Whether you’ve been in Malta for a while or you’re simply looking to invest in a property abroad, the Maltese islands currently provide an excellent opportunity to invest in real estate. Why? Well, over the years, the industry has grown tremendously with property prices increasing at an exponential rate year after year. And most importantly if you’re thinking about making an investment, it shows no signs of stopping just yet. However, before diving in head first into buying property in Malta as a foreigner, we really suggest doing some research on the process involved in buying a place as well as taxes when selling your property. Below we provide a guide to buying property in Malta that’s been exclusively tailored to foreigners seeking to buy their first home or a rental investment.
The Process of Buying Property in Malta as a Foreigner
Before buying a property, you’ll obviously need to find the right one to purchase first. In Malta, many property seekers typically look for immovable property to purchase by browsing through online listings of reputable real estate companies or the classifieds in newspapers. Apart from that you can also expect to receive property magazines in your mailbox too.Generally speaking, there’s a lot to browse through.
Before you start ringing owners and real estate agents, you should always make sure you’ve determined a budget and have set some time to look at property before buying it. Provided that the property you’re interested in exceeds your budget by a small amount, you should go take a look at it anyways. In most cases, there’s always some room for negotiation.
While some people manage to find something within a few months, it’s also common for people to spend even up to a year or even two looking for a place. After all, buying a property is a huge commitment at the end of the day. So it isn’t something you should rush through. Once you’ve found a place that you’d like to buy, it’s now time to negotiate a price with the owner of the property or the agent if you’re going through one instead.
Taking the first step by signing the promise of Sale
After you’ve agreed on a price, you’ll then need to sign Promise of Sale Agreement (this is referred to as a ‘konvenju’ in Maltese). The agreement will be drawn up by a notary public prior to the date of when you need to sign it and will stand as a legally binding contract between you and the owner of the property. The document will contain everything from the conditions of the sale of the real estate, to the time duration by when the property must be paid to the deposit amount that will be needed. Generally, the deposit amount on a property stands at 10% of the value of the real estate being purchased.
What occurs during the ‘Konvenju’ term?
After the Promise of Sale Agreement has been signed, the notary public that has drawn up your contract will carry out the necessary searches on the property you’re buying. He/she will do everything required to check the legal title of the property, to verify if there are any outstanding debts that need to be paid by the owner, liens or hypotecs, special requirements and building permits issued.
As a purchaser, you’ll need to go the bank to organize a loan for the property and check on building permits. The owner of the property will need to complete any works on the place you’re buying (eg. tiling, plastering etc.) or fulfill any other obligations as stipulated in the contract.
Signing the Final Deed to Your Property
Once all the research has been done by the notary and the ‘konvenju’ term has passed, a date for signing the final deed will need to be agreed upon. Typically, the signing of the deed will occur either at the bank from which the loan is being granted, the notary public’s office or the real estate agent’s office. During the signing, the deed will be read out to both parties involved and a legally binding agreement for the transfer of the immovable property will be reached. When the final deed has been signed, the remaining balances due will need to be paid. These include the price of the property that you agreed to pay to the owner; the amount due to the commissioner of inland revenue for stamp duty and finally the 66% of the notarial fee (typically set at 1.5 to 2.5%) that’s payable to the notary public who has drawn up the final deed and carried out the research on the property.
What language are the legal documents in?
Due to the fact that Malta’s two official languages are English and Maltese, the legal documents which are drawn up by the notary public can be in English or Maltese. In cases where the one party considers himself/herself more comfortable communicating in English and the other party in Maltese, legal documents can also be drawn up in both languages.
Buying Property in Malta for EU Foreigners
If you’re an EU Citizen, who has lived in Malta for a duration of at least 5 years during the time when you’re trying to purchase a property, you’ll be eligible to purchase immovable property without applying for a permit. However, if you haven’t lived in Malta for the minimum amount of time stated and you’re buying an investment property, you’ll need to apply for a permit from the inland revenue department to do so. On the other hand, should you be purchasing your first property with the intention of using it as your sole residence you won’t need to apply for a permit under chapter 246. Nor will you need to do so provided that you’d like to acquire property for the use of business activities (eg. an office space) or supply of services.
Buying Property in Malta as a second home or non-EU
Provided that you’re a Non-EU citizen or that you’re an EU citizen who wishes to buy a property as an investment or a second home, you’ll need to acquire an AIP (Acquisition of Immovable Property) permit. In order to do so, you’ll need to buy real estate worth at least the minimum amount of €150,000. This generally takes 6 to 8 weeks.
Notary Fees for Foreigners in Malta
When buying a property, hiring a notary public is a must. Typically, notarial fees in Malta vary from 1.5% to 2.5%. Part of the fees are to be paid on the promise of sale agreement (33%) and the rest of the balance due is to be paid on the final deed (67%).
Stamp Duty on Property in Malta for Foreigners
In Malta, the stamp duty on property bought stands at 5% of the immovable property. During the Preliminary agreement, 1% of the stamp duty must be paid. The rest of the balance (4%) will need to be paid when the final deed of the sale is signed. In certain situations, buyers can benefit from special schemes from the government such as the ‘First Time Buyers’ scheme and the ‘Second Time Buyers’ scheme even as foreigners.
First-Time Buyer Exemptions for Buying property in Malta as a Foreigner
Provided that you’re buying your first property as a foreigner in Malta, you’ll be able to benefit from the current governmental scheme that’s in place called the ‘First Time Buyers scheme’. This scheme exempts individuals from stamp duty on the first €150,000 which translates to a saving of €5,000. Stamp duty will be charged at 5% on the rest of the property value.
Margaret decides to buy a place in Hamrun for €149,000. Since she’s buying a property as her main residence for the first time, she’s eligible to use the First Time Buyers scheme. In this case, since the price of the property does not exceed €150,000, Margaret is exempt from stamp duty.
Second-Time Buyer Exemptions for Buying property in Malta as a Foreigner
If you’re buying a property as a foreigner in Malta for the second time round, you’ll be able to benefit from the ‘Second Time Buyers’ scheme that’s currently being offered by the government. Just like the ‘First Time Buyers’ scheme, the scheme offers purchasers the right to claim a refund on stamp duty. In this case, you’ll be able to claim a refund of about €3,000 on the first €86,000 of your property. The stamp duty refund in this case is granted on the basis that the sale of the first property takes place within a 12 month time period of when the acquisition of the new apartment or house occurs. Stamp duty will then be calculated at 5% on the remaining value of the property.
A man named John who lives in Gzira has already got a property in his name which is his sole residence. He decides to buy a larger property in Mosta and puts it up for sale. After looking at different types of property, he decides to buy a house for €250,000.
Since John already has a property in his name and previously used the ‘First Time Buyers Scheme’, he’s now eligible to use the ‘Second Time Buyers Scheme’ instead. According to this scheme, John is exempt on paying duty up to €86,000. In his case, the remaining balance is €164,000. He’ll need to pay 5% stamp duty on this amount which equates to € 8,200
if his application for the scheme is approved and he manages to sell his old property within 12 months of his acquisition.
Our Advice to Foreigners Buying Property in Malta
Prior to buying a place,as a sole residence or investment, it’s always advisable to look at different properties around the Maltese islands before making such a life-changing decision. Although we’ve provided quite an in-depth guide to buying a property in Malta as a foreigner, discussing things with your chosen notary about your individual needs will allow you to benefit from getting the advice you need about your individual situation.