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Malta

Contents

1. Introduction – why buy real estate?

2. Contact details

3. Forms of property ownership

4. Taxes and other costs on property acquisitions

5. Issues during Ownership

6. Disposal of property

7. Non resident owners of property

8. Sundry issues

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1. Introduction - MaltaThe property market has long been one of the most valuable asset classes in Malta with both development and construction considered as a solid investment yielding a satisfactory margin. Malta offers a wide range of both commercial and residential property, in very distinct locations. There is a broad selection of office space available: a firm can choose between purpose built office blocks, converted houses or flats or a location within some of the new, large mixed use areas currently under development. On the residential side, Malta has long been renowned for quiet retreats in the form of converted farmhouses and traditional houses of character while at the same time providing the possibility of acquiring high class apartments in new residential complexes at prices which are still considerably lower than the equivalent in mainland Europe.

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2. Contact Details

Mr Karl Cini

Brian Tonna & Co

karl@briantonna.com

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3. Form of property ownership

The main distinction that is normally made with respect to forms of property ownership is that of whether it being residential, commercial or industrial.

Within each segment one can decide to either rent or outright purchase a property for their specific use. When it comes to commercial properties there are various designated areas that are more suited for commercial dealings.

Malta offers very attractive industrial rentals. With the help of the Malta Enterprise, a government agency, incoming firms can be directed towards the right location whilst offering rates that normally average out at €10 per m².

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3. Form of property ownership (contd…)

COMMERCIAL RENTALS

Top End Portomaso: € 300 - € 420 per sq.m. per annum Ta’ Xbiex Whitehall Mansions: € 186 - € 239 per sq.m. per annum

Mid End Sliema / St Julians / Ta’ Xbiex / Gzira Smart office blocks: € 58 - € 116 per sq.m. per Annum

Bottom End Central / North / South part of the island € 34 - € 58 per sq.m. per annum

RESIDENTIAL RENTALS

Top End Portomaso / Sliema / St Julians seafront: € 1,397 - € 3,400 monthly per apartment (designer finish)

Mid End Sliema / St Julians / Ta’ Xbiex seafront: € 580 - €1,200 monthly per apartment (non designer finish)

Bottom End Central / North / South part of the island and basic apartments in Sliema / St Julians: € 230 - € 690 monthly per apartment

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4. Taxes and other costs on property acquisition

All property bought in Malta is subject to stamp duty at the rate of €5 per €100 or part thereof, which payment is due to the Commissioner of Inland Revenue. This percentage is based on the higher of the consideration and market value of the property and is paid in two stages, 1% at the time of signing of the preliminary agreement (konvenju) and the remaining 4% settled at the time of signing of the contract of sale. There is no property tax that is applicable to immovable property in Malta.

Notarial fees are normally circa 1% of the selling price of the immovable property and are paid by the purchaser.

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6. Disposal of property The disposal of immovable property situated in Malta gives rise to income tax. There exist two methods of settlement of this tax. A complete exemption from tax is applicable where the immovable property has been the registered main residence of the person who is making the disposal for a minimum of three years and is being sold within a year of when it was vacated.

In all other cases the following tax regime will apply:

On the signing of the Final Deed of Sale, provided the property that is being transferred has been owned for less than 5 years the seller is given an option on how to be taxed. He can either choose to be taxed under the regime whereby tax is paid on the selling price as reduced by a number of allowable deductions or he can choose to be taxed under the new Final Property Transfer Tax system whereby a final withholding tax of 12% of the transfer value is applied. If the immovable property is held for more than 5 years the aforesaid option is not available and in this instance the final withholding tax of 12% is applicable.

Apart from the above agency costs associated with the sale of property normally range from 3.5% to 5% of the total selling price of the immovable property in question.

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7. Non resident owners of property Non residents wishing to acquire immovable property in Malta require a special permit and may do so only under certain conditions. The resale of immovable property by a non-resident is allowed as long as this is to a Maltese resident. A release permit is required in other cases. Repatriation of full resale price, including profits, is allowed without complications. Since Malta joined the European Union in 2004 many of the previous restrictions have been abolished for EU citizens.

Mortgages are available for property purchase by non-residents or non-Maltese citizens residing in the islands. Renting out of property purchase is allowed in special circumstances. More than one property can be purchased in Malta by a company or trust if located in particular designated areas.

All EU citizens who have resided in Malta for a minimum of 5 years at any time preceding the date of acquisition may freely acquire immovable property without the necessity of obtaining a permit.

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7. Non resident owners of property (contd…)

Rental of property by non-residents

Non-residents have through the years realised that property in Malta yields a good return and many have opted to purchase and subsequently rent immovable property. Rentals for short or long term lets are governed by contractual lease agreements. Letting agents and property brokers generally charge fees of one month’s rental.

The letting of immovable property is exempt from Value Added Tax (VAT) except where the lessor is a limited liability company.

A non-resident deriving income from the rental of property in Malta has to be registered with the Inland Revenue Department. Payments made to non-residents in respect of rent are required by law to be made net of withholding tax at rates stipulated by law which differ according to whether the payment is being made to an individual or a limited liability company.

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8. Sundry issues

The price brackets that are normally associated with immovable property vary considerably. One would expect to pay in the region of €72,000 to €320,000 for an apartment depending on the location, whilst the cost of a village house or a farmhouse will range between €175,000 to €480,000. Prices for high end apartments, town houses and farmhouses vary between €800,000 to €2million.

Over the years the Maltese property market has enjoyed a growth rate of 8% per annum, this rate increasing to between 12% and 15% during 2005 and 2006. As an investment, property in Malta does offer some excellent opportunities. One of the advantages of Malta’s small size is that commuting times between Malta International Airport and an office is rarely greater than 20 minutes and it almost never takes more than 40 minutes to get to anywhere else on the island.

Besides appreciating in value, investment in the Maltese property market is an ideal rental investment with returns averaging 5% per annum, in a destination with over 7000 years of history, culture and over 300 days of sunshine.

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