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Malta: Guide to Buying Costs and Procedures

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Buying costs are moderate to high in Malta

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.

The 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 Lm30,000 (E69,900) for an apartment or Lm50,000 (E116,500) 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.

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 for foreigners is the normal rate of 5% of selling price. For Maltese citizens buying a main residence, stamp duty is 3.5% for the first €116,468, the remaining balance is subject to the normal rate of 5%.

Registration and other fees:
The buyer should allot around €600 for registration fees and searches.

Non-EU nationals are required to get an Acquisition of Immovable Property (AIP) permit from the Ministry of Finance. Permit costs €233.

Legal fees:
Legal fees, including notarial fee, can be paid in two stages: 33% with the signing of the preliminary agreement and 67% with the publication of the final deed. Each party pays for their own lawyers, approx. 1% of property value.

Agent's commission:
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% ifnot 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 are generally taxed at a flat rate of 12% applied to the transfer value or the selling price. 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.

Sale of properties held for less than five years can be taxed in two ways. It can be taxed at a flat rate of 12% of the proeprty value or at progressive rates with a maximum of 35% of net gains.

Malta - more data and information

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