Buying Property in Malta
Buying or selling a property is a big step. You must be aware of all the rules, regulations, and laws of the country where you are intending to deal in property. One of the best places in the world to own any residential or commercial real estate is Malta. The beautiful tourist destination, with its warm weather and prosperous culture, recreational areas, and heritage sites has made it a favourite among property buyers and sellers.
If you are looking for investment opportunities or a cosy residence in a beautiful place, Malta is the place for you. The Maltese government, understanding the opportunities of the hot Maltese real estate market, is monitoring the tax rules and regulations. Here is your complete guide to buying, selling, or investing in property.
Reasons why you should think about buying property in Malta
Here are just a few reasons why you should buy a property in Malta:
- This beautiful Mediterranean island is situated just 50 miles from Italy. It is connected via airlines to most of the major European capitals. Transportation via vessels and ferry is also easier. If you are planning to get a second home in Malta, this connectivity can help you with easy access to the whole continent.
- A home is where you feel safe and to feel safe, it is important to have a great neighbourhood, where you could grow your family without any concern. While every country has its problems, Malta's crime rate is quite low, which makes it an attractive place to settle down.
- The Maltese islands are a popular tourist destination, with rich history and beautiful landscapes. Buying Property in Malta allows you to experience the perks of living in a place that has so much to offer.
- Being a place that has hosted several cultures over the years, you will find diversity in Maltese culture, which makes it a perfect place to call home.
Now that you know why Malta is an ideal place for you and your family as well as for your business, you should know how you can own real estate in Malta or put up Real Estate for Sale in Malta. There are certain tax rules and laws which outline the legal boundaries within which you can own a property in the Maltese Islands.
Procedure for Buying Property in Malta
There is a usual procedure for buying properties, starting from finding the right property to finalizing the agreement. The same follows for Malta. Here is the trail-
- The very first step when buying property in Malta is to hire the services of a professional reliable estate agency such as Excel Homes Real Estate Ltd. The real estate agency will assist in filtering the thousands of properties available on the market according to your needs. The expertise of a local real estate agent will guarantee to find a property in a short timeframe and without any flaws.
- When you are searching for properties in Malta, it is important to hire an architect as well who can help you scan the right property to check out that everything is built according to plans and within the Local Planning Authority Standards.
- Once the property is chosen, the real estate agent will negotiate for you with the seller and get a konvenju prepared. A Konvenju is a written agreement which is also known as “Promise of sale”. Usually, it’s the purchaser’s notary if choice who undertakes the tasks related to the documents and finalizing the deed.
- A stamp duty of 1% of the agreed price is imposed when buying property in Malta. It is to be paid along with the deposit. The total stamp duty is 5% and the first fifth is given along with the deposit.
- The property you are buying should be a legal one as you do not want any legal issues; later on concerning the title. It is the responsibility of your Notary to conduct the searches and find out whether the property has a clear legal title or not.
- Once you have the konvenju, you can apply for a bank loan, if required.
- Usually the term of the agreement is three months which may extend to six months or one year in rare cases. Once the term expires and all the terms are met, a final deed is prepared for both parties. The deed can be made in either English or Maltese according to your choice.
- The buyer pays off the balance and receives the keys. The seller needs to pay the arrears of taxes, if any, due on the sold property.
- The buyer pays the rest 4% stamp duty and the Notary’s fee.
This complete procedure may take a maximum of six months depending on the Malta Real Estate Agency you have hired.
Important Things to Know Before Buying Or Selling Property In Malta
1. "Konvenju" or Promise of Sale - What is it?
A Promise of Sale allows the buyer to conduct further legal proceedings like title search, applying for a bank loan, etc. A sum of 10% of the agreed price is lodged with the Notary after signing the "Konvenju". If the purchaser fails to complete the final deed of transfer without any valid reason, this sum is retained by the vendor.
Konvenju includes the following details-
- The agreed price of property.
- Ground Rent conditions.
- Any repairs or work to be performed by the seller on the concerned property.
- A list of all the furniture and fixtures which form the part of sale.
- The agreement period in which the deal must be closed after all the relative searches.
- Conditions that would release the buyer from the agreement.
- The amount of the deposit to be made by the buyer to seller after signing the agreement.
2. Ground Rent
Ground Rent, an unknown concept for some people nowadays, was a popular contract condition for the transfer of the property once. It is not used much anymore but is still an important concept in Malta and Gozo. In the Maltese language, it is known as “Cens”.
Ground rent or emphyteusis is an annual rent that is paid by the buyer to the seller. It can be temporary or permanent as stipulated in the deed. It could also restrict the buyer to use the land for certain purposes depending upon the contract.
If the ground rent is revisable i.e. it may change after a certain period of time. In the case of a temporary ground rent contract, the property goes back to the seller after the expiry of the contract or the buyer may convert it into a perpetual contract (permanent).
In case of the permanent ground rent contract, the buyer may redeem the contract by paying 20 times the annual ground rent to the seller in a one-shot payment. This procedure is called “Jinfeda” in Maltese. Both the parties can undergo it in presence of a Notary or by filing a “Cedola” i.e. a suit in the court.
When buying property in Malta, it is important to discuss the ground rent conditions with the seller.
3. Acquisition of Immovable Property permit
Those who are not residents of Malta, or are European Union Citizens or non-EU citizens, it is important to obtain an AIP permit for acquiring Real Estate in Malta and Gozo.
AIP permit is necessary for-
- Those who are non-Maltese citizens.
- Those who are an EU citizen but not residing for Malta for more than five years.
- Those who are non-EU citizens.
Rules concerning AIP-
- EU citizens who are buying their first home in Malta do not need an AIP but it is a must for buying a second home, including vacation properties.
- A property bought under AIP cannot be rented out. It can only be used for residence purposes by the applicants and their family.
- The property must be of a minimum value as stipulated for AIP purchases.
- A copy of notarized deed is to be filed with the governing authority after the sale is completed.
- The property cannot be divided for subletting.
Procedure for obtaining AIP-
- Fill the form as per your status i.e. individual or company
- A copy if the notarized agreement is to be submitted along with two passport-sized photographs and a copy of your passport.
- A fee of €233 is to be submitted.
- With the right documentation, the permit is granted in 35 days.
Energy Performance Certificates
An Energy Performance Certificate is similar to the energy label on electrical appliances. Whether you are buying property in Malta, or selling, renting or constructing a new building, an EPC plays an important role. A seller needs to show the EPC to the respective buyer.
It certifies the energy performance of the building and its performance in terms of energy. An EPC is a requirement of both EU directive and Maltese Law. It is performed by an Energy Performance of Buildings (EPB) assessor. There are several factors which are taken into account by the assessor while doing the assessment like construction of the building, material used in the building, insulation, ventilation, lighting, air-conditioning system, hot water system, etc.
The Building Regulation Office charges a fee of approx. €75 for each certificate registration while it is up to the EPB to set the fee for assessment. An EPC is valid up to 10 years from the issue date provided there have been no structural changes in the building which might have changed its energy performance. EPC is an important step for the property sellers in Malta.
A foreigner in Malta- How can you own property here?
If you are a resident of Malta, there are no hurdles in buying property. But if you are a foreigner, you must know the tax rules and law as well as the requirements for acquiring properties. The Maltese Government is well aware of the demand of the Maltese land and thus, for securing the rights of the residents and getting them fair prices, they have made certain rules for the foreigners to buy property here.
Buying Property In Malta as an EU Citizen
Being a non-Maltese EU citizen or a non-resident Maltese citizen, the following rules apply on you as a potential buyer.
- An AIP is compulsory for buying a second home in Malta, including Vacation properties.
- A value of properties is fixed and only properties of more than the stipulated value can be bought with an AIP. The values are- apartments and maisonettes over €121,791 only and all other properties valuing more than €202,929.
- A non-Maltese EU citizen can only buy one property in Malta. After five years of residence in Malta, this rule is lifted and you can buy properties in Specially designated areas and commercial property for business.
- Being an EU citizen, there is no restriction on buying a first home in Malta.
Buying Property in Malta as a non-EU citizen
In case, you are neither a Maltese resident nor an EU citizen, you can only buy one property in Malta. An AIP is compulsory for buying such property.
Property Tax in Malta
There is no annual property tax imposed in Malta on property owners. There are the ways in which such tax is collected.
Stamp Duty by the Buyer
Every property buyer in Malta is required to pay a stamp duty of 5% on the purchase price. One-fifth of this duty or 1% of the purchase price is payable at the time of signing the Konvenju. This stamp duty is payable on the price of immovable property only and not on the price of moveable property included in the sale price. However, there are certain exceptions concerning the stamp duty where the buyer can pay the stamp duty at a reduced rate.
- If it is buyer’s first real estate purchase worldwide, then an exemption of €150,000 is given to the buyer. Above this amount, a regular 5% duty is levied.
- If the property is situated in Gozo, then only a 2% stamp duty is levied on the purchase price.
- If the property is situated in the Urban Conservation Areas designated by the Maltese Government, a stamp duty of 2.5% is levied.
These rules are effective for a single year only as they are changed every year by the government.
Final Withholding Tax by the Seller
The seller of a property in Malta is required to pay a tax on capital gains after the changes in the system are made from January 1, 2015. An 8% Final withholding tax is charged on the purchase price.
However, there are certain exceptions to this rule-
- A residential property which was made for residential purposes is sold within three years is taxed at 2%.
- Properties bought before January 1, 2004, are taxed at a rate of 10% of the purchase price.
- Properties situated in Urban Conservation Areas are taxed at a reduced rate of 5% withholding tax rate after meeting certain conditions.
- Certain arm-length transfers made within a few years of acquisition of the property are also taxed at a reduced 5%.
These rules are a bit complicated and can be better dealt in by an expert. You are advised to hire a good Malta Real Estate Agency in order to help you with the taxation laws. However, it is to be noted that the numbers and percentages mentioned in this article may change over the period of time as deemed necessary by the local Government.
Selling an Inherited Property in Malta
If you have acquired an immovable property as a part of your inheritance and you are looking to sell it, you must know the rules and complications you might face while selling it. Each heir of an inherited property receives a deed of causa mortis. This deed states your ownership as an heir and the value of the inherited property.
A flat rate of 12% is charged on the capital gains on selling the inherited property. Capital gain is the difference between the sale price and the property value as declared in the Causa Mortis, which is subject to review by the Maltese Government.
There are certain rules regarding the sale of such inherited property.
- If the property was inherited before 25 November 1992, a reduced rate of tax is charged.
- If the list of heirs is changed owing to the deaths and divorces.
- Heirs have dealt in between themselves by compensating in cash for their share of the property.
In case, your landfalls in any such cases, you need to hire professional help.
Final Words on Buying Property in Malta
Now, you have a good idea of what is involved when selling or buying property in Malta. There are certain things you should keep in mind and your sale procedure will be completed smoothly.
- As a buyer, you need to ideally hire a professional Real estate agent to help you out with all aspects of the buying process.
- Choose the Notary for your own.
- If you are a buyer, you need to pay the stamp duty. If you are a seller, you need to pay a withholding tax.
- Two contracts are involved in the procedure- a Konvenju and a final sale deed.
To obtain an indication of the types of properties available for sale, we suggest that you browse through the selection of properties listed on our website. This list is not exhaustive and we strongly suggest that you get in touch with us for further lists and assistance.
We ensure that details on every one of the several thousand properties listed on our database are updated promptly, while new properties coming on the market are uploaded daily. Once we know what your budget and requirements are, we can proceed to show you a choice of properties which we believe will suit you. Should you so wish, we can sort out your accommodation here in Malta or Gozo for the duration of your stay, and organise your inspection visits to your choice of properties.
Excel Homes Real Estate Ltd helping you with the Guide for Buying Property in Malta