Malta Top Property Buying Tips

The British have been closely linked to Malta for hundreds of years and many choose to purchase homes and retire there. With good weather, a favourable tax regime and most Maltese speaking English fluently, it’s easy to see the attraction.

If you are interested in purchasing Maltese real estate, here are the steps to follow:

Appoint a notary and a lawyer
A notary is a public officer entrusted with the enrolment of public deeds such as the purchase and sale of property.  They are meant to be impartial, so it is unusual for a notary to be connected to a developer or estate agent.  You should therefore ignore any suggestion of whom to appoint from the seller or estate agent; the same applies to your lawyer.

Your lawyer should specialise in property transactions. In the case of foreign buyers, it is important for the lawyer to be aware of the rules specific to the ownership, transfer and subletting of property by a foreign resident.

Get a permit
If you are an EU citizen, and the property you are purchasing will not be your main residence, you will need to obtain an acquisition of immovable property (AIP) permit, which is granted by the Ministry of Finance.

The minimum price you must pay for an apartment is €107,670 or €179,400 for a house or villa. EU citizens who intend to make the property their main home do not require a permit.

Sign an agreement and pay the fee and deposit
Once you have decided on a property and your offer has been accepted, a preliminary agreement is signed between the seller and buyer. This is usually valid for three months and binds both parties to the transaction based on a set of agreed terms and conditions which have to be satisfied for the final agreement and legal transfer of title to go ahead. After the signing of the preliminary agreement, but before entering into a final deed of sale, the notary will carry out the necessary searches into the property to confirm everything is in order before proceeding.

At this stage, one per cent of the total stamp duty fee of five per cent is payable to the Inland Revenue and a 10 per cent deposit is paid by the buyer. The remaining four per cent of the stamp duty will be paid on issue of the final deed

Watch out for problems
While unusual, it is not unheard of for irregularities to arise, from which your lawyer should do their best to protect you. Problems could include:

·         A defect in title; the supposed seller might not be the rightful owner.
·         A creditor may have obtained a judgment against the seller, and a lien over the property would remain in place, even if the property is sold.
·         There might be a right of “servitude”, where the property you are buying is legally subject to the rights of other properties. This could include, for instance, a right to access a roof for a water tank or antenna.
·         Many of the traditional limestone townhouses in Malta are hundreds of years old.  You might encounter strange building methods, or structural defects that are not immediately evident. Alternatively, improvement work might not be covered by permits.
·         In the event that further work is required or there is a discrepancy, you have the right by law to pull out of the preliminary agreement and be refunded the deposit in full plus the initial one per cent of stamp duty paid. It is worth noting that if the discrepancy is corrected within an agreed period, then you must complete the sale.

Sign the final paperwork and pay for everything else
Once everything has been completed, a date is set for the signing of the final deed of transfer at which point the balances due must be paid – the  selling price to the vendor; the rest of the stamp duty to the Inland Revenue and one per cent in notary fees.

It is possible to give a power of attorney to a nominee such as your lawyer, to sign contracts on your behalf.

Taxes
Malta’s favourable tax regime does not impose wealth tax, and inheritance tax does not exist, but if a death occurs then a beneficiary will have to pay a five per cent duty on the value of the property. If a property is jointly owned and a spouse or partner passes away then a five per cent duty will only apply to half the value of the property.

When selling your main residence of more than three years, no capital gains tax is payable on the transfer, as long as the sale is made within 12  months of you vacating the property.

If the property is a holiday home or investment property, then since January 1 2015, the rate of capital gains tax is eight per cent of the value of the property. If the property was acquired before 2004 the rate is 10 per cent of the value, and transfers of property by non-property traders within the first five years of purchase are subject to a rate of five per cent of the value.