Procedure for purchase of property by Maltese Residents

Once a property has been decided upon, and the price and conditions have been agreed, the Vendor and the Purchaser enter into a promise sale (konvenju) for the transfer of the agreed property.

A promise of sale is an agreement drawn up (usually) in front of a Notary Public wherein the Vendor promises to sell, and the Purchaser promises to buy a specified property for a specified price and under the terms and conditions agreed to therein.

A deposit on account of the price is paid on the promise of sale. This is usually equivalent to 10% of the purchase price of the property, however a greater or a lesser amount may be agreed to between the parties. The deposit may be given to the Vendor, or may be left with the Notary Public, Legal Advisor, or Estate Agent, for peace of mind.

The promise of sale is valid for three months, unless a longer or shorter period is agreed to between the Vendor and the Purchaser. Prior to the lapse of the agreed time, the final deed must be entered into.

In the period between the promise of sale and the final deed, the Notary will undertake and carry out all the necessary research into the Vendor's title and liabilities, in order to ensure that the Vendor's title is in order and that the property is not burdened by any liabilities. In the case of foreigners, the Notary will also apply for the necessary permits for the purchase of the said property.

Once the searches are found to be satisfactory, and the necessary permits have been issued, the final deed (kuntratt) will be entered into. This must be published by a Notary Public. The Vendor and the Purchaser, or their authorized attorney, must be present to sign the final deed. On the final deed the balance of price is paid and the property is transferred to the new owner with vacant possession.

Expenses payable by the Purchaser

• Duty on Documents on the transfer of the immovable property is payable at the rate of 5% of the purchase price. First time buyers have a reduced rate of 3.5% on the first € 46,587 / Lm 20,000.
• Notarial fees and other expenses for the carrying out of searches, and for the registration of the deed approximately between 1% and 2%.
• Estate Agents service fee are free of charge as it is payable only by the Vendor.

Procedure for purchase of property by Non-Maltese Residence

Rules applicable only to Non-Residents

In respect of purchase of property in Malta, the phrase "non-resident" is understood to mean any person not holding a Maltese Passport, or any body not registered in Malta, inclusive of all those companies in which more than 20% of their shareholding is vested in the name of foreigners.

Non-Residents who want to purchase a property in Malta must obtain the necessary permission from the Ministry of Finance. This is referred to as Acquisition of Immovable Property by Non-Resident Permit (A.I.P. permit). The Notary publishing the deed will apply for the A.I.P. permit once the promise of sale is signed. For this purpose, the applicants will be required to produce a photocopy of their passport and four passport size photos. This permit is normally granted within 35 working days from application.

The A.I.P. Permit will be issued subject to the following conditions (there are some exceptions as specified below):

1. The applicant and/or his spouse must NOT own other property in Malta. An applicant who already owns a property in Malta may acquire another one only after having sold the first property, and this after obtaining the necessary permits from the Ministry of Finance.

2. The MINIMUN purchase price must be not less than € 69, 881 / Lm 30,000 for an apartment and not less than € 116,468 / Lm 50,000 for house or villa.

3. All funds for the purchase must be brought into the country from an EXTERNAL SOURCE. Documentary evidence to this effect must be produced and passed on to the local exchange control authorities prior to the signing of the final deed.

4. The property may only be used for RESIDENTIAL purposes of the applicant and/or his family, and may not be used for commercial purposes. It may not be rented. Guests may be accommodated only when the owner, or a member of his family, is in residence. Villas with swimming pool may, however, be considered for a permit to rent to other non-residents on short let basis, provided that an application is made to the Hotels and Catering Board. All income theron is subject to15% tax rate.

5. Applicants may not purchase a property in Malta which is of historical interest or situated in a historical area. This condition does not apply to most houses of character or farmhouses on the market for sale.

6. The immovable property being purchased must not be transferred except to a resident of Malta. However this condition is waived when efforts to re-sell the property to a resident of Malta have proved unsuccessful.

New Regulations 2004 : Circular JA01/2004, issued 10th January 2004

• IBAN - International money transfers

  Banks are insisting that with immediate effect, all international money transfers are to be accompanied with the International Bank Account Number (IBAN).

  This effectively means that potential foreign purchaser of immovable property, are to give to their respective bank (from where the money transfer is to originate), the IBAN of the beneficiary.

  Local banks have recently been advising the IBAN. Local banks are not too eager to accept foreign personal cheques, and this effect a press release was issued by the Commercial Banks in Summer, discouraging the use of foreign personal cheques.

  Thus when the prospective purchasers are foreigners, and when the transaction involves a money transfer by the prospective foreign purchaser to a local beneficiary's bank account, it is important to provide the prospective foreign purchaser with the IBAN of the account where the money is to be credited to.

• Buying and selling property in Malta

  For Maltese Residents, the situation as regards the property market has not changed so much since 1st May 2004. However, there are certain details that will apply as from May with regard to foreign residents buying property in Malta. These are outlined as follows:

  For definition purposes, the EU includes the 25 member states and Iceland, Liechenstein and Norway which are part of European Economic Area agreement. Residents from any one of these countries are treated as EU citizens when it comes to buying property in Malta.

  EU citizens who wish to purchase a secondary home in Malta will still require a permit. This permit will continue to be granted automatically if certain conditions are fulfilled. But they still cannot buy more than one property.

  EU citizens who settle in Malta and have a regular residence permit and wish to buy a property as their primary residence can do so without a permit. Again, however, they cannot buy more than one property, EU citizens who have been resident in Malta for more than five years will be able to buy a second or more property in Malta. Additionally, EU citizens who conduct business in Malta will be able to buy property that is related to their business without a permit.

  Restrictions such as the limit of € 69,881 / Lm 30,000 on maisonettes and flats and € 116,468 / Lm 50,000 on other property remain in force while the rights of Maltese citizens are not affected. However, Maltese citizens who have not lived in Malta for five years will be treated like other EU citizens when it comes to property buying and selling.

  Additionally, there will be no restrictions for EU citizens buying in designated area which include the Manoel Island / Tinge, Portomaso and Cottonera Waterfront Projects. EU citizens may also rent their properties without restrictions, providing to obtain the relevant Letting Licence from the Malta Tourism Authority.

  	Category	1st Property	2nd/ Further Property
  a)	Maltese citizen	FREE to buy (also in EU)	FREE to buy (also in EU)
  b)	EU citizen residing abroad	Permit granted	No permit granted
  c)	EU citizen residing in Malta	FREE to buy	No permit granted if resided in Malta for less than 5 years, else FREE to buy.
  d)	Non-EU citizen	Permit granted	No permit granted

  
  

• Property deriving from an inheritance

  Properties resulting from an inheritance were up to the 24th November, 2003 not subject to Tax on Capital Gains on their transfer, directly by the heirs.

  The position has now changed, the sense that such property is now subject to Tax on Capital Gains, on the profits between the declared value of the property at the time of Inheritance, and the sale price of the property.

  A measure has been introduced in respect of promise of sales signed prior to the 25th November, 2003. This measure is as follows, namely that in the case of:

  • a promise of sale signed prior to the 25th November, 2003; and

  • which involves property deriving directly from the inheritance; and

  • which has been specially registered with the Ministry of Finance, by the 5th January, 2004, the Notary/Lawyer in whose possession such promise of sale lies; and

  • where the final deed of transfer is published by not later than the 31st March, 2004;

  Then the Vendors (namely the heirs) may opt to pay a 5% FINAL WITHHOLDING TAX, rather than pay Tax on Capital Gains. In other cases the Vendors are subject to Tax on Capital Gains.

  Please note the deadline of 31st March, 2004

• Promise of Sales, signed from 1st January, 2004 onwards

  Promise of sales, signed from the 1st January, 2004 onwards, are to be registered within 3 weeks of their signing, with the Commissioner of Inland Revenue

  The following details are to be supplied on registration:

  • Prospective Vendor (Transferor) name, address, telephone number and Income Tax number (Identity card or Company number will do);

  • Prospective Purchaser (Transferee) name, telephone number and Income Tax number (Identity card or Company number will do);

  • Date of promise of sale;

  • Validity period of promise of sale;

  • Price of the property being sold;

  • Provisional Duty payable (this is equal to 1% of the sale price, to be pre -paid Duty by the prospective Purchaser)

  • A Block plan and site plan of Land Registration Stationery duly signed by the Architect (Plan and site plan on Land Registration Stationery are collected from the Land Registry offices, at 116, West Street, Valletta);

  • A copy of the promise of sale, authenticated (witnessed) by a Notary or Lawyer.

  The registration of the promise of sake, is to be effected on a special form (known as DDT3) filed in duplicate, and signed by the prospective Vendor (Transferor) and the prospective Purchaser (Transferee) and witnessed by a Notary or Lawyer, who is to rubber-stamp same.

• Promise of sale registration charge

  Payments effected by the prospective Purchaser on the signing of a promise of sale, are categorized as follows:

  • Deposit, normally 10% (which is normally deposited with the Notary, the Broker, or occasionally with the Vendor);

  • 1% of the purchase price of the immovable property, which is to be deposited with the Commissioner of Inland Revenue as pre-paid Duty; (effective 1st January, 2004);

  • € 58.23 / Lm 25 as registration fee for the promise of sale (to be paid by the prospective Purchaser at the time of signing of the promise of sale); (Effective 1st January, 2004 by broad agreement between Notaries); and

  • Promise of sale processing charge (as already applied).

  
  

• Extension to promise of sale

• Claims for Refund

  Claims for Refund of any Duty on Documents paid provisionally (that is where promise of sale lapses, or contract is not concluded within the validity period of the promise of sale), shall be made in writing jointly by the prospective Vendor and by the prospective Purchaser, and endorse by the Notary or Advocate who had authenticated the relevant promise of sale.

  The Commissioner of Inland Revenue shall not consider the Claim for Refund, unless he is satisfied that such promise of sale has lapsed or that both parties have agreed to terminate their obligation towards one another (naturally in so far as the said promise of sale is effected).

• Registered of deeds by Notary

  The registration by a Notary with the Commissioner of the Inland Revenue of the Publication of a deed now incorporates additional requirements. (This registration is necessarily effected by the Notary on Form DDT1, when the Notary pays at the offices of The Commissioner of Inland Revenue, the amount collected at the date of the deed as Duty on Documents, and Tax on Capital Gains or Final Withholding Tax.

  The additional requirements are the following:

  • The telephone number (of each of the parties to the deed);

  • The Reference /date of the original notification of the promise of sale (since the amount prepaid as Duty on Documents has to be matched with the registration of the deed itself);

  • The name of the Broker

  • The Identity Card/Income Tax number of the Broker;

  • An authenticated copy of the I.D. in respect of each individual (presumably individual means the Purchaser and the Vendor).