In recent years, the Maltese Islands have received an even bigger boost, with its reaffirmation as one of Europe’s highly lucrative property investment propositions.
Although the European property market witnessed a downturn, the Maltese real estate market has only strengthened its value, earning itself a coveted reputation; stable and highly lucrative.
Immovable Property in Malta is still supported by the Maltese legal system, one that does not enforce a levy on ownership or wealth. This fact has been a catalyst for attracting many foreigners to take up residence on one of the Maltese islands.
A new high-rise policy has fueled further growth in the property sector, giving rise to multi-storey, large-scale developments.
In this article, we will provide some guidelines for those who are interested in living in Malta, but not quite sure how to go about it.
When investing in property, you should keep in mind the main key points;
Even on an island as small as Malta, location is key. 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 make your decision.
Depending on your situation, you will have to factor in your individual needs. In the case of a young entrepreneur, you might want to be close to the hustle and bustle of Sliema and St.Julians, in close vicinity to restaurants, bars and nightlife. If you have a family, you might consider areas with a good school, public gardens and supermarkets.
The most popular areas for buying property in Malta provide stunning sea views, are close to all essential amenities, as well as benefiting from local transport routes. Purchasing an apartment or house in the following areas is a fantastic investment:
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.
As previously outlined, Malta boasts a stable and profitable property market. Unlike the rest of Europe, investing in property in Malta has proven to be an advantageous venture in a consistent market.
Below we have highlighted the benefits of buying property in Malta:
In order to increase the mobility of the property market and incite further investment, the Maltese government has set a number of measures which has boosted the market to even higher levels.
A benefit afforded to EU citizens who have resided continuously on the island for a period of at least 5 years, is that you may acquire immovable property, as your primary residence or for business activities, in Malta without the need to apply for an Acquisition of Immovable Property (AIP) Permit.
EU citizens who have not resided in Malta on a continuous basis for at least five years, require an AIP permit to purchase immovable property as a secondary residence.
As a Non-EU Resident, it is still possible to acquire immovable property in Malta through an AIP Permit, as a primary residence.
A body of persons (excluding that of a commercial partnership), established and operating in the EU, may freely obtain immovable property that is 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 which have been established and operate in an EU member state, an immovable property may be acquired for the purpose of the commercial partnership, and a minimum of 75% of its share capital must be owned by EU citizens.
In any other case, a permit will be granted only for the purpose of an industrial or touristic project, or as a contributor to the development of the Maltese economy.
Referred to as Specially Designated Areas, these zones have no restrictions to acquire a property. The high-end areas include:
Fort Chambray, limits of Għajnsielem, Gozo; Madliena Village, Madliena; Portomaso Development, St Julians; SmartCity; San Lawrenz Kempinski Development, Gozo; Fort Cambridge, Sliema; Cottonera Development; Manoel Island/Tigne Point, Gżira and Sliema; Tas-Sellum Residence, limits of Mellieħa; Ta’ Monita Residence, Marsascala; Pender Place and Mercury House, St Julians; Metropolis Place Gżira; and Vista Point, Marsalforn, Gozo.
One of the main reasons which draw foreigners to relocate to Malta is the highly appealing tax rates. These tax rates extend to the transfer of property to the new buyer at the time of transfer.
All transfers of Immovable Property in Malta are dictated by the final tax rule 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. Which was 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.
12% final tax is applicable to the difference between the transfer value and the cost of acquisition for the transfer of inherited immovable property, or 7% final tax on the consideration if inherited before the 25th November 1992.
In the case of 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.
Certain transactions are exempt from property transfer tax. These include:
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 value of the property.
In the instance that 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 have the intention 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.
Subsequent to 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.
In 2018, during the Annual Budget, the Minister of Finance announced that a refund of up to €3,000 of stamp duty is granted to those individuals purchasing a second home. Eligibility is conditional on the fact that the individual is has sold his first home and does not own any other property.
The purchase of residential properties in Gozo and in Urban Conservation Areas are 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 sale agreement and the remainder of the balance is due on the deed or purchase.
All Non-EU nationals are required to pay 5% in stamp duty on the value declared in the final deed.
Once the individual decides on a property he/she would like to invest in, then both 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.
Renting out a property in Malta is a swift process, in fact, an agreement can be signed within a few days! Unless otherwise stated, a final tax rate of 15% on the gross rent receipts is applied.
Generally, rental of immovable property is exempt from VAT, therefore no VAT applied on the lease of immovable property.
However, exceptions to the rule do exist, which means that some property leasing may be subject to VAT. In such instances, the taxable person will be required to charge VAT according to the relevant rate, and also will be able to claim VAT on any expenses incurred in the maintenance directly related to the leasing of the property.
Some of these include:
The Maltese market has earned itself an envied reputation for being stable with excellent return on investment benefits.
Learn about areas where no distinction applies between Maltese and non-Maltese citizens.