Updated: September 09, 2021 | 11 minute read

    Introduction

    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. Buying property in Malta is one of the safest real estate transactions in Europe.

    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. 

    Read more on relocating to Malta here.

    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.

     

    Where to Buy Property in Malta?

    When investing in property in Malta, you should keep in mind the main key points;

    1. Location

    2. Profitability 

    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 a 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:

    • Sliema.

    • St.Julians.

    • Valletta.

    • Mellieha.

    • San Pawl tat-Targa.

    • Madliena.

    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 a real estate showing a steady rise.

     

    The Benefits of Buying Property in Malta

    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 a profitable venture in a consistent market

    Below we have highlighted the benefits of buying a property in Malta:

    1. Proven Return on Investment;

    2. No Ownership or Wealth Tax;

    3. Simple 5%-8% Final Withholding Tax on Sale (No further Capital Gains Tax);

    4. 5% Stamp Duty;

    5. Flat 15% Tax on Rental Income; and

    6. No VAT on the Transfer of Immovable Property.

    The Benefits of Buying Property in Malta

     

    Conditions for Buying Immovable Property 

    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.

    Buying a Property in Malta as an EU Resident

    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.

    Buying a Property in Malta as a Non-EU Resident

    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 EU citizens must own a minimum of 75% of its share capital.

    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:

    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. Smart City, 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.

    18. Mistra Heights.

    Buying Property in Malta's Specially Designated Areas

     

    Malta Property Transfer Tax System

    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.

    The final tax rule dictates all transfers of Immovable Property in Malta 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.

     

    Exemptions to Property Transfer Tax

    Certain transactions are exempt from property transfer tax. These include:

    • Donations made by an individual to specific family members, or philanthropic institutions.

    • Transfer of property that had been owned and occupied by the transferee or if the property was used as the individual’s primary residence for a period of three consecutive years immediately following the date of transfer.

    • Assignment of property between spouses ensuing a judicial or consensual separation or divorce.

    • Assignment of property that constituted part of the acquisitions between the spouses or jointly owned.

    • Transfer of property from one company to another where the companies meet the requirements, such as forming part of the same group.

    • Transfer of property by a company to its shareholder in the course of its liquidation or distribution of assets, provided certain conditions are met.

    Exemptions to Property Transfer Tax

     

    Stamp Duty in Malta

    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 Urban Conservation Areas is 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 the 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.

    Process to Purchase Immovable Property in Malta

     

    What is the Procedure to Purchase Immovable Property in Malta?

    Once the individual decides on a property, he/she would like to invest in, 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 Property in Malta 

    Rental income in Malta may opt to be taxed at a flat rate of tax of 15% on the gross rental income.