed of Sale a provisional tax amounting to 7% of the total selling price is to be deposited with the Notary Public to be passed on to the Commissioner of the Inland Revenue, with the following exceptions: If the immovable property has been the registered main residence of the vendor for a minimum of three years and is being sold within a year of when it is being vacated. As mentioned above the tax being paid at this time by the vendor is only a provisional tax. The definite amount due is calculated by computing the capital gains less a series of expenses sustained at the time of purchase as well as maintenance and inflation allowance, brokerage fees (limited to 5% of the selling price) and other eligible costs sustained during the time of ownership of the property in question. This sum is then added to all other incomes of the vendor for the current year and the income tax for that year is calculated. Rebates or additional payments are then received or to be deposited as the case may be.