Acquiring a property in Malta
In view of the limited number of land available for construction, Malta has always had special rules for foreigners buying property. Individuals who are not citizens of an EU-member state require a permit to acquire immovable property in Malta referred to as the AIP permit. Citizens of EU-member states who have not resided continuously in Malta for a minimum five-year period require a permit to acquire immovable property for secondary residence purposes. On the other hand, EU citizens who have resided continuously in Malta for more than five years or EU citizens who intend to acquire residence in Malta do not require a permit. Properties falling within “Special Designated Areas” are exempt from the restrictions set out in the AIP Act.
TAXES ON PROPERTY
There are no annual property rates or taxes in Malta.
The transfer of immovable property is generally subject to 12% final withholding tax however certain exemptions and opt out provisions are available. Where one opts out of the final tax, income tax is due on the adjusted capital gain at the standard personal income tax rates. Property sold within a seven year period from the date of acquisition, provided certain conditions are met, may opt out of the final tax and apply capital gains if this is more efficient. Subsequent transfers, a final withholding tax of 12% on the transfer value is applicable. Non-residents producing a certificate from the tax authorities of their country of residence to the notary can opt out from paying this final tax. The opt out is also extended to the sale of property made within a Special Designated Area provided the necessary conditions are met. A total exemption from property tax applies if the property is used as one’s own residence for 3 years prior to disposal provided the property is disposed of within 12 months from the vacation of the premise as well as donations to close relatives
Inherited property that is subsequently disposed is subject to a final rate of tax of 12% on the difference between the transfer value over the acquisition value as declared upon inheritance, where a rate of 7% on the transfer value applies if the property was acquired before November 1992.
There is no inheritance tax although a duty on documents and transfer tax, referred to as stamp duty, is due on transfers, including those arising upon death. The rate is 5% on transfers involving immovable property (including shares in property companies) and 2% in the case of shares held in Maltese companies. However certain transfers may be exempt from such stamp duty..