Purchase and Sale of Immovable in Malta

Once the buyer identifies the property to be purchased, he/she enters into a written agreement  also known as a promise of sale agreement with the vendor.

This document would contain the several details including a description the property, identification of the parties, the deposit, the agreed price, the validity period and any other terms and conditions agreed between the parties.

The transfer of immovable property may only be done by a public deed published by a Notary who is usually appointed by the buyer. Once a promise of sale is signed, it must be registered by the appointed Notary at the Capital Transfer Duty within 21 days of the actual signing.

At this stage the provisional duty of 1% is paid by the Notary on behalf of the buyer and a receipt for such payment is issued.

Before the final deed of sale it is important to ascertain:

That the vendor/s is/are the owners of the property to be transferred and that no creditors of the owners hold hypothecs or other liens on the property. Documentary searches for such purposes are usually ordered by the Notary at the buyer’s request and charge, however Notaries are not authorized to give advice and the examination of the documents and determination of validity of title is best left to the buyer’s advocate.

That any pending bills for electricity, ground rent, water, telephone or television/cable have been paid. Receipts are to be presented before signature of the final deed.

That the property is in full compliance with planning laws

The Notary’s fees and costs as well as duty or taxes to be paid on the final deed

If the buyer intends to finance the purchase through a bank loan, it is possible to make the promise of sale subject to the approval of the loan by the bank. Such approval, evidenced by a loan sanction letter issued by the bank, is usually to be advised to the vendor by a given date prior to the expiry of the promise of sale. Until such date the buyer may withdraw from the purchase, if a letter from the bank declining the loan is presented to the seller. If the time allowed for obtaining the desired finance runs out without result, the seller may enforce the purchase or sue for forfeiture of the deposit. Consequently, it is very important that finance applications treated with urgency by the buyer and the bank. Buyers are well advised enquire at the bank how long the loan application will require to be processed before establishing the validity period on the promise of sale. The Notary must also present all relevant documents to the Bank’s legal office for vetting in good time prior to the issue of the sanction letter.

If the vendor is not a Maltese national or not resident in Malta the Notary must obtain clearance from the tax department prior to proceeding with the final deed of sale. Such clearance is usually handled by the Notary.

If the is buyer is a third country national, a citizen of a European Union member state, or a Maltese citizen who has not resided continuously in Malta for a minimum period of five years, he/she will require a AIP permit to acquire immovable property (AIP) for secondary residence purposes. However there are no such restrictions to acquisition of properties in special designated areas which also benefit from exemptions of or from reduced rates of Stamp Duty.

On the final deed of sale both the purchaser and the vendor are subject to tax. Vendor is subject to transfer tax, whilst the purchaser is subject to stamp duty. There are no other taxes due on transfer of immovable property situated in Malta.

Generally Stamp Duty, payable by the buyer at 5%, is calculated on the declared transfer price or on the market value of the immovable, whichever is higher. The initial 1% of stamp duty due is paid on the promise of sale and the remaining 4% on the final deed of sale.

However, a European Union citizen intending to purchase an immovable property in Malta may benefit from a favourable rate of 3.5% on the first €150,000 of the price and the remaining amount which exceeds the first €150,000 is then calculated at the rate of 5%. It is important to note that a buyer wishing to take advantage of this reduced rate must make a declaration on the deed that he intends to dwell in the property which is being purchased by him and thus taking up the status of a sole ordinary residence.

First time buyers ie  persons purchasing their first property are exempt from stamp duty on the first €200,000 of the price of the property. The amount of the purchase price in excess of €200,000  is charged at a rate of 5%.

If the property is located in an Urban Conservation Area or in Gozo, then the stamp duty will be charged at a rate of 2.5% on any amount over €175,000.

Our agents are fully trained and will guide you through the process.

Private Residential Leases.

Leasing immovable property situated in Malta is fairly straightforward.

Once the terms are agreed, a written lease agreement is drafted accordingly. Some essential terms and conditions include the duration of the lease, rent payment terms, situations of default and payment of utilities. Our agents will guide you through this process. Lease agreements must be in full compliance with the Private Residential Leases Act.

Usually the first rental instalment is paid on signature of the lease agreement together with a deposit which is usually equal to one months’ rent.

As from 1st January 2020 lease contracts for a primary residential purpose must be registered by the owner with the Housing Authority online on the website www.rentregistration.gov.mt within ten (10) days from the commencement of the lease.

Taxes on Private Residential leases

Taxes on rental of immovable property in Malta are due by the Lessor/Landlord.

The Lessor has two options:

Either paying at a flat rate of 15% on gross rent received. This tax is final, therefore rental income need not be declared in the annual income tax return because it is not subject to further tax; or

Reporting the rent income in a tax return and paying tax on the applicable progressive tax rates.