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Property Buying Regulations
Buying your house is probably the biggest financial transaction
that you will ever carry out. It is also probably one of the more
stressful one. In order to help you out with the process, we are
listing some of the pertinent rules relevant to this procedure. This
is a list of the must-know regulations relating to property in Malta. You are
however strongly advised to take buying or selling legal advice only
from a registered Notary or Lawyer.
Some consideration prior to making your decision to buy:
- Size of property: is it good for you now? Will you need something smaller or larger quite soon? Children?
- Location: Why do you want to live in the area you are looking for. Make a list. Does it make sense?
- Facilities: Are they close enough to you, schools, grocer, pharmacy, etc. If not, how far are you prepared to travel. What facilities do you need often?
- Where is the money to purchase this property coming from? Sale of existing house? Investment? Parents? Bank? (if so, have you made an appointment with the Bank yet?)
- Type: Flat, Maisonette, Penthouse, Condo, House of Character, Terraced House, Bungalow, Villa? Modern, Classic, Rustic, Minimalist, Art Deco?
- Garage: Large, Very Large, 1 car, 2 car, street level, basement, car space or just do not need one in the first place. Do you have a boat, or keep animals?
- Garden: Everyone wants one. But do you really need it? Can you afford it?
Share this information with your Property Consultant. Be frank.
He is there to help you and probably sees dozens of new properties every week.
It could be that that new property that came in today, has your name on it. Help him to help you. You are just a phone call away.
Once you have found the property of your dreams,
(or at least that which your Bank Manager allows you to dream about) make sure that you are absolutely clear about the following:
- Price: Amount and payment terms
- Deposit: Normal 10%. Is it to be held by Notary, by vendor, under what conditions may you forfeit it?
Is it a deposit on account of the price or is it a 'Kappara', both have their implications. Ask your Notary,
and make sure that it is YOUR Notary that you are taking this kind of advice from. You can normally expect
to lose the deposit if for a reason not valid at law you fail to sign the final deed/contract.
- Ground Rent: Is it Perpetual, Perpetual Revisable, Temporary? If temporary is it State owned or privately owned.
- Extras: Are you buying an empty house? Are the air conditioners staying, what about the fitted kitchen, the fitted cupboards? Are they going to stay? Are they included in the price?
- Outstanding Works: Are you buying the place as it is when you saw it? If not where does it say so?
Is it written in the convenium? Is it explicitly clear and who is going to pay for what? Be clear...
(convenium is a promise of sale between the property owner and the purchaser)
- Convenium: What is the duration? What is it subject to? If these conditions are not met, what are the consequences? Is your deposit safe?
- Bank: How much is the Bank lending? Have you gone to the Bank to see how much you qualify for? Is the convenium subject to Bank loan? It should be.
- The Parties to the agreement: You know who you are. But do you know who the seller is? Has he brought his ID Card?
Is it an individual who is selling or a company or an inheritance? Are you buying alone or with your girlfriend? Are you married?
Do you know enough about the 'Community of Acquests' and its implications?
 Once you are happy with all the answers to the above questions and you have explicitly agreed to them with the seller,
find a Notary that you can trust and set up a date together with the Seller, to draft and sign your convenium. This is your promise
of sale (and implicitly a promise to buy from your part).
Once you have signed a convenium certain things have to be done:
- Legal Searches: The Notary will normally order the legal searches from Eureka Services into the assets and liabilities
of parties involved and assures himself that there are no outstanding debts, hypothecs, or liens on the property. It takes time.
Notaries might not be inclined to order the searches if there are subject-to clauses in the convenium that should have been settled
and have not been. Don't take anything for granted. Regular phone calls to the Notary, the seller and your Bank are not a waste of
time. You might regret not doing them. You cannot sign a contract or take a Bank loan with the Legal Searches being completed. You
might exceed the term of the convenium, lose your deposit and lose the property if you are careless. Be careful.
- Permits: The Notary, contrary to popular belief, is not responsible to ensure that the place is built according to
permits, even if there is a declaration from the seller that all is fine. Only an Architect can do this. It is not expensive.
Just Do it. You will be responsible for any problems (though you might have legal recourse to the seller) if the building is not
in compliance with a valid building permit. Besides if you bring an Architect to see the place before you buy it he can advise as
to the structural soundness of the property. An architect is not however the ideal person to give advice on a property unless of
course he is a developer himself or is regularly involved in the purchases or sale of the type of property that you are buying.
Ask an independent broker. MEPA are getting stricter by the day and an enforcement Notice is not one of the more pleasant things
in life.
- Time Frames and Obligations: Buyers must honour all his conditions contained in the Convenium (promise of sale agreement),
such as expeditious Bank Loan applications and building permit applications within specified time frames. Seller must honour all
his conditions contained in the promise of sale agreement, such as finishing or refurbishing works within specified time frames,
regularisation of permits.
- Contract / Final Deed: This is drafted by the Notary who notifies all sides, including the Bank who will want to see
the contract a few days, possibly weeks, before it is signed. All outstanding conditions and obligations deriving from the
Convenium have to be honoured BEFORE the contract is.
Final Procedure
- Bank Loan: If a Bank loan is required for the purchase, the final deed is signed at the Bank, in
which case the deed will consist of two parts, firstly the Bank loan to the purchaser and secondly the sale from vendor to purchaser.
The loan will be paid directly from the Bank to vendor as part of the purchase price.
- Reading of Contract: The contract of purchase is read out and if all is in order and to their approval, all the parties concerned sign it.
- Payment: The balance due i.e. the purchase price less any deposits paid on account is paid to the vendor.
- Expenses: The parties concerned settle their relative expenses concerning the purchase.
- Keys: Keys to the property are passed on to the purchaser.
- Registration: The Notary Public registers the transfer at the Public Registry (and Land Registry if applicable).
All transfers must be registered at the Public Registry, but not all transfer dealings need to be registered at the Land Registry.
This is because not all of Malta and Gozo has been declared a “Compulsory Land Registration Area”, and only those properties in
areas which the Land Registry has declared “compulsory” must be registered. More information on this technical point can be
obtained by the Notary on or prior to the Sale.
Notaries and Estate Agents go through these procedures practically every day. Make copious use of their services.
They will be only too happy to help out. If needed we are just a phone call away on 23 88 00 99 or 79 44 66 88
Expenses on Selling or Buying Immovable Property
Upon the transfer of immovable property
the following expenses must be taken into consideration:
Purchaser Charges
- Stamp Duty: 3.5% on the first Lm30,000 (thirty thousand Maltese Liri) of the immovable property
contract price. This concession is applicable only on the purchase of one's sole place of residence and subject
to the purchasers not having other residence in their name.
5% on an amount greater than Lm30,000 (thirty thousand Maltese Liri)
of the immovable property contract price, or on the full price if the concessions mentioned previously are not applicable.
- Notary: Approximately 1% of the immovable property price is due to the Notary, who is usually chosen by the purchaser.
- Recognition Fee: On immovable property subject to ground rent, a recognition fee (known as a Laudemium) equivalent
to one year's ground rent is due upon the signing of the contract of sale. This fee is payable just once and is due to the owner of
the said ground rent.
If the present owner is imposing the ground rent, no recognition fee is due to the vendor
but stamp duty amounting to Lm100 (one hundred Maltese Liri) is due on every newly imposed perpetual ground rent up to
Lm100 (one hundred Maltese Liri). One can avoid this proposed ground rent prior or on the deed by “redeeming” it at the rate of 5%,
or the proposed ground rent multiplied by 20.
Vendor Charges
- Capital Gains Tax: 7% of the immovable property contract price is charged as a provisional capital gains tax.
This provisional tax is always due, with the following exceptions:
- If the immovable property was inherited and is being sold for the first time since it was inherited.
- If the immovable property was the vendor's primary residence for the previous three years.
- If it can be proved that no profit on the sale has been made, in which case a Certificate to this effect from the Office of Inland Revenue would be required prior to the deed.
One must bear in mind that, as a provisional tax, the 7% forms part of the vendor's annual income and ultimately the amount to
be paid can be lesser or greater, depending on how much the immovable property was purchased for, the expenses incurred
(against receipts) and how much it is being sold for at present.
Naturally, every case must be taken upon its' own merits.
We would be in a better position to advise the vendor when the immovable property is placed on our books.
Estate Agency Fees
- 5% of the selling price in the case of a multiple-agency agreement, or 3.5% of the selling price in the case of a
property benefiting from a sole agency agreement.
The expenses listed above are all due upon the signing of the final contract. Stamp duty and capital gains
tax are collected by the Notary, preferably in the form of bank drafts to be passed on to the respective government departments
while notarial and estate agency fees are paid directly there and then.
This information has been compiled by:
Notary Patrick Critien BA LLD,
of St. Mary's Street, Sliema, Malta.
Tel: 21312770, 21330389; Mob: 99492420; Fax:
21388259
RETURNED MIGRANTS
Individuals born in Malta, whether Maltese nationals
or not, who have been absent from Malta for at least 20 years in
aggregate during the last 25 years prior to their return to Malta,
will, if they so elect, be taxed at a maximum rate of 15% subject
to a minimum tax liability of €2,325, upon taking up residence in
Malta.
The tax is calculated on income and capital gains arising in Malta
and on foreign income (excluding capital gains) remitted to Malta.
Returned migrants may engage in gainful occupation in Malta, but
any income derived from such occupation will be taxed at the standard
resident married rates without any tax-free portion.
Returned migrants are required to remit to Malta foreign income
of at least €14,000 (plus €2,400 per dependant) annually.
| Married |
Single |
| Taxable income |
Tax rate |
Taxable income |
Tax rate |
| First €5,900 |
0% |
First €4,200 |
0% |
| Excess |
15% |
Excess |
15% |
Applicable for calendar year 2009
This provides returning Maltese migrants and persons transferring
their residence to Malta a guide on certain key features of the
tax system in Malta and related matters.
It covers:
Residence Scheme Certificate holders
EU/EEA nationals holding a Maltese residence permit
Returned migrants
RESIDENCE SCHEME CERTIFICATE
A non-Maltese person is eligible to apply for a
residence scheme certificate if such person either:
A certificate holder who is an EU/EEA national may at any time
opt to renounce the certificate and apply for a residence permit.
The minimum tax liability of €4,192 is still payable in the year
the option is taken up.
A residence scheme certificate will be deemed to have been withdrawn
with immediate effect if the holder of the certificate is issued
with a residence permit for EU/EEA nationals.
Income tax payable by holder of a Residence
Scheme Certificate
The holder is subject to a flat income tax rate
of 15%, subject to a minimum annual tax liability (after double
taxation relief) of €4,192.
The tax is calculated on income and capital gains arising in Malta
and on foreign income (excluding capital gains) remitted to Malta.
Double taxation relief is available for tax levied outside Malta
on income remitted to Malta which is subject to tax in Malta.
Foreign tax is added to income remitted to Malta and the total is
subject to tax at 15%. Foreign tax paid is then deducted from the
Malta tax, up to the Malta tax payable (i.e. 15%). However, the
Malta tax payable cannot be less than €4,192.
A number of treaties concluded by Malta allow certain foreign income
remitted to Malta to qualify for a reduced withholding rate of foreign
tax or to be exempt from foreign tax (typically private pensions
and certain capital gains).
Other tax cosiderations and requirements
There is no estate duty in Malta. Stamp duty is
payable, amongst others, on the transfer of immovable property situated
in Malta and shares in Maltese companies. Duty on the acquisition
of immovable property is levied at 5%, with a reduced rate being
possible in certain situations.
- For persons transferring their residence from a country in
the EU to Malta, no import duty or VAT should be chargeable on
used household and personal effects, cars, furniture and other
domestic articles, unless subject to excise duty.
RESIDENCE PERMIT FOR EU & EEA NATIONALS
- A citizen of the EU/EEA has the right to enter, remain and reside
in Malta. Where a person intends to reside in Malta for a period
longer that 3 months, he is obliged to apply for a residence permit.
- Residence permit holders typically qualify as Maltese residents
for income tax purposes and are taxed at normal progressive rates
going up to 35%. Tax is chargeable on income and capital gains
arising in Malta and on foreign income, excluding capital gains,
remitted to Malta, for as long as the individual is deemed not
to be domiciled in Malta.
Resident married couples opting for a joint
computation*
| Taxable income |
Tax |
| € |
Rate |
Deduct |
| 0-11,900 |
0% |
€0 |
| 11,901 -21,200 |
15% |
€1,785 |
| 21,201 -28,700 |
25% |
€3,905 |
| Over 28,700 |
35% |
€6,776 |
Resident single persons and married couples
opting for a separate computation*
| Taxable income |
Tax |
| € |
Rate |
Deduct |
| 0 - 8,500 |
0% |
€0 |
| 8,501 - 14,500 |
15% |
€1,275 |
| 14,501 - 19,500 |
25% |
€2,725 |
| Over 19,500 |
35% |
€4,676 |
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