Acquisition of property in Malta mainly involves the entering into a preliminary (promise of sale) agreement, otherwise known as the ‘konvenju’ , the carrying out of title and ownership searches, applying for an AIP (Acquisition of Immovable Property by Non-Residents) permit , where applicable, and entering into the final deed of sale. Both documents, that is the preliminary agreement and the final deed (contract) and drawn up in front of a Notary Public who albeit an independent official, is engaged by the buyer.
EU citizens who have either resided in Malta continuously for 5 years may or EU citizens that are acquitting the property with an intention to establish their primary residence in that property need not apply for the AIP permit. EU and non-EU citizens that shall be acquiring immovable property within a Specially-Designated area also need not apply for an AIP Permit.
To date the Specially Designated areas are:
'¢ Fort Cambridge
'¢ Fort Chambray
'¢ Kempinski Residences
'¢ Metropolis
'¢ Portomaso
'¢ Ta' Monita
'¢ Tas-Sellum Residence
'¢ Tigne Point
Duty on Documents, more commonly known as Stamp Duty, at 5% is payable on the acquisition of immovable property. One per cent is payable on the signing of the Preliminary Agreement whilst the remaining four per cent is payable on the signing of the final deed. Sale of property is not subject to Value Added Tax (VAT).
Issues related to tax on Capital Gains
Property being sold that has been owned and occupied by the seller as the main residence for three years (and not vacated for more than one year) is not subject to capital gains tax or a final withholding tax by the seller.
If the above condition does not apply then the seller is subject to tax on the Capital Gain. The rate applicable is subject to the residence status.
Tax on capital gains is either at the applicable rate on the actual profit or a twelve per cent final tax on the sales consideration less agency fees. If the property has been acquired for more than five years (seven years during fiscal years 2010 and 2011), then the final tax only applies.
Transfers by foreigners / non-residents
In all cases of non-Maltese persons selling their property in Malta , the notary in charge of drawing up the deed of sale is required to notify the Commissioner of Inland Revenue in advance. The Commissioner may impose conditions on the transfer to the extent that the tax that may be due on the sale of property or any other tax that may be due is paid.
There is no restriction on the transfer outside Malta of proceeds from the sale of the property, subject to the payment of any outstanding tax. No VAT is due on the transfer of property. There are no net worth, real estate tax or any local taxes in Malta.
THIS INFORMATION HAS BEEN PROVIDED BY JOHN HUBER AND ASSOCIATES TAX SERVICES MALTA
E-mail queries should be forwarded to info@johnhubermalta.com
Disclaimer - No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity.
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