When a purchaser and a vendor have agreed on a price for the transfer of a particular property, the first step would be to engage a Notary (Purchaser has the right to choose and is bound to pay) to draw up the preliminary agreement or promise of sale (Convenium) which actually binds the vendor to sell and the purchaser to acquire the property on terms and conditions agreed upon, subject to good title, as well as issuing of all relative permits. On signing of the preliminary agreement, a 10% deposit is usually lodged with the Notary or Estate Agent as intermediary.
The duration of this preliminary agreement is for 3 months or for a term to be agreed upon by the vendor and the purchaser and can be as short as 15 days and as long as required. General practice however is for 3 to 6 months. During this time, the Notary (Solicitor) will undertake to submit all necessary applications and conduct researches on the property to prove good title, which is guaranteed with a general hypothec by vendors on all their present and future property. Preliminary agreements and Contracts may be written in Maltese or in English, The remaining balance is paid, vacant possession is given by the vendor on contract, and the keys to the property transferred are handed over.
When buying a home, it is important to be fully aware of the funds required to complete the transaction. We obviously guide you thoughout the whole procedure so you are fully aware of each and every step of this important transaction. It is useful to remember that on the 1st January 2008, Malta will join the other thirteen E.U.Member States that have adopted the single euro currency. This means for citizens from other EU countries there will no longer be any exchange rate risk when bringing in euros to buy property in Malta.
The introduction of the euro will make Malta more attractive to expatriates than ever before. Of most significance is the removal of exchange rate risk (and costs) when purchasing property. Many experts are predictin a surge in property purchasers by nationals of fellow euro-users in 2008.
The adoption of the euro can only be positive for investors, savers and the many foreigners who continue to retire or set up business in Malta.
Below we have briefly listed all expenses incurred in purchasing a property.
On the Preliminary Agreement (also known as Convenium or Promise of Sale):
1% as part payment of the Stamp Duty to Government
Lm100 for A.I.P permit (Application of Immovable Property) This is not required when purchaser is an EU resident who has resided in Malta for a minimum period of 5 years at a stretch.
On the Final Contract:
90% as balance of the price
4% as balance of Stamp Duty (when the purchaser is Maltese and buying the property as his primary residence he is charged at a total Stamp Duty rate of 5% except for the first Lm30,000 on which he is charged at 3.5%)
1.5-2% Legal fees and expenses
It is important to know that Capital gains tax may be incurred when selling your property. When selling a residence owned and lived in for a minimum of 3 years then one is not subject to any form of Capital Gains Tax. When paying Capital Gains Tax in Malta there are two options.
The first option is taxable on the difference between the cost price and the selling price, less any expenses incurred such as legal fees, improvements, agency commission, maintenance charges, etc. All receipts must be produced including VAT. There is also an allowance for inflation. The Notary drawing up the Contract is responsible to collect a Provisional Tax at 7% of the sale price. Over the following 12 months the Income Tax Department works out ones nett profit and taxes the individual at a maximum of 35% on this profit. If this amount is less than the 7% Provisional Tax paid on the contract, one is refunded the difference, while if the final Government tax exceeds the 7% Provisional tax paid then the seller then one is billed at accordingly with a maximum rate of 35%. When the vendor is not resident in Malta this procedure is carried out before the signing of the Final Contract so the vendor pays his tax in Full on the Final Contract and is given clearance by the Local Tax Department to transfer his funds overseas.
The second option on payment of Capital Gains Tax is for the vendor to pay a Final Witholding Tax of 12% of the Sale price. On choosing this option one is certain never to receive another tax bill concerning the transfer of this property.
In the event of death, the beneficiary is liable to 5% transfer tax on the value of immovable property in Malta as a Succession Duty Tax. One is not liable to pay this immediately, but if one does not pay this within 6 months, one is liable to interest payable on the amount due. Death Duty will only be charged on the Malta estate of the deceased but not on assets held by the deceased outside Malta.
Mortgage facilities are available in Malta from a number of Banking Institutions. Often people resident overseas opt for a Mortgage facility overseas for the purchase of a property in Malta.
Non-EU Citizens Purchasing Property in Malta
Non-EU citizens are required to apply for a permit for the purchase of Immovable Property (A.I.P). This is issued by the Ministry of Finance and is applied for by your Notary or Solicitor on your behalf. It takes approximately 2- 4 months to be issued.
The minimum purchase price and fees are adjusted from time to time according to the immovable property price index established by the Director General of the National Statistic Office Presently it stands at a minimum of about Lm42,519 / €99,000 for apartments and about Lm70,845 / €165,024 for houses.
Documentary evidence must be shown to prove that the funds for the purchase of property have originated from outside Malta. A banker's receipt is sufficient evidence.
The property being purchased may be used only by the purchaser, his/her immediate family or friends.
Property with the facility of a communal/private swimming pool will be granted a permit to be rented out.
Non EU citizens may own only one property in Malta or Gozo at any given time unless the properties are situated in a Special designated area. Presently these areas include: Portomaso, Tigne Point, Cottonera Waterfront and Chambray in Gozo
It is possible to reside in Malta or Gozo and avail yourself of one of the following residence status: Permanent Residence or Temporary Residence.
The following are the conditions and concessions applicable.
Applicable only to those seeking to reside in Malta on a permanent basis. Provided all requirements are met, the permanent residency holder will enjoy freedom of movement with no minimum or maximum lengths of stay on the islands. A fee of Lm 50 is payable to the Director, Department of Citizenship and Expatriate Affairs once the permit is issued. At the end of each year of residence and subsequently at the end of each calendar year, you will be required to complete an Annual Declaration to confirm that you have fulfilled the conditions attached to your permit.
An extremely favorable flat rate of 15% tax is applicable with a minimum liability of Lm 1,800 per annum after double taxation relief. To qualify for this tax concession applicants need to prove they have an annual income of Lm 10,000 or capital assets of Lm 150,000. In either case the whole amount is not required to be brought into the island. The purchase of the property will also be considered as part of the capital requirement.
The minimum annual income to be remitted to Malta is Lm 6,000 for one person and Lm 1,000 for every dependant (anyone under the age of 21).
Double taxation agreements already exist with Albania, Austria, Belgium, Croatia, Czech Republic, Egypt, Finland, Germany, India, Korea, Latvia, Libya, Luxembourg, Netherlands, Pakistan, Portugal, Slovakia, South Africa, Switzerland, Tunisia, Barbados, Bulgaria, China, Cyprus, Denmark, Estonia, France, Hungary, Italy, Kuwait, Lebanon, Lithuania, Malaysia, Norway, Poland, Romania, Slovenia, Sweden, Syria, United Kingdom as well as America, Canada and Australia. The agreement enables residents in Malta to claim back tax from the country from where the income originates and double taxation relief from Malta.
Residents are exempt from paying Capital gains tax if their property has been their official/ordinary residence for at least three years preceding its sale.
Applicable only to those individuals who wish to obtain an extended tourist permit to enable them to stay on the Maltese Islands for a longer period than the 3 months allowed by law. This permit is renewable at fixed periods, presently every 6 months and visas are obtainable from the Principal Immigration Department at the Police Headquarters in Floriana.
Proof of income is required to prove that the applicant will not be a burden on the country and local income tax is limited to the funds brought into the country (only if temporary resident exceeds their stay of 182 aggregate days in one calendar year, otherwise exempt).
Importation of Possessions to Malta
Persons with Permanent Residency Status
Understandably, when purchasing a property in Malta, non-Maltese nationals would normally need to import certain items and personal effects into the country. The following information is intended to give as clear an indication as possible of the various procedures involved.
All personal and household effects may be imported into the country absolutely free of charge within six months of the date of arrival in Malta of the person importing them, or within such a period allowed by the Comptroller of Customs, at his discretion. The authorities concerned will require proof that permanent residency has been obtained.
In the event that a car is being imported, certain conditions and charges apply.
the vehicle must be at least 6 months old
the vehicle must have been registered abroad in the applicant's name
the vehicle must be imported into Malta not later than 6 months from the date of issue of the residence permit
Charges are as follows.
registration tax of 11% of the assessed value up to 1500cc engine capacity
registration tax of 16.5% of the assessed value over 1500cc engine capacity
No duty or VAT is payable, however should the vehicle be re-sold locally, these charges shall be due in their entirety.
Importation of Pets:
Pet animals entering Malta require an Import Licence issued by the Director of Agriculture on application to the Government Veterinary Regulation Division. The following are required for the pet's entry into Malta:
An official pet travel scheme certificate. This shows that the pet animal has been micro chipped, blood tested and vaccinated
An official Declaration that the pet animal has not been outside the qualifying countries
An official certificate signed and stamped by a Veterinarian. This shows that the pet has been treated against ticks and tapeworms
The Pet travel scheme is for those animals (cats, dogs and ferrets) originating from qualifying countries to enter Malta without quarantine as long as the requisites are satisfied, otherwise the pet travel scheme does not apply for other animals, which will be quarantined for six calendar months. Pets cannot come into Malta before a six month period of taking the abovementioned blood test showing a successful siero- neutralization titre test result.
Pets will be quarantined for 21 days should they be entering the islands from a qualifying country but have not been vaccinated against Rabies, or have not yet satisfied the six month requisite following the blood test.
Persons with Temporary Residency Status
Overseas purchasers who are not in possession of Permanent Residency are required, upon arrival of their used effects, to pay a deposit to cover duty on all imported items. This deposit will be refunded to them either when they are granted freedom of movement or if they live in Malta for not less than 200 days in a period of one year immediately following the arrival of the goods, whichever is the earliest.
The deposit amount, when due, depends on the quantity of the imported effects. It can, however, be safely indicated that a container full of personal effects (including video and 2 TVs) does not incur a deposit or bank guarantee of more than Lm 1,000 (one thousand Maltese Liri). In the event that a car is being imported, no charges apply. Cars may only remain on the island for a maximum of three months at a time.