Townhouses, farmhouses, penthouses, houses of character, villas, bungalows, maisonettes, country views, sea views. You want it, Malta’s got it.
In the world of international real estate, Malta has been making some noise, successfully targeting the cream of the crop, i.e., the wealthier foreigner, not only to reside here due to Malta’s many life-style perks, attractive residency programmes and tax advantageous regimes but also for investment purposes. Indeed, property investment, even on a small scale, remains a tried and true means of building an individual’s cash flow and wealth.
property investment, even on a small scale, remains a tried and true means of building an individual’s cash flow and wealth
So, what does it take for a foreigner to secure his/her title of ownership and enjoyment over immovable property in Malta, be it for residential or investment purposes?
As soon as the property to be purchased has been identified, the prospective buyer must enter into a promise of sale agreement with the seller, which would contain certain information pertaining to inter alia details of all the parties, a detailed description of the property, the price, the validity period of the agreement and any other terms and conditions agreed upon between the parties, such as works which need to be completed.
The promise of sale agreement is essentially a private agreement which is usually drawn up by a lawyer or the same notary who would be engaged to publish the final deed of sale. Unless agreed otherwise, promise of sale agreements are valid for a period of three months.
In the transitory period between the signing of the promise of sale and the final contract, the notary, unless exempted from doing so by the parties, carries out the appropriate searches on the property to ascertain that there are no debts encumbering the property and that the seller has good title over the property. Indeed in terms of Maltese law, in spite of the absence of any stipulation of warranty in the contract of sale, the seller is nevertheless bound to warrant to the purchaser against any eviction which deprives him/her of the immovable property, and against any burdens on the same, claimed by others and not stated in the contract. The parties may however agree to add to, or diminish the effects of such an implied warranty, or to even stipulate that the seller will not be liable to any warranty whatsoever.
During the period of validity of the promise of sale agreement, the parties must ensure that all the prescribed conditions set out in the said agreement are satisfied. One vital condition would be the issuance by the Minister of Finance of the required permit, in terms of the Immovable Property (Acquisition by Non-Residents) Act (the “AIP Act”), to acquire the property, which may be applicable if the purchaser is a non-Maltese resident.
As a general rule, European Union citizens who have resided in Malta continuously for a minimum period of five years at any time preceding the date of acquisition may freely acquire immovable property without the necessity of obtaining an AIP Permit. Moreover European Union citizens, who have not resided continuously in Malta for a minimum period of five years are exempt from obtaining an AIP Permit if they are purchasing their primary residence or any immovable property required for their business activities or supply of services. An EU citizen who resides in Malta for a continuous period of 5 years following the acquisition as aforesaid, can then acquire his secondary residence without the need to apply for an AIP permit.
In the case of a non-EU citizen, or an EU citizen who has not resided in Malta for at least five years and is acquiring a secondary residence in Malta, a permit would be required
In the case of a non-EU citizen, or an EU citizen who has not resided in Malta for at least five years and is acquiring a secondary residence in Malta, a permit would be required and will only be granted if the immovable property is an apartment or maisonette the value of which is not less than €107,670 or any other property the value of which is not less than €179,400 and which is intended to be used by the non-resident as a residence for himself and his family and such non-resident does not own any other immovable property in Malta, other than immovable property which is exempt, such as property situated in Special Designated areas.
Special Designated Areas refer to the defined zones in Malta and Gozo in respect of which there are no restrictions to acquisition whatsoever and are in fact the main areas targeted by foreigners for investment purposes. Consequently both European Union and non-European Union citizens may acquire one or more units situated in such areas without requiring an AIP Permit. The Special Designated Areas are the following:
- Portomaso Development, St. Julian’s, Malta;
- Cottonera Development, Cottonera, Malta;
- Manoel Island / Tigne Point, Tigne/ Gzira, Malta;
- Tas-Sellum Residence, Mellieha, Malta;
- Madliena Village Complex, Malta;
- Smartcity, Malta;
- Fort Cambridge Zone, Tignè, Malta;
- Ta’ Monita Residence, Marsascala, Malta;
- Pender Place and Mercury House Site, St Julians, Malta;
- Metropolis Plaza, Gzira, Malta;
- Fort Chambray, Ghajnsielem, Gozo;
- Kempinski Residences, San Lawrenz, Gozo;
- Vista Point Marsalforn, Gozo.
Once a foreigner purchases property in Malta, there are no restrictions for the resale of the property, aside from obtaining the necessary tax clearance from the Inland Revenue Department. Repatriation of the selling price, including profits after tax, is allowed. Moreover, a foreigner who acquires residential property in Malta and uses it as his own residence for at least 3 consecutive years immediately preceding the date of the transfer and disposes of such property within 12 months of vacating the property, is exempt from any Maltese taxes upon resale.
This Article was first published on Money Magazine, 2016.