All That You Need to Know About Property Tax in Malta

VAT implications and stamp duty. Here’s your guide to the main property tax points in Malta

There is no doubt about it – Malta is, and has always been, a very appealing place to stay for both locals and foreigners alike. Not only is the island situated right in the middle of the Mediterranean Sea, but it also enjoys over 300 days of sunshine, it is surrounded by crystal blue seas, and the people are known for their hospitality.

However, that’s not all. The island’s growing GDP and favourable tax laws are a magnet for attraction when living on the Maltese Islands, especially if you are a foreigner thinking about moving to Malta.

Unlike other countries, when buying property in Malta, taxes are not endless and there are no VAT implications when purchasing or selling immovable property in Malta. However, there are other things that you need to take note of.

Stamp Duty

Stamp duty can be considered as a transaction-based tax, and it is only payable when the transfer of the immovable property happens. The duty is calculated on the selling price of the property and it is paid by the purchaser of the property.

This stamp duty is highly important when purchasing a property since the konvenju or Promise of Sale will not be considered valid unless a provisional payment of 20% of the stamp duty is paid to the Commissioner for Inland Revenue. A Promise of Sale needs to be registered with Public Registry within 21 days from the signing.

Recently, due to the Covid-19 pandemic, there have been some changes to the stamp duty made by the government. In light of the situation, and only applicable to Maltese residents, these changes included the reduction of the stamp duty from 5% for buyers with the first 20% payable upon signing the Promise of Sale (POS), to 1.5% for the buyer. Withholding tax for the seller also dropped from 8% to 5% with these new changes.

If you are a first-time buyer, stamp duty is exempt on the first €175,000 of the property price. The amount of 5% on the remainder will then be charged to the first-time buyer.

Non-Residents Buying Property in Malta

Non-residents buying property in Malta will require an AIP (Acquisition of Immovable Property) permit if this property will not act as their primary residence. EU citizens do not require this permit if they are buying property in Malta as their primary residence. If an EU citizen is purchasing a property as a second home, an AIP permit is then required.

The minimum property values are the following:

• Flat/Maisonette: €121,792
• Any other property: €350,000

These values are subject to change, according to the Property Price Index.

The AIP permit is usually issued withing 35 days and there is a €233 fee that is charged per permit.

Renting/Leasing of Property

Lessors are exempt from paying VAT unless renting via a company, in which case, the VAT payable amounts to 5%. However, this also means that lessors cannot claim input VAT on expenses related to their business when VAT is not being charged.

Other Expenses involved when Buying Property in Malta

When buying property in Malta, tax payments are a blessing since they are not limitless. However, other expenses need to be noted for. Here is a list of all other expenses for easy reference:

• Stamp duty 5% (taking into consideration if you are a first-time buyer or not).
• Notarial fee which amounts to around 1%.
• Around €300 should be dedicated to searches. However, the cost of searches varies property-by-property.
• The AIP permit (if required) will cost €233 excluding professional fees like accountant fees, auditor fees, lawyer costs, etc.
• Recognition fee that is equivalent to one year’s ground rent (only required when the property is subject to ground rent). This is called ‘Laudemium’.

It is important to team up with a real estate company like Bernards Real Estate that is registered and accredited. Our trusted team of professionals will ensure that they direct you towards the right people to comply with Malta Tax regulations.

If you are looking for your dream home in Malta, do not hesitate to contact us. Our team will ensure the best service possible while making sure that you are completely in line with regulations.

For more information on taxation, kindly visit our website here.