PURCHASING

For many years, legislation has controlled the purchase of immovable property by non-residents. The reason is Malta’s small size. Malta’s membership to the European Union has brought some relaxation to these restrictions with regard to citizens of E.U. member states, though Malta obtained a permanent derogation to continue to control such purchases.

Purchases by Individuals:

Citizens of all European Union member states, who have resided in Malta continuously for a minimum period of five years at any time preceding the date of acquisition may freely acquire any immovable property without the necessity of obtaining a permit.

Citizens of all European Union member states who have not resided continuously in Malta for a minimum period of five years may only purchase their primary residence or any immovable property required for their business activities or supply of services without the necessity of obtaining a permit.

Citizens of all European Union member states who have not resided continuously in Malta for a minimum period of five years, require a permit to acquire immovable property for secondary residence purposes (“second home” in Malta).

Individuals who are not citizens of a European Member state may not acquire any immovable property (other than in a special designated area) unless they are granted a permit.

There are defined zones in Mata, referred to as special designated areas, where there are absolutely no restrictions to acquisition. There is also no restriction on acquisition through inheritance and there are also several other special exemptions.

Where property is purchased as a primary or secondary residence, with or without a permit, as the case may be, that property must be used as such. Furthermore, there are restrictions on allowing such properties to be rented out to other persons.

In the cases that a permit is required, the property must have a value of at least €116,468 (or €69,881 in the case of an apartment). In the case of the purchase of a primary or secondary residence, whether a permit is required or not, the purchaser must not have acquired any other immovable property in Malta (other than in a special designated area).

Different rules apply to the acquisition by bodies of persons, such as companies.

Some legal aspects of purchase:

There are two legal stages. Signing the promise of sale agreement is the first stage. The promise of sale agreement is really the most important one, since once signed it is a binding promise on both parties to sell/purchase, it will contain all the terms and conditions for the transaction, and cannot be withdrawn unless by agreement, or unless there is good legal reason. Nor can any terms be added or changed without mutual agreement. The law requires this agreement (and any extension thereof) to be in writing. Once the promise of sale agreement is signed, your notary will carry out the necessary searches to ensure that the vendor has good title and that there are no undisclosed burdens on the property. Among other things, the promise of sale agreement will state whether the property is freehold, or whether it is subject to an annual ground rent (emphyteutical grant), and in such case, whether it is temporary or perpetual. It is advisable to engage the services of a legal adviser at an early stage.

It is advisable to engage an architect to inspect the premises, which should ideally be done before signing the promise of sale agreement.

It is also a wise precaution for the purchaser to require a clause inserted in the promise of sale agreement whereby the vendor guarantees that the house is built according to planning permits, and to ask an architect to verify this before the final deed. Verification of planning permits will not normally be done by the notary.

The promise of sale agreement will state a validity period, i.e. a time limit by which the final deed should be published (if none is stated, then the law deems the period to be three months). Typically, this validity period is three- four months.

The purchase is completed by the signing of the deed of purchase, which is a public document.

RELOCATION

A citizen of the EU basically has 2 options:

Option 1:

(a) You set up residence in Malta, under the “normal” Immigration rules (Legal Notice 205/ 04, see below for link), whereby EU citizens are able to set up residence in Malta, and work in Malta. This is administered by the Immigration Office of the Malta Police. There will be some procedures to complete: application for a residence permit, and application for an employment licence or evidence of self-employment. The application process includes checking by the police, and this in practice unfortunately can take some time.

(b) You will be treated for tax purposes in the same way as a Maltese resident, and you will pay tax at 35% on income that arises in Malta or that you receive in Malta.

Option 2:

You set up your residence in Malta under the optional Residents Scheme Regulations (Legal Notice 428/04, see link below). This scheme is administered by the expatriates section of the Inland Revenue dept. There is an application form to complete, and documents to produce. The application process includes checking by the police, and this in practice unfortunately can take some time. The advantage is chiefly that you will pay a reduced personal rate of 15% tax on income brought into/arising in Malta, subject to a minimum annual amount of €4,200. There are also exemptions/reduced tax on personal effects and car brought to Malta.

(b) The main requirements and restrictions:

You must show evidence that you have a capital (e.g. bank deposits, investments, immovables) of €350,000 or an annual income of €23,300.

You must import a minimum income of €14,000 plus €2,330 for each dependant, into Malta on an annual basis.

Within a year of taking up residence, you are required to lease a premises (not less than €4,200 per annum) or purchase a house (not less than €116,500) or purchase an apartment (not less than €69,900). Apart from this, there is no minimum stay requirement.

The exercise of a profession, occupation, or any employment or engagement in trade/business is in effect prohibited.

This information is provided by Hugh Peralta & Associates (Advocates) and is given as general guidance only. It is not a substitute for legal advice. For further information, please view the Inland Revenue Department's website.