• Malta Budget 2017

• Investment Guide & Business Directory 2016-2017

• Financial Services Survey 2016

• Malta Tax Rates 2016

• Malta Tax Facts 2016

• Malta International Indirect tax guide 2016 - Grant Thornton

• Castille Salary Survey 2016

Living in Malta, an Island where many Foreigners enjoy advantageous tax rates and a beautiful life style

Have you ever dreamt of moving abroad to an English speaking Island in the middle of the Mediterranean where crime is practically non-existent, the climate is pleasant throughout the year, the standard of living is high and the cost of living being reasonably low?  Well, you can stop dreaming because your wishes may even be closer than you think. You might just want to start packing your bags after you read this.

For some years now, Malta has become a popular destination for Foreigner Nationals (amongst people from other nations) who have headed to this Mediterranean Island country to take up residency and live a lifestyle that up to that time did not seem it could be a reality.  English is very widely spoken, in fact it is the second language by most of the locals who are also well known for their very friendly nature thus making it easier to integrate into the Maltese community and understand the way of life and the general system.  It is in fact no casual coincidence that there is already a sizable expatriate community made up of foreigners who are in Malta on work assignments, permanent residence holders, retiree’s as well as business travelers that keeps growing from year to year.   

Malta enjoys several double taxation agreements with various countries including Foreign Countries.  There are two types of Residence status that one may take up in Malta. In both cases, one must buy or rent a property in Malta. Individuals residing in Malta are taxable only on income arising and/or remitted to Malta at the applicable rates depending on the residence status one has opted for.

The property market in Malta might be an interesting prospect. It is an ideal investment as well as the perfect home away from home.  The procedures are straight forward and foreign investors are encouraged and assisted actively by government to invest in Malta.  There are also options to set up business in Malta where Malta has become a hub for the IT, financial and gaming industries amongst others due to their tax advantages. 

 Residents Scheme Regulations, 2004

One may take up residence in Malta by obtaining a certificate from the Inland Revenue Department, which certificate is issued for an indefinite period as long as certain conditions are satisfied on an annual basis. Holders may therefore reside indefinitely in Malta and may enter and leave Malta as and when required without the need of any other formalities.

The following is a list of incentives and advantages applicable to holders of a certificate in terms of the Residents Scheme Regulations:

• A low flat rate of income tax of 15% with a minimum tax liability of €4,230 per annum after double taxation relief.
• Malta’s tax legislation provides for relief from double taxation, whether through negotiated double tax agreements with a substantial number of countries worldwide, or through unilateral provisions. In the case of Foreign Countries the following double taxation rates apply.

• There is no real estate tax in Malta. Tax on capital gains arising from the sale of real estate in Malta does exist but residents are exempt if they have used the property as their main residence for three consecutive years immediately preceding the sale and the property is disposed of not later than one year of vacating it.
• Duty, at 5%, is chargeable only at the time of the purchase of real estate in Malta.

Conditions for Application

One must own worldwide capital of at least €352,000 (or equivalent) or have an annual income of not less than €23,500 (or equivalent) arising outside Malta. The permit holder is also required to remit €14,100 per annum (plus €2,350 for each dependant, including the spouse) into Malta. The minimum remittances must not be repatriated out of Malta.

Furthermore, a holder of a Residents Scheme certificate is required to purchase or lease property in Malta, having the following minimum values:

• Purchase of apartment: €98,067;
• Purchase of any other type of property: €1 74, 703;
• Lease of residence: €4,193 per annum.

Application Process

The application form has to be accompanied by the following documents:

A copy of the applicant’s birth certificate and/or marriage certificate, as applicable;

Five passport-size photographs in respect of the applicant and his or her spouse and dependants (where applicable);

• A police conduct certificate in respect of the applicant and his or her spouse (where applicable) from the police authorities nearest to the place of residence.
• A copy of the personal details page in the applicant’s passport as well as that of his or her spouse;
• A financial certificate from the applicant’s bankers, accountants or a financial institution, stating that the applicant has an annual income in excess of €23,000 (or equivalent) or a minimum capital of €349,000, and is able to transfer €14, 100 (or equivalent) per annum. The €14, 100 must be increased by €2,350 for each dependant whose name appears on the application (e.g. for an applicant and spouse the amount required is €16,450);
• A self-declaration stating that the applicant shall remit to Malta the minimum amounts required.
• A copy of either the deed of purchase or the lease/rent agreement if the applicant already owns or rents/leases property in Malta. If the applicant does not already own/lease property in Malta a copy of such deed/agreement is required to be produced at the point in time when one actually takes up residence in Malta this being not later than 12 months after the date of issue of the residence permit.
• A fee of €230 is payable upon application to the Inland Revenue Department.

All the above documents must be certified by a Notary and apostilled by the Ministry of Foreign Affairs in the country of nationality.

Timing

The issue of a certificate typically takes around three months from the date of the application. The minimum amount of tax shall be payable within thirty days of approval of the application and shall be credited against the tax due for the first year of residence. The holder of a permit must take up residence within 12 months from the issue of the said permit.

Endorsement of Passport

Non EU citizens are required to have their passport endorsed with the residence stamp. This is obtained by filing an application with a separate department, which stamp is valid for a period of one year and may be renewed on an annual basis as long as the annual conditions on the residence permit certificate have been fulfilled. A fee of €23.29 is payable to the respective department on submission of the application.

Other Residents

This scheme is intended for individuals seeking to transfer their tax residence from high tax countries to those offering lower tax regimes.

 An individual who is economically self-sufficient must prove to the authorities that he or she is in receipt of an annual income of €23,000 if married and €14,000 if single.

 An individual may also become a resident of Malta as a consequence of taking up employment in Malta. A foreigner taking up such employment would require employment permission, which would be applied for by his employer. Tax Benefits as outlined under the Residence Scheme above will however cease to be applicable to be replaced by rates as shown in the below table.

Taxation

For tax purposes an individual is normally regarded as being resident in Malta for a particular year if, in that year, his stay in Malta exceeds 183 days.

The applicable income tax rates are, however, the normal rates of income tax applicable to residents, which are as follows:

 Married couples may also opt for “single” rates individually on certain income.

 Non EU citizens are required to have their passport endorsed with the residence or employment permit stamp depending on the purpose of residence. This stamp is obtained by filing an application and is valid for a period of one year and may be renewed on an annual basis.  A fee of €23.29 is payable to the respective department on submission of the application.An individual who is in receipt of income arising and/or remitted to Malta however does not reside in Malta is subject to such income at the nonresident rates as follows:

Household Effects 

Non EU Citizens may import their household effects into Malta free of VAT and import duties. For non-EU citizens Customs may initially require either a deposit or a bank guarantee for the amount of VAT/duty in question. Upon the expiry of 200 cumulative days stay in Malta, any such deposits or bank guarantees are refunded or cancelled, provided that the duration of stay can be proved upon request. 

 Inheritance and capital transfer tax 

• There is no general inheritance tax system in Malta. However, upon the transfer or transmission (upon death) of: 
• Real estate or shares in a company owning mainly real estate a duty of 5% is payable;
• Marketable securities (mainly shares in Maltese companies) a duty of 2% is payable.

 Identity Cards

 Non EU residents in Malta may apply for an identity card only once they have obtained the stamp on their passport. A Maltese identity card is obtained by completing an application with the relevant authority. A Maltese identity card is not a travelling document for foreigners, however it may be found useful for applying for various services in Malta such as television, telephone, banking and other services.

 Buying Property in Malta

 Whether you are Buying a property in Malta as an Investment or as your own personal residence in Malta our associates understand that you need to make an informed decision. This is the reason why we train our people to be professional and precise with the information they provide. All of our associates go through a strict screening process and are put through our world renowned training programme “Succeed” which is an A-Z educational programme specifically designed by leading real estate associates in the Industry for real estate professionals.

It has been a long standing custom in Malta where locals have always believed in purchasing property rather than renting. This tradition has said to have contributed to the increase in property prices over the years and has continued to keep the industry solid. Over the past decade the real estate industry in Malta has seen a year on year increase in property prices up until the last couple of years where we have seen different markets affected differently. The low end to middle price ranges has seen a drop in prices over the last couple quarters whereas the high end market has not been affected as much if at all. There are opportunities in every type of market and it will be a pleasure to guide you step by step in purchasing your property our country.

Our buying procedure is simple and straight forward plus it protects both the vendor and the buyer unlike in some other countries where one may experience Gazumping or outbidding.  Just as most Maltese are bilingual, legal documents tend to be in either English or Maltese. As leading realtors in Malta we are able to recommend a Notary to you however you may also get advice from your own.

One may also rent a property beforehand to get an idea of the market before taking the plunge.  We are able to organize hotel accommodation for you should you prefer through our contacts in Malta at preferential rates as well as any other service required through our concierge service.

The opportunities are endless and SIMON Estates malta can show you the way professionally and advise you through the full process accordingly.  Hereunder is a guide to buying your property in Malta.  Of course should you have any queries you may contact our Operations manager Mark Callus on +356  79861510 or send an email to him directly on marcal@simonestates.com

General Procedures and Costs

Once the immovable property has been selected and we have assisted you in negotiating the price as well as any special conditions duly negotiated and agreed upon an appointment is set to sign the Preliminary Agreement or what is commonly known as ‘Konvenju’. This is essentially an agreement binding both the purchaser and the vendor to conclude the transaction within an established date (term of Konvenju) subject to a set of conditions.On signing of the ‘Konvenju’ you will be required to pay 1% provisional stamp duty as part payment of the full 5% which the balance is due on signing of the final deed and an agreed deposit which is generally 10% in such circumstances.

During the ‘Term of Konvenju’:

• Notary Public carries out the necessary searches to verify legal title and to ensure that there are no outstanding debts, hypothecs or liens on the property
• Purchaser is to complete all the special requirements e.g. organise bank loan, check on building permits, etc. as agreed upon with seller and stipulated in the konvenju
• Vendor will complete all special requirements e.g. complete the building, or finishing certain works etc. as agreed upon with buyer and stipulated in the konvenju

During this time we can be called upon to assist in any queries the client might have. We have very good relationships with all the leading banks on the island and can therefore also assist you as the client in setting up meetings with the bank of your choice.

Once all the above has been completed by all parties concerned a date is set for the actual signing of the Final Deed. The venue of the signing will be held at the local banks legal offices in the case that one may be obtaining finance or either at our office in naxxar or at the office of the Notary Public. The final deed is read and agreed upon and the balances due will be paid accordingly. Theses are; balance of the selling price to the vendor; the balance due to the Commissioner of Inland Revenue for stamp duty as well as 1% Notary fees to the Notary Public.

Buying a Property in Malta as a second home/Non-EU Resident

If you are a foreigner to the European Union or if you are a Citizen of a European Union however the property you are purchasing is not for a prime residence in order to purchase a property in Malta there is a minimum price that one must pay for an apartment as well as for a house or a villa to be able to obtain an AIP (Acquisition of Immovable Property) permit which is granted by the Ministry of Finance and usually takes some 6-8 weeks. These prices are € 174, 703 (Lm75, 000) (if a house or villa) or € 98, 066 (Lm42, 100).

Buying a Property in Malta as a primary residence

Citizens of all European Union member states, who have resided in Malta continually for a minimum period of five years at any time preceding the date of acquisition, may freely acquire more than one immovable property without necessity of obtaining a permit.EU Citizens, who have not resided in Malta for at least five years, but have the intention of purchasing their primary residence (take up residence in Malta), do not require a permit, under chapter 246, nor do they require a permit to purchase immovable property required for their business activities or supply of services.

Acquisition of Companies

A body of persons, other than a commercial partnership, established in, and operating from a European Union member state may freely acquire immovable property that is required for the purpose for which it has been set up as long as it is directly controlled by citizens of the European Union Member state who has resided in Malta continuously for five years. A commercial partnership established and operating from a European member state (therefore including Malta) may freely acquire immovable property that is required for the purpose for which it has been set up as long as such partnership is controlled by and at least 75% of its share capital is held by a person (or persons) who is a European Union member state citizen and who has resided in Malta continuously for five years. Any other body of persons require a permit, which is only granted if the property is required for an industrial or touristic project or as a contributor to the development of the economy of Malta.Permission may be refused for the purchasing of property, which is considered to be of historical interest

Income Tax/ Tax on Capital Gains

The good news regarding real estate in Malta is that our legal system does not impose wealth or property taxes, adding one more important advantage to buying property in Malta which at the time of preparation of this document this regime was structured as follows:

Renting out:

In cases where income is derived from activity generated directly through the employment of the immovable property itself. In other words if the property is rented out resulting in revenue being generated through this activity then this revenue will become subject to taxes which as foreign nationals will be subject to the (still) very favourable flat rate of 15%.

Selling:

The tax structure set out for this eventuality although simple to follow is detailed to explain and does not really fall within the scope of this document.

Benefits of Buying Property in Malta

• Resale of property is allowed;
• Repatriation of full resale price, including profits after taxes, is allowed without complications; (for a comprehensive explanation of the tax structure please refer to link mentioned above)
• Mortgages are available for property purchase by non-residents or non-Maltese citizens residing in the islands: – once permission is granted by Central Bank of Malta, you can borrow as much as you wish from the local banks within the established commercial conditions.
• You can rent out your property to third parties (some limitations do apply)

In summary, Citizens of an EU Member State enjoy the benefit that they can buy their first property in Malta without restriction. Permits are not required in most cases and when they are they are easily issued to all bona-fide purchasers without any major requirements.

 Typical assistance provided by an Associate

1. Identify the most suitable properly according to the clients requirements and criteria, from our extensive database;

2. Organise and carry out viewings;

3. Follow up, continually assisting the client until the properly has been selected;

4. Carry out negotiations with the Endeavour of obtaining the best market price and payment terms. Our office will also assist in organising the preliminary agreement (Promise of Sale or, as mare commonly known, Konvenju (where a Notary Public will be appointed either as chosen by the client or through our office. This document will bind both vendor and purchaser during the term required to carry out the appropriate searches to verify legal title and during which our associate, through our office, will remain available to offer any assistance required.

Special Popular Destinations

Portomaso, located within the Hilton Complex, is one of the most prestigious property developments in Malta.  It is one of those luxurious locations where the travelling businessmen, expatriates and local families find very convenient.  With everything at your feet, including an underground high end Supermarket with all amenities, shopping arcade, Hilton Hotel, various restaurants and other entertainment places as well as underground parking, the complex has become a prime investment development where buyers are almost guaranteed return on investment and a rental return if required.