The cost of buying property in Malta

Taxes when buying real estate in Malta
Taxes when buying real estate in Malta

Malta is an excellent option for those who want to invest in real estate and capitalize on rising prices and renting out residential property. Purchasing property in Malta also allows the investor to permanently live there or in the European Union. In this article we discuss how to buy residential property in Malta, its price and the running costs involved.

Attraction of real estate in Malta for investors

Malta is well known as a tourist destination with a mild climate and ancient buildings. However, investors value the country for more than that. They are attracted by the possibility of profitable investments in real estate, tax benefits and the status of an EU resident.

Property prices in Malta have been increasing year-by-year, as construction has been growing steadily and only a limited area of undeveloped land is left. In addition, an increasing number of foreigners have been moving to Malta to buy real estate. In the past few years, 2020 was the only exception to this rule, as quarantine and other problems related to the COVID-19 pandemic limited the arrival of foreign investors. Despite this, although prices did not rise, they remained stable.

Renting out residential real estate generates an income of 5 to 10% per annum, and in the most popular destinations, in Sliema and St. Julian’s, 10 to 15%. In 2020, the short-term rental market contracted, and long-term rental prices fell by 5一20%. However, prices are expected to recover quickly after the end of the pandemic and the return of tourists.

Malta’s real estate market has been growing for several years, with finished housing prices rising 5一7% per annum on average, and in special residential areas, by as much as 10%. The return on investments at the excavation stage can reach 50%. Sometimes the price of a well-located apartment or villa can grow by 15一20% in one year.

Most foreigners buy new developments in special residential areas, known as Special Designated Areas (SDAs). They are built specifically for sale to foreigners. In contrast to buying real estate in other areas, there is no limit on the number of properties that can be bought in SDAs and then rented out. Furthermore, an Acquisition of Immovable Property (AIP) permit, which is normally required for purchasing property, does not need to be obtained for properties purchased in SDAs.

The investment attractiveness of SDA complexes is higher than that of other residential buildings and their prices grow faster.

Three-bedroom apartments on the beachfront in Marsascala

Three-bedroom apartments on the beachfront in Marsascala cost from 450,000 €. When buying, you will need to pay 35 093 €: stamp duty (5%) - 22 500 €, notary fee (0.5%) - 2250 €, agency fee (1%) - 4500 €, registration fees (1% + VAT) - 5310 €, permission to purchase - 233 €, opinion of the architect - 300 €

Three-bedroom apartments on the beachfront in Marsascala

Three-bedroom apartments on the beachfront in Marsascala cost from 450,000 €. When buying, you will need to pay 35 093 €: stamp duty (5%) - 22 500 €, notary fee (0.5%) - 2250 €, agency fee (1%) - 4500 €, registration fees (1% + VAT) - 5310 €, permission to purchase - 233 €, opinion of the architect - 300 €

Three-bedroom apartments on the beachfront in Marsascala

Three-bedroom apartments on the beachfront in Marsascala cost from 450,000 €. When buying, you will need to pay 35 093 €: stamp duty (5%) - 22 500 €, notary fee (0.5%) - 2250 €, agency fee (1%) - 4500 €, registration fees (1% + VAT) - 5310 €, permission to purchase - 233 €, opinion of the architect - 300 €

Three-bedroom apartments on the beachfront in Marsascala

Three-bedroom apartments on the beachfront in Marsascala cost from 450,000 €. When buying, you will need to pay 35 093 €: stamp duty (5%) - 22 500 €, notary fee (0.5%) - 2250 €, agency fee (1%) - 4500 €, registration fees (1% + VAT) - 5310 €, permission to purchase - 233 €, opinion of the architect - 300 €

Three-bedroom apartments on the beachfront in Marsascala

Three-bedroom apartments on the beachfront in Marsascala cost from 450,000 €. When buying, you will need to pay 35 093 €: stamp duty (5%) - 22 500 €, notary fee (0.5%) - 2250 €, agency fee (1%) - 4500 €, registration fees (1% + VAT) - 5310 €, permission to purchase - 233 €, opinion of the architect - 300 €

Three-bedroom apartments on the beachfront in Marsascala
Three-bedroom apartments on the beachfront in Marsascala
Three-bedroom apartments on the beachfront in Marsascala
Three-bedroom apartments on the beachfront in Marsascala
Three-bedroom apartments on the beachfront in Marsascala

An investor can sell the property 5 years after purchasing it without affecting their residence status. In this period, the value of their property can increase by 25一50%. The property can also be sold in this 5-year period without affecting their residence status as long as the investor buys another eligible property.

Low taxes. There is no annual property tax in Malta. However, a tax of 5% is charged upon purchase and a tax of 8% upon sale of a property.

Visa-free travel and permanent residence in the EU. Owners of real estate in Malta can participate in investment programs that entitle them to permanent residence in Malta and travel in the EU without a visa.

Minimum cost of real estate to participate in investment programs in Malta:

SDA complex in Kalkar

An example of an SDA complex in Kalkar, a town south of Valletta, the capital of Malta. The largest project under development today is located right on the seashore. It has one, two and three bedroom apartments, duplexes and penthouses. The complex includes restaurants, shops, gyms, spas, swimming pools with a relaxation area, etc.

SDA complex in Kalkar

An example of an SDA complex in Kalkar, a town south of Valletta, the capital of Malta. The largest project under development today is located right on the seashore. It has one, two and three bedroom apartments, duplexes and penthouses. The complex includes restaurants, shops, gyms, spas, swimming pools with a relaxation area, etc.

SDA complex in Kalkar

An example of an SDA complex in Kalkar, a town south of Valletta, the capital of Malta. The largest project under development today is located right on the seashore. It has one, two and three bedroom apartments, duplexes and penthouses. The complex includes restaurants, shops, gyms, spas, swimming pools with a relaxation area, etc.

SDA complex in Kalkar

An example of an SDA complex in Kalkar, a town south of Valletta, the capital of Malta. The largest project under development today is located right on the seashore. It has one, two and three bedroom apartments, duplexes and penthouses. The complex includes restaurants, shops, gyms, spas, swimming pools with a relaxation area, etc.

SDA complex in Kalkar

An example of an SDA complex in Kalkar, a town south of Valletta, the capital of Malta. The largest project under development today is located right on the seashore. It has one, two and three bedroom apartments, duplexes and penthouses. The complex includes restaurants, shops, gyms, spas, swimming pools with a relaxation area, etc.

SDA complex in Kalkar
SDA complex in Kalkar
SDA complex in Kalkar
SDA complex in Kalkar
SDA complex in Kalkar

Maltese citizenship for a family living outside Europe
Sergei and Tatiana are a married couple living outside Europe. They have two daughters: Svetlana, who is still at school, plans to receive her higher education in Europe, and Maria, who is studying through a correspondence course at a university in Switzerland and is bringing up her son Arseny.

The entire family had planned to move to Europe but could not choose a country. Initially it seemed that Maltese citizenship was not suitable. Maria and her child were considered a separate family, and two applications needed to be made, which would have meant costs of at least €2 mln. However, since Sergei formally accepted to bear all the costs of maintaining Maria and her child, according to the Maltese program she was considered a financially dependent person, making it possible for them to submit just one application for the entire family.

As a result, the whole family received Maltese citizenship by investment. Sergei and Tatiana can live in their home country and fly freely to Europe, it has become easier for Maria to travel to Europe for her studies, and Svetlana is about to enter a European university.

Purchasing real estate in Malta

The process of buying a property in Malta can take from a few weeks to 3 months. The costs for the entire transaction amount to 7一8% of the property’s value. The entire process can be completed through agents and lawyers without the investor’s presence in Malta for the registration.

Real estate sales in Malta take place in four stages:

1. Selection of a property. We help the investor find a suitable property and contact the seller or their real estate agent to view the property and discuss the details of the transaction.

2. Hiring a notary. The main work is done by the notary, who applies for permission to purchase the property, assumes the main responsibilities for supporting the transaction, represents the investor’s interests in the purchase, and drafts the purchase agreement.

The investor cannot buy real estate without using a notary, as only a notary has the right to certify transactions, hold the deposit, and pay the required fees and taxes on behalf of the buyer.

3. Preliminary purchase-sales contract. The buyer’s notary contacts the seller or their real estate agent to inform them of the buyer’s intention to purchase the selected property. The notary oversees the legal aspects of the sale and verifies that there are no encumbrances or obstacles to the purchase, draws up a preliminary purchase and sale agreement with the seller or their lawyer and agrees on the terms of the contract.

The preliminary contract must contain the following information:

  1. Cost
  2. Condition and description of the property
  3. Land tax
  4. Any repairs or other work that must be performed by the seller prior to the sale
  5. Furniture and appliances, if included in the transaction price
  6. The term of the contract (usually 3 months but occasionally 6 to 12 months) within which the seller has to complete all the work agreed to in (4).
  7. The amount of the deposit that will be kept by the seller if the buyer cancels the transaction without justification.
  8. Purpose of the purchase. If the buyer is purchasing the real estate in order to obtain permanent residence or citizenship, this must be reflected in the document. Then, if the application for residence or citizenship is turned down, the buyer can withdraw from the transaction without losing the deposit.

After signing the preliminary contract, the buyer pays the first part of the stamp duty, 1% of the property’s value, and a deposit, usually 10一15% of the sales price. All the money transfers in a real estate transaction take place through a notary.

At this stage, we can help the buyer obtain a mortgage if they are buying the property with borrowed funds.

4. Signing a purchase-sales contract. After the preliminary contract is signed, the buyer’s notary checks the legal aspects of the property, including the absence of obstacles or encumbrances against the property that could complicate the sale. The notary then submits a notice of the pending transaction and transfers 1% of the stamp duty to the Maltese Ministry of Finance (Internal Revenue Department (IRD)). The Ministry of Finance confirms that the deal has been registered.

If a foreign buyer needs a purchase permit (AIP Permit), then the notary applies for it at this stage.

The notary prepares the final purchase-sales contract. The buyer pays the remainder of the 4% stamp duty based on the sales price, as well as the notary and registration fees. The notary transfers the original signed copy of the contract to the National Archives of Malta and copies of the document to the buyer and seller.

After that, we, as representatives of the owner, register the transfer of the property’s ownership in the land register and obtain the certificate of ownership. This can be done without the buyer being physically present in Malta.

Which real estate is suitable for foreigners

Only citizens of Malta and the European Union who have been living in the country for more than 5 years can buy real estate without a purchase permit or other restrictions. In order to protect the interests of the local population and keep housing affordable, restrictions have been placed on foreigners and Maltese citizens not resident in Malta for 5 years from buying property there.

Citizens of Malta and the European Union who have been living in the country for less than 5 years can buy only one residential property without special permission. In order to purchase a second property, they need permission for the purchase.

Citizens of other countries need special permission to purchase property (Acquisition of Immovable Property (AIP) Permit) from the Ministry of Finance even when buying their first property. It takes 6 to 12 weeks to issue the permit. Permission will be granted if the cost of the residential property is at least €160,000.

The permit allows the holder to buy only one property as their own residence.

A property purchased through an AIP permit cannot be rented out.

However, there are exceptions to these purchase requirements: Special Residential Areas, or Special Designated Areas (SDAs). These are residential complexes with their own infrastructure: they are located in a closed-off area, with service personnel, a swimming pool, a gym, and recreation areas. SDA complexes contain all types of properties covering a wide price range, including apartments, penthouses and villas.

SDA complexes: the most convenient and profitable properties for foreign investors in Malta are located in SDA complexes:

  • their price and rental value grows faster than other properties;
  • when there is a crisis in the market, the price and rental value of properties in this segment fall less than in the others;
  • an investor can buy several properties at the same time and rent them out;
  • There is no need to obtain special permission to purchase real estate;
    the purchase-sales transaction is faster and simpler than in the other market segments;

Cities with strong demand for rental properties: Sliema, St. Julian’s, Bugibba, and Mellieha.

Property taxes in Malta
Portomaso a coastal residential development in St Julian's was the first SDA to be built. It is considered one of the most prestigious residential, business and entertainment areas in Malta. It has 420 apartments, offices, a conference room, shops, restaurants, underground parking and a marina

Property taxes in Malta

Taxes need to be paid when buying and selling a property.

Taxes paid by the buyer:

  1. Stamp duty: 5% of the value of the residential property (in some cases 2%, and until March 2021, 3.5% for a property costing at least €200,000 )
  2. Notary fee: 0.25–1% of the property’s value
  3. Agency fee: 1% + 18% VAT
  4. Registration fee: up to 1% + 18% VAT
  5. AIP permit (if needed): €233
  6. Architect’s certificate: about €300

Land tax (ground rent) has to be paid annually for certain categories of properties: €40–250 per annum.

Tax on rental income: 15% of the rental value

Tax paid by the seller: 8% of the sales price or market value. In certain cases, it can range from 2 to 10%.

Until the end of 2021, the standard rate for the sale of real estate that has been owned for more than 5 years is 5%.

Below we consider these taxes in more detail.

Taxes paid by a foreign buyer

Stamp duty: 5% of the purchase price. For properties located in urban conservation areas recognized as cultural heritage sites, it is reduced to 2.5%, and in Gozo, it is 2%.

Stamp duty is paid only on the value of the immovable property. The value of movable property, such as furniture or appliances, is not taxed even if it is included in the price of the residential property.

1% of the stamp duty is payable after signing a preliminary contract and the remaining 4% within 15 days of signing the final purchase-sales contract.

There is no stamp duty in the following cases:

  • the buyer and seller are current or former spouses; or the widow, widower, or heir of the deceased;
  • the transaction takes place within the same group of companies;
  • the real estate of the company is transferred to a shareholder in the process of liquidation or distribution of assets.
Permanent residence in Malta when buying real estate.
Typically, city centers in Malta are designated cultural heritage areas. Stamp duty for purchasing real estate there is 2.5% instead of the standard 5%

Sometimes part of the stamp duty can be returned. For example, a buyer purchases their first and only home in Malta and pays stamp duty at a reduced rate, and then buys a second home at the regular rate of 5%. If the buyer then sells their first property within a year after buying the second one, they can claim a refund of 1.5% from the 5% paid when they bought their second residence .

Reduced rate for stamp duty until the end of 2021
Special stamp duty rates apply until the end of 2021: 1.5% for the first €400,000 of the property value for all categories of buyers (including non-residents and foreigners), and the standard 5% for the rest of the property value (i.e., above €400,000). The reduced rates apply only to residential properties. This is one of the measures introduced by the government to help Malta recover from the economic consequences of the COVID-19 pandemic.

The reduced rates also apply to residential properties that can be purchased under Malta residence permit or citizenship programs by naturalization based on direct investment. The tax relief offers tangible savings for applicants. It resulted in the monthly sales in August and September 2020 being the highest in the past 2 years.

Savings when buying real estate, taking the reduced rates into account. Please note that if a buyer simultaneously sells a property that they have owned for less than 5 years, they will have to pay the standard stamp duty of 5% of the purchase price.

Notary fees: up to 1% of the property’s value. The fee depends on the price of the property:

  • up to €10,000: 1%;
  • €10,000–€500,000: 0.5%;
  • over €500,000: 0.25%.

Agency fee: 1% + VAT of 18% of this amount. This is the commission paid to a private agent (if used) for finding the property. If the buyer used the services of a registered real estate agency, the seller pays 3.5一5% (+VAT of 18% of this amount).

Registration fee: up to 1% + VAT of 18% of this amount. It is charged based on the statutory registration fee schedule.

AIP Permit (if needed): €233.

Architect’s certificate: about 300 €. It confirms that the property was built and remains in compliance with the requirements contained in the building regulations.

Land tax

In Malta property tax does not have to be paid every year. Instead, an annual tax is charged on the land (ground rent) on which the property is located. On average it is about €250 per annum, but sometimes it can amount to several thousand euros. Land tax payment can be a fixed annual payment or vary according to the schedule set out in the sales contract.

Land tax is not charged in the majority of cases. It is payable only when the property is built on plots allocated by the Maltese government.

When buying a home, in order to register the ownership of land, the buyer must pay the seller the ground rent for 20 years. If the owner of the home has already paid the entire tax, the buyer must reimburse these costs.

Tax on rental income

The tax on rental income tax is 15% of the rental value. It is a flat rate for residents and non-residents of Malta, residential and commercial properties, individuals and legal entities. The rate does not depend on the number of properties rented. For example, regardless of whether an owner rents 5 apartments or an entire villa, the rate remains 15% of the total rental income.

15%

tax on rental income

Reduced rates or benefits not available.

A VAT payment of 18% is charged on short-term rentals for up to 3 months. However, no VAT is charged on rental income from long-term rentals. Leases longer than 3 months must be registered with the Internal Revenue Department (IRD).

Property insurance in Malta

When purchasing a property in Malta through a mortgage, the buyer must take out real estate and life insurance.
The cost of real estate insurance is on average €50–100 per annum for an apartment and at least €500 for a house. If an insured event occurs, the sum insured should be sufficient to compensate the costs of purchasing new furniture and appliances, and carry out repairs. It does not depend on the cost of the property.

The cost of life insurance is also on average 50-100 € per year.

Permanent residence in Malta for couple
Ivan and Maria are a young married couple developing their own production business.

They decided to move to a country with a pleasant climate, good ecology and low taxes, which also offers them the opportunity to develop their own business.

The couple chose Malta, but the investment required to obtain citizenship required a large share of their capital to be taken out of their business. However, they found that the Malta permanent residence by investment program was affordable and sufficient for their purposes.

As a result, the whole family now lives in a country in which they feel comfortable and which is also making it easier for them to achieve their aims. Maria gave birth to her first child in Malta and Ivan has concluded a contract to supply equipment for his business in Malta.

The costs of buying a property in Malta

Let us calculate the costs of buying two properties: a one-bedroom apartment in Mellieha worth €160,000 and a seaside villa in St. Julian’s for €1,200,000. The buyer is a foreign investor who has not previously lived in Malta and is buying their first home on the island for their own residence.

Apartments in Mellieha for 160,000 €

Costs Tax rate Amount
Stamp duty 5% 8000 €
Notary fees 0,5% 800 €
Agency fee 1% 1600 €
Registration fees 1% + VAT 1888 €
Purchase permit 233 €
Architect's certificate 300 €
Total 12 821 €
apartments in a residential complex in Mellieha

Example of apartments in a residential complex in Mellieha worth from 160,000 €

apartments in a residential complex in Mellieha

Example of apartments in a residential complex in Mellieha worth from 160,000 €

apartments in a residential complex in Mellieha

Example of apartments in a residential complex in Mellieha worth from 160,000 €

apartments in a residential complex in Mellieha

Example of apartments in a residential complex in Mellieha worth from 160,000 €

apartments in a residential complex in Mellieha

Example of apartments in a residential complex in Mellieha worth from 160,000 €

apartments in a residential complex in Mellieha
apartments in a residential complex in Mellieha
apartments in a residential complex in Mellieha
apartments in a residential complex in Mellieha
apartments in a residential complex in Mellieha

Villa in St. Julian's for €1,200,000

Cost Tax rate Amount
Stamp duty 5% 60 000 €
Notary fees 0,25% 1500 €
Agency fee 1% 12 000 €
Registration fees 1% + VAT 14 160 €
Purchase permit 233 €
Architect's certificate 300 €
Total 88 193 €

Real estate in Malta: a profitable investment and a step towards obtaining citizenship

Real estate in Malta is an excellent investment, which on average grows 5–10% per annum in value and can earn another 5–10% per annum in rental income.

The owners can also obtain a residence permit, resident status or Maltese citizenship for the whole family. A Maltese passport will allow all family members to live, work and study in any country in the EU, as well as travel without visas to over 160 countries around the world, including Britain and the United States.

Maintaining real estate in Malta is not expensive. Monthly utility costs range from €100 to 150 for an apartment and €400 to 500 for a house. Land tax and insurance cost another €80一450 per annum. Rental income is taxed at 15%.

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