Buying Property in Malta

The Preliminary Agreement (Konvenju)
has been duly signed and both yourself (as the buyer)
and the seller are now bound to go ahead with the contract and to adhere to the
terms and conditions set therein. Yes, the real estates in Malta is very
advantageous and buying property in Malta is hardly a complicated exercise!

But what does allthis entail, in legal parlance?

Stamp Duty and Other Considerations

Buying property in Malta? All property bought in Malta is subject
to a 5% Stamp Duty which payment is due to the Commissioner of Inland Revenue.
This percentage is based on the value of the property as stated in the
Preliminary Agreement (Konvenju) and is paid in two
stages. 1% at the time of signing of the Konvenju and
the remaining 4% settled at the time of signing of the Contract of Sale.

Typically the time period between the signing of the Preliminary
Agreement and that of the Contract of Sale is of three months. This time is
required by the Notary Public, in most cases elected by yourself
as the buyer, to conduct all necessary searches which would enable him/her
primarily to confirm that:

There is good title to the property
(ie that the seller is the actual owner of the
property and/or that he has legal authority to be selling that same
property to third parties) and that it is not burdened by any liabilities
such as hypothecs, special privileges etc. and that should it be the case
then these liabilities can be waivered or settled
by the date of signing of the Contract of Sale;

The property comes with
vacant possession (ie that it's not currently
being occupied by anyone else or that if it is it will still be vacated at
the time of signing of the Contract of Sale);

as well as that all other legal details pertaining to the property in
question are in order.

>Moreover the Notary willalso take care of registering the necessary paperwork
required for the issuance of the Acquisition of Immovable Property (AIP) permit
in cases where it is needed to complete the sale. (see below for details on
whether or not you are required to apply for this permit).

Stamp Duty dues are also paid (in the schedule as outlined above) through the Notary
who also has the responsibility of registering both the Preliminary Agreement and the Contract
of Sale with the competent authorities within the stipulated time frames thus
rendering the said documents official and public. All relevant receipts as
issued by the department of the CIR will be passed on to yourself as the buyer
in due course in confirmation of these payments.

At this point it is also important to note that should the Promise of Sale Agreement
lapse or otherwise get cancelled, the amount paid by way of Stamp Duty paid
will be refunded in full.

Income Tax / Tax on Capital Gains

The good news regarding Malta property is that our
legal system does not impose wealth or property taxes, adding one more
important advantage to buying property in Malta which at the time of
preparation of this document this regime was
structured as follows:

Renting out:

In cases where income is derived from activity generated directly through the
employment of the immovable property itself. In other words if the property is
rented out resulting in revenue being generated through this activity then this
revenue will become subject to taxes which as foreign nationals will be subject
to the (still) very favourable flat rate of 15%.

Selling:

The tax structure set out for this eventuality although simple to follow is
detailed to explain and does not really fall within the scope of this document.
May we kindly direct you to the specific document which you will find at the
end of this link for a full explanation of this structure.

Necessary Permits

When required the permit in question is termed as an AIP
(Acquisition of Immovable Property) Permit.

In the case where the property
being purchased forms part of an SDA (Special Designated Area) Development
and/or the buyer is a citizen of an EU Member State taking up residence in
Malta, and/or the purchaser has spent a minimum of 5 continuous years living in
Malta at any moment of his/her lifetime, no permit is required.

All other situations
require the AIP permit which will be issued following a formal application
through the Notary Public to the competent authorities. In most cases this
permit is a formality and the process from application to issuance is between 6
to 8 weeks. Meeting the requirements is relatively simple and mainly depends on
the verification that the funds being used for the purchase are of legal
foreign origin and that the reason for the purchase is within the scope of the
law.

All non Maltese nationals
are bound to spend not less than the established minimums which at the time of
preparation of this document stood at € 98,066 in the case when purchasing an
apartment and € 174,703 for all other types of properties.

Non-Maltese citizens are not allowed multiple property ownership, unless within
SDA (Special Designated Area) Developments as well as the ownership of
properties of historical value (this category does not include farmhouses and
houses of character). There is a vast number of SDA Developments distributed
around the islands of both Malta and Gozo, typically
offering superior quality standards of living, to choose from.

Purchasing Property in Malta – The Benefits

Resale of property is allowed

Repatriation of full resale price,
including profits after taxes, is allowed without complications; (for a
comprehensive explanation of the tax structure please refer to link
mentioned above)

Mortgages are available for property
purchase by non-residents or non-Maltese citizens residing in the islands:
- once permission is granted by Central Bank of Malta, you can borrow as
much as you wish from the local banks within the established commercial
conditions.

You can rent out your property to third parties (some limitations do apply

In summary, Citizens of an
EU Member State enjoy the benefit that they can buy their first property in
Malta without restriction. Permits are not required in most cases and when they
are they are easily issued to all bona-fide purchasers without any major
requirements.