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Apr 05, 2016

Buying costs are moderate to high in Malta


Transaction Costs

Who Pays?
Provisional Stamp Duty 1% buyer
Stamp Duty 4% buyer
Notary Fee 0.25% -1% buyer
Registration and Other Fees 0% - 1% (+ 18% VAT)
1% - 5% (+ 18% VAT)
buyer
seller
Property Transfer Tax 5% - 12% seller
Costs paid by buyer 5.53% - 7.68%
Costs paid by seller 6.18% - 17.90%
ROUNDTRIP TRANSACTION COSTS 11.53% - 25.58%
See Footnotes
Source: Global Property Guide

How difficult is the property purchase process in Malta?

EU citizens may purchase one property in Malta or Gozo, though more properties may be bought in ‘Specially Designated Areas’ – such as Tigne Point, Portomaso, Cottonera, Manoel Island, Chambray.

Malta modern home interior designsThe property purchased must be used solely as a residence for the owner or for his immediate family, though guests may be accommodated in the property when the owner or a member of his family is in residence. The property may not be rented out, except for villas with a swimming pool, which may be considered. A second property may only be purchased after residing in the country for a minimum continuous period of five years.

Other foreign nationals, who are not citizens of the EU, are required to obtain an Acquisition of Immovable Property (AIP) Permit from the Ministry of Finance – processing usually takes three months. To be granted an AIP permit, the purchase price of your prospective property must be at least MTL30,000 (€69,900) for an apartment or MTL50,000 (€116,500) for other types of property.

The prospective buyer must also be able to prove that the funds to be used have been remitted from abroad (i.e. bank receipt). An AIP permit only allows you to purchase and own one residential property for you and your family’s personal use. Additional properties may only be purchased if they are located in Special Designated Areas: Portomaso, Tigne Project, Cottonera Waterfront, and Charmai in Gozo.

The first step in purchasing property in Malta is to hire a notary public. He will lodge the Application for Immovable Property (AIP) on behalf of the buyer (if required) and assist in the buying process as well.

Once a property has been chosen, contact the seller or estate agent to make an offer. Upon acceptance, the notary will be responsible for drawing up a purchase agreement – also known as a konvenju or convenium. If the terms of contract have been settled by both parties, proceed with signing the document.

Malta luxury vacation homes Upon signature of the contract, the buyer pays 10% of the selling price as deposit. One percent (1%) stamp duty must also be surrendered to the notary public for registration of the purchase agreement and payment to the Commissioner of Inland Revenue.

The purchase agreement is usually valid for three months. During this term, the notary will perform due diligence to prove authenticity of ownership. When this has been accomplished, he will prepare the Final Deed for signing of both parties. The balance due on the selling price and stamp duty must be paid upon signing. This signals the conclusion of the sale.



Footnotes to Transaction Costs Table


The round trip transaction costs include all costs of buying and then re-selling a property – lawyers’ fees, notaries’ fees, registration fees, taxes, agents’ fees, etc.

Stamp duty:
Stamp duty on property transfers is generally levied at a flat rate of 5% on the property value.

The provisional stamp duty of 1% is payable when the when the notary registers the promise of sale with the Inland Revenue Department (IRD). The remaining stamp duty of 4% is payable within 15 days after the signing of the final deed of sale.

Notary Fee
Notary fee is generally around 0.40% to1% of the property value.

NOTARY FEE

PROPERTY VALUE, € RATE €
Up to € 10,000 1%
10,000 - € 500,000 0.50%
Over € 500,000 0.25%
Source: Global Property Guide

Registration Fee
Registration fee is based on the legislated registration fee schedule. Registration fee is levied at varying amounts, depending on the property value.

REGISTRATION FEE

PROPERTY VALUE, € RATE €
Up to €11,646.87 €13.98
€11,646.87 - €23,293.73 €18.63
€23,293.73 - €46,587.47 €27.95
€46,587.47 - €69,881.20 €37.27
€69,881.20 - €93,174.94 €46.59
Over €93,174.94:
every additional €23,293.73 €9.32
Source: Global Property Guide

Real Estate Agent’s Fee
The seller pays 3.5% for agent´s commission (plus 18% VAT) if the buyer was found through the services of a Registered Real Estate Agency under a sole agency agreement and 5% if not under a sole-agency agreement. If the buyer was found through the services of a private agent (broker), the fee is only 1% (plus 18% VAT).

The buyer, on the other hand, pays 1% (plus 18% VAT) of the purchase price if property was found using the services of a private agent (broker) and pays no agent´s fee if the property was found using the services of a Registered Real Estate Agency.

Capital Gains Tax
Capital gains tax is generally levied at a flat rate of 12% on the transfer value or the selling price of the property. Because the tax is imposed on the selling price instead of the increase in property value (capital gains), it is essentially a transaction cost. During the sale, a provisional tax equal to 12% of the selling price must be paid to the notary public who will then pass it on to the Inland Revenue as payment of the tax liability.

If the seller has inherited the property before 25 January 1992, capital gains tax is levied at a flat rate of 7%.

If the seller is not involved in property trading, capital gains tax may be levied at a final withholding tax rate of 5% on properties that were sold within five years of acquisition.

If the seller has acquired the property prior to 01 January 2004, capital gains tax is levied at a final withholding tax rate of 10%.






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