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Special Designated Areas in Malta

Buy a Property in Special Designated Areas in Malta

The Maltese archipelago is located in the heart of the Mediterranean and for more than two decades has been a popular tourist destination.

With its favourable tax structure, reduced red tape, increased accessibility and regulatory development, Malta not only draws EU nationals but also attracts expatriates from all over the globe who are looking to invest in the booming Real Estate Sector in Malta.

The Maltese market has earned itself an envied reputation for being stable with an excellent return on investment benefits.

The fact that immovable property in Malta still benefits from a legal system with no tax on ownership or wealth, Malta attracts many foreigners to take up residence.

In this regard, there are some Special Designated Areas (Malta) where no distinction applies between Maltese and non-Maltese citizens.

What are Special Designated Areas (SDAs’)?

As per the Maltese laws, there are some areas in Malta and Gozo where there are no restriction/conditions on purchasing property in Malta. In these areas, there is no distinction between a foreign citizen or a citizen of Malta.

A foreign citizen can purchase a property in these areas (listed below) with the same rights as that of a Maltese citizen.

The property in these primary residence areas intends on providing luxurious amenities such as marinas, spas, swimming pools, shopping malls, supermarkets and restaurants to its residents.

Find the List of Special Designated Areas in Malta and Gozo below:

  1. Portomaso Development, St. Julian’s, Malta
  2. Portomaso Extension I, St. Julian’s, Malta
  3. Cottonera Development, Cottonera, Malta
  4. Manoel Island / Tigne Point, Tigne/ Gzira, Malta
  5. Tas-Sellum Residence, Mellieħa, Malta
  6. Southridge, Mellieħa, Malta
  7. Madliena Village Complex, Malta
  8. Smartcity, Malta
  9. Fort Cambridge Zone, Tignè, Malta
  10. Ta’ Monita Residence, Marsascala, Malta
  11. Pender Place and Mercury House Site, Paceville, Malta
  12. Metropolis Plaza, Gzira, Malta
  13. Quad Business Towers, Mrieħel, Malta
  14. Pender Place and Mercury House Site, Extensions I, II, III, IV and V, Paceville, Malta
  15. Fort Chambray, Ghajnsielem, Gozo
  16. Kempinski Residences, San Lawrenz, Gozo
  17. Vista Point, Marsalforn, Gozo

Advantages of Buying Property in Special Designated Areas

1. No Permits Required for Buying Property in SDAs

Buying a property in special designated areas does not require any residency permit. This indicates that foreigners have the same rights as the locals when investing in property in Malta in these areas.

In simple words, irrespective of the nationality, a foreign national in Malta, would not need an AIP permit for buying a property in Malta. Additionally, once the property has been acquired, it can also be leased without any restrictions.

On the other hand, properties which are situated outside of these areas require the buyer to get the AIP permit issued by the Ministry of Finance, Economy and Investment first in accordance with the laws of Malta. Property acquired under an AIP permit cannot be sublet.

In terms of Chapter 246 of the Laws of Malta, the following table represents the various requirements for the acquisition of immovable property in Malta:

 

Maltese and EU Citizens –  both with 5 years continuous residence in Malta

Maltese and EU Citizens – without 5 years continuous residence in Malta

Non-Maltese and Non-EU citizens

Primary Residence

No restrictions – No need to apply

No restrictions – No need to apply

Prior authorisation is required*

Secondary Residence or any other immovable property

No restrictions – No need to apply

Prior authorisation is required*

Prior authorisation is required*

Property in a Special Designated Area**

No prior authorisation is required and no limit

No prior authorisation is required and no limit

No prior authorisation is required and no limit

Immovable Property required for the person’s business activities’ or supply of services by such person

No prior authorisation is  required and no limit

No prior authorisation is required and no limit

No permit granted unless required for an industrial or touristic project or as a  contributor to the development of the economy of Malta

 

*An AIP permit would need to be applied for where indicated.

An AIP permit will not be granted if the applicant has already acquired immovable property in Malta – an exception however lies with ‘Special Designated Areas’.

2. Renting of Property in SDAs

Usually when a property is acquired through an AIP permit in Malta, a number of restrictions on making it available for rent applies. But one of the advantages of purchasing a property in one of the special designated areas is that it can be rented out without any hassles and restrictions at any time, thus, further allowing them to enjoy rental income and capital growth.

Renting out a property in Malta is taxed at a preferential rate of 15% (explained in detail below).

3. Quick access to Facilities

As property situated in the special designated areas are built to cater to the need of foreigners, they normally offer a number of luxurious amenities such as,

  • Marinas,
  • Spas,
  • Swimming Pools,
  • Shopping Malls,
  • Supermarkets and
  • Restaurants.

So, another benefit from a practical aspect is the close proximity to the facilities.

4. Access to Special Residency Programmes

Malta offers a number of residency programmes like the Malta Residence and Visa Program (MRVP) and the Malta Global Residence Program (GRP) that individuals can benefit from. In order to qualify for these special programmes, one is required to meet certain eligibility criteria, one of which is to acquire or lease a property in Malta of a certain value.

Since the property value in the special designated areas is on the higher side, the property bought in these areas can give buyers the possibility of applying for these programmes.

Learn more about getting your Maltese passport in 12 months

Malta Citizenship by Investment

Renting of Property in Special designated areas

Process for Buying a Property in Malta

Non-Maltese residents who want to buy a property in Malta need to:

  • Fill in the Acquisition of Immovable Property (AIP) permit application form. But if the property is situated in one of the Special Designated Areas, then the AIP permit is not required.
  • Present a copy of the preliminary agreement or promise of sale of the immovable property being acquired, if entered into.

If the person is a first-time applicant, he/she would need to:

  1. Fill in the Acquisition of Immovable Property (AIP) permit application form. If the property is situated in one of the Special Designated Areas, then the AIP permit is not required.
  2. Present a copy of the preliminary agreement or promise of sale of the immovable property being acquired, if entered into.
  3. Present a photocopy of one’s particulars with two passport size photographs.
  4. Following that, the application will be submitted to the department and a police background check will be carried out.
  5. Once the application is examined thoroughly and is approved, a letter will be sent to the individual or his/her representative for collection.
  6. For the issuance of the AIP permit, a fee of €232.94 is to be paid. Once issued, it is valid for six months (applicable if the property is not situated in SDAs’)
  7. The individual is then required to enter into the deed of sale with the seller of the property within a period of six months.

Process for Buying a Property in Malta - Apartments Tigne Point


Cost for Buying a Property in Malta (Fees)

Below mentioned are all the expenses incurred while acquiring a property in Malta:

1. Stamp duty on documents

Stamp duty at the rate of 5% of the value of the property is due by the buyer upon the acquisition of immovable property in Malta.

The acquisition of a person’s first residence is subject to a reduced rate of stamp duty at the rate of 3.5% on the first €150,000 of the price of immovable property. The price of the property in excess of €150,000 is subject to stamp duty at the rate of 5%.

The reduced rate of 3.5% on the first €150,000 is subject to the purchaser having the intention to establish within the property his/her ordinary residence. The reduction of stamp duty to 3.5% only applies to persons who do not require an AIP permit as explained above.

Upon the acquisition of immovable property in Malta, a stamp duty of 1% on the acquisition value of the property is payable upon signing the promise of the sale agreement, and the balance is payable on the deed of the purchase at the rate of 5%.

All non-EU nationals have to pay 5% in stamp duty on the value stated in the final deed of sale.

2. Legal fees

1% (approximately) of the purchase price payable in two stages:

  • 33% with the signing of the preliminary agreement and
  • 67% with the publication of the final deed.

3. Variable costs

A variable fee for the researches into title, liabilities etc. (depends on volume).

4. Acquisition of Immovable Property

€232.94 for the Acquisition of Immovable Property (AIP), a Government permit which a non-resident, who wishes to acquire property in Malta, must obtain.

5. Brokerage fees

If you would have found your property through the services of a Registered Estate Agency, then brokerage fees are only due by the seller; if the property has been found through the services of a private agent (broker), then you must pay 1% as a brokerage fee to this private agent.

Cost for Buying a Property in Malta (Fees)

Selling a Property in Malta (Procedure)

The process of selling a property in Malta is quite simple and straightforward but it can sometimes be troublesome.

Hence, to protect the rights of the sellers at every step of the way, the guidance from legal experts is required.

  1. Defining the correct price of the property is one of the most critical factors. The right pricing not only draws potential buyers but is also important from a financial perspective as the sale price of the property would also determine the taxable value of the said transaction.  

  2. Once the prospective buyer is found and all the terms and conditions relating to the sale price are agreed upon, the next step is to sign the Promise of Sale agreement with the buyer.

  3. The Promise of Sale agreement is crucial when buying the property as it states the conditions under which the property will ultimately be bought. Based on prior discussions, the agreement is typically settled between the legal representatives of both the parties.

  4. The Promise of Sale agreement is drawn by the Notary and binds both the parties until the final deed of sale is signed.

  5. 10% of the property value is deposited with the Estate Agent or the Notary by the buyers after signing the Preliminary Agreement. If the buyer fails to sign the final deed for no valid reasons at law, the deposit will be forfeited in the seller's' favour.

  6. Usually, the validity of the agreement is 3 months but its duration is decided and agreed upon between the parties.

  7. During this period, the Notary will register the Preliminary Agreement in terms of the law, carry out searches into the title and apply for any permits if necessary.

  8. Mainly in the case of foreign citizens, prior to signing the final deed of sale, the Notary would apply for clearance from the local tax authorities as the entire sale price including sale proceeds of movables may be repatriated abroad.

Process of Selling a Property in Malta - Apartments Portomaso

Property Transfer Taxation System in Malta

Reasons for attracting foreigners to invest in real estate in Malta include the highly appealing tax rates inflicted on the person transferring the property to the new buyer at the time of the Sale of property.

All transfers of Immovable Property situated in Malta, or rights thereon, are governed by the final tax regime under article 5A of the Income Tax Act.

By default, the rate of 8% final withholding tax is applicable on transfers of Immovable Property situated in Malta except for the following situations where different final withholding tax rates apply as shown in the following table:

Final Withholding Tax Rate

Context

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

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 1st January 2004 and for which transfer of a promise of sale has not been presented to the Commissioner of Revenue before 17th November 2014.


Transfer of inherited immovable property
 will remain subject to 12% final tax on the difference between the transfer value and the cost of acquisition (valuation of property for causa mortis deed), or 7% final tax on the consideration if inherited before 25th November 1992.

12% tax on the profits made also applies in the case of transfer of immovable property acquired through a donation where the transfer is made more than five years after the date of the donation.

Property Transfer Taxation System in Malta

The Budget Measures Implementation Act, 2014 provided for a reduced flat rate of 15% on the rental of residential property.

The new tax option for letting property in Malta

  • The 15% flat rate on the gross rental income as aforementioned is optional and is applicable only to the rental of residential tenements by any person when such person is renting to an individual or individuals who occupy such tenement as a home or residence.

  • When the lessors are individuals, such income does not need to be further declared in the personal income tax return.

  • Holders of more than one residential tenement must tax all the tenements at the same option meaning that if the 15% flat rate option is chosen, it must be used for all tenements; otherwise, the previous system would apply to all.

  • Given that the 15% flat rate on residential tenements is optional, the previous system can still be applied in those cases where there are expenses to be deducted against the rental receipts, as provided for by law.

  • This is usually the case where the allowable expenses, such as bank interest on loans acquired to finance the property being rented out, are to such extent that the profit from the lease is minimal and thus, the 15% flat rate would result in a higher tax to be paid.

  • The previous system may also prove to be more beneficial in the case of individuals whose rental income is their only source of income, since in that case, by the application of the progressive tax system applicable to Maltese resident individuals; the tax to be paid may result in a lower tax charge compared to the 15% flat rate option.

  • Residential tenements, which are defined as being non-commercial tenements consisting of a dwelling house or part thereof which is to be or is occupied as a home or residence.

    • A dwelling house for this purpose consists of an apartment, flat, villa, maisonette, townhouse, farmhouse, terraced house, or a garage.

    • The garage must be attached to, or underlying, such dwelling house or situated in the same block of which the residence forms part, or a garage of not more than 30m2 situated within 500m2 of such residence, where such garage has been let out together with such dwelling house on the same contract of letting.

Method of Payment of Tax in Malta

The 15% tax shall be paid by not later than the 30th June of the year following the calendar year, in respect of the gross rental income received during the period January to December.

This payment shall be accompanied by the relevant form which the Commissioner may prescribe indicating the gross rental income received for the relevant calendar year.

Related

Malta Tax Structure

Written by
Yashica K. Pathak
Editorial Content Manager

Apartments Tigne Point - Method of Payment of Tax in Malta

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