Buying a property in Malta is very safe and simple.
Once a property has been decided upon and price and conditions have been agreed, a promise of sale/preliminary agreement is signed between the vendor and purchaser. This agreement binds both parties to purchase/sell the immovable property under the terms and conditions agreed upon.
The signing of the final deed is, however, always subject to clear title and the issue of any relative permits to purchase, if necessary. The agreements and contracts are written in English. On signing the preliminary agreement, a sum equivalent to 10% of the price is lodged with the agent or notary public as stake-holder. This deposit will be forfeited in favour of the vendor should the purchaser fail to complete the final deed of transfer for no valid reason at law.
The agreement is usually valid for three months (term prescribed by law) or as mutually agreed by the parties. During the period between the signing of the preliminary agreement and the signing of the final deed of sale, a Notary Public engaged by the purchaser will carry out the necessary researches into the property to confirm good title, as well as submit the application for a permit to purchase, to the Ministry of Finance if such permit is necessary.
Once the relative permit has been issued and researches have proved clear title to the property, the final contract of sale may be entered into – the deed of sale being drawn by purchaser’s Notary. The balance of the purchase price and Stamp Duty plus legal expenses is paid upon the signing of the contract when vacant possession to the property is handed to the purchaser.
Expenses related to the acquisition of property include:
- 5% stamp duty,
- 1% notarial fee (apx.),
- €600 searches and registration fees (aprx.)
- €233 AIP permit fee (where applicable).
These costs are the liability of the purchaser, whilst agency fees are borne by the vendor.
Conditions for buying property
Non-residents may freely purchase property in Malta, subject to obtaining an AIP permit, if such permit is necessary. An AIP permit will not be required to purchase properties in Special Designated Areas and, in the case of EU citizens who:
- Have been resident in Malta for at least five continuous years;
- Intend to purchase a property which is to serve as their primary residence; or
- Who intend to purchase a property for investment purposes.
Where one of the spouses is an EU citizen and the other spouse is a non-EU citizen, both can likewise benefit from the exemption outlined above and acquire property without the necessity of obtaining an AIP permit, provided the acquisition is being made to establish therein their primary residence. Also exempted is the acquisition of immovable property by an EU national for the conduct of one’s business activity or for the supply of services by such person. In such a case, a declaration reflecting the purchaser’s intention for the acquisition should be inserted in the relative contract of purchase.
Where the purchase requires an AIP permit, the property must satisfy a certain minimum value which changes periodically and which currently stands as follows: €98,000 for apartments and maisonettes and €164,000 for villas, townhouses and other property. These values are index linked and thus may be subject to revision annually.
The property purchased has to be used solely as a residence by the applicant and his family. This condition will be waived once the applicant obtains the relative permit to rent the property. (Refer to Letting Your Property at the bottom of the page)
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). 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. Nor do they require such a permit to purchase immovable property required for their business activities or supply of services.
Individuals who are NOT citizens of a European Member State may acquire immovable property after they obtain the relative permit (AIP permit) in terms of Chapter 246 of the Laws of Malta from the Ministry of Finance, unless they acquire property located in a Special Designated Area.
When purchasing a property in a (Ref to Special Designation Area at the bottom of this page), no restrictions whatsoever apply. Foreigners (EU and non-EU) may purchase any number of units within such developments without the need for an AIP permit, hence such purchases are not governed by any of the above mentioned conditions.
Acquisition of property by a group 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.
Mortgage facilities are available for the purchase of property from all banks in Malta, subject to status. (Refer below regarding, Obtaining bank loans in Malta).
Letting: Legal requirements
Owners of property may rent their property as long as a letting licence is obtained from the Ministry of Tourism. Licence will be issued once the property meets first class standard requirements. Properties may be rented under a long let or holiday licence. For details of licence fees and application forms please visit Malta Tourism Authority website www.mta.com.mt/index.aspx
Lessors would also have to register with the VAT and Income Tax Department.
Income Tax implications
Income derived from the letting of immovable property can be of two types – investment income and income derived from a trading. Typically, the difference between the two is distinguished by whether the rental agreement is for short periods (usually for furnished premises for a few weeks or months) or for long periods.
The tax deductions taken against these two types of rental income is different. Any expense incurred in the production of income derived from trading rental income is an allowable tax deduction, given that upon demand, the taxpayer would be in a position to present to the Inland Revenue Authorities supporting documentation.
In the case of rental income derived from long lets where the rental activity is not a trade, the allowable deductions are (1) the MTA (formerly HCEB) licence fees if any, (2) ground rent and rents payable on property rented out, (3) any interest incurred on a loan specifically taken to finance the purchase (and perhaps the renovation) of the property from which rental income is derived, and (4) a further deduction equal to 20% of the rental income received less rents and ground rents payable and less the MTA licence fees.
The applicable income tax rates are, however, the normal rates of income tax applicable to residents, which can be seen on the IRD website: www.ird.gov.mt/services/taxrates.aspx
High Profile Developments
High Profile Developments of Malta and Gozo boast of a good selection of luxury property developments, commonly referred to as Special Feature Properties. Spread across the two islands, these refer to a cluster of apartments, maisonettes and penthouses built with a common theme on an extensive piece of land, often enhanced by their location, amenities and finishes. To date these included Portomaso, Tigne Point, Fort Cambridge, Pendergardens, Fort Chambray, Tas-Sellum Residences, St Angelo Mansions (Cottonera Marina), Madliena Village, Savoy Gardens and Verdala Mansions. More of such developments are in the pipeline.
MOST OF THESE DEVELOPMENTS ARE LOCATED IN SPECIAL DESIGNATED AREAS (SDA) WHERE THERE ARE ABSOLUTELY NO RESTRICTIONS TO ACQUISITION FOR FOREIGNERS.
Accommodation in these major projects is typically 1, 2 or 3 bedrooms, having an average area of 80sqm to 400sqm. Situated all across the island, people interested in purchasing a property can choose from a selection of waterfront and marina developments, such as Portomaso, St Angelo Mansions (Cottonera Marina)and shortly Tigne Point. Those who are more interested in the countryside and country views can go for Madliena Village and Verdala Mansions.
Sliema and St Julian’s, considered to be Malta’s fashionable and commercial districts, boast of the largest selection of such developments, including Portomaso, Pendergardens, Tigne Point and Fort Cambridge. All four names enjoy lovely seaviews and encompass luxury finishes and an array of amenities, including shopping areas, health and fitness facilities, massive communal and private pools, underground parking, and so on. The neighbouring town of Gzira hosts Metropolis and Savoy Gardens.
Tas-Sellum Residences is situated in the Northern part of Malta, in Mellieha and is only a 5 minute drive from Malta’s top sandy beaches.
Gozo also has its own flagship development – Fort Chambray. Situated on the edge of the Ta’ Cenc cliffs, overlooking magnificent views of Malta and Comino, as well as Mgarr Harbour, this development is expected to become a trend-setter on the quaint island of Gozo.
Smaller scale developments may be found in other areas and villages around Malta and Gozo.
Loans to purchase or finish a property may be obtained from all local Banks. HSBC Bank Malta plc., Bank of Valletta plc., APS Bank Ltd and Banif Bank offer attractive Home Loan facilities to suit individual borrowers’ needs.
Home Loan facilities are being offered under the following terms:
- Up to 90% of purchase price or completion costs
- Preferential interest rates especially for the first years and for high value loans
- Monthly repayments up to 30% of the gross income
- Flexible loan repayment terms of up to 40 years
The Banks normally require the following basic documentation to enable them to process the loan smoothly and efficiently:
- Recent pay slip and FS3
- Architect’s/Manager’s estimate of the property value
- Character reference unless customer is already an account holder
- Photocopy of ID card
- Copy of the preliminary agreement
All Banks also offer Bridging Loan facilities and loans to purchase summer residences.
Through special arrangements which Nouv Consulting has with all these Banks, we can make arrangements for the best loan package which suits your requirements and help to expedite the processing of the loan.