Property Tax when Buying Property in Malta

Well known for its 300 days of sunshine, crystal clear beaches, fascinating history and strong sense of tradition, the Mediterranean Island of Malta offers a unique lifestyle with a high standard of living and superb quality of life.

More than the islands alluring charm - Malta is a prime destination for property investment. This jewel in the Mediterranean not only enjoys a strategic location but also a year on year growing GDP, business friendly regulations and favourable tax laws making Malta a magnet for foreign investment, this is especially true when looking at straightforward property tax landscape for those wishing to buy property in Malta as a foreigner.

Property Tax on Buying Property in Malta – Stamp Duty

Unlike many other countries, there isn’t a long list of taxes associated with purchasing property in Malta. There are no VAT implications on the purchase or sale of any immovable property situated in Malta or Gozo however the property is subject to Stamp Duty which is payable by the purchaser.

What is Stamp Duty in Malta?

In simple terms, stamp duty is the tax applied to legal documents and transactions, with one of the most notable being the sale, or transfer of immovable property and the main tax that buyers must account for when purchasing property in Malta.

How Much is Stamp Duty on Property in Malta?

The stamp duty is generally calculated at a standard rate of 5% of the property's sale price, or market value of the property, whichever is higher and is paid by the purchaser. This property transfer tax is split into two payments: 20% is due upon signing the Promise of Sale Agreement (POS) or Konvenju, A POS will not be considered valid unless this provisional payment of 20% of the total stamp duty fee is paid to the Commissioner for Inland Revenue. The remaining 80% is paid when the Deed of Transfer is executed.

In 2020 the Maltese government implemented a number of tax relief measures pertaining to the property market as part of the country’s stimulus package. These tax relief measures are reviewed and adjusted annually where necessary. Currently certain conditions allow for a reduced stamp duty rate provided the buyer and/or the property meet certain criteria. The exceptions to the 5% stamp duty rate are as follows;

• If the property purchased is acquired as a primary and the sole residence of the buyer, then a reduced stamp duty rate of 5% will be applied to the first €200,000 of the purchase price. The remaining purchase amount is then subject to the standard rate of 5% stamp duty.
• Should the property be purchased in Gozo the purchaser will benefit from a reduced stamp duty rate of only 2%.
• 0% stamp duty rate is applied on the assignment of immovable property between spouses who are married or formerly married who;
• Sell the immovable property to one another;
• Sell the property due to a divorce or separation between them;
• In the event of the dissolution of the community assets between them;
• The partition of property held between them;
• In the event of the death of a spouse.

First Time Buyers Scheme When Buying Property in Malta

There are many benefits afforded to those who purchase property in Malta as first-time buyers. Under Malta’s First Time Buyers Scheme, those wishing to get a foothold onto the property ladder can benefit from a number of tax relief measures and grants implemented by the Maltese government.

What Benefits to First Time Buyers in Malta Have?

First time buyers who purchase a property as their sole residence benefit from a stamp duty rate of 0% on the first €150,000 of the property purchase price and need only pay the 5% stamp duty rate on the remaining price of the property. This reduced rate applies only if the property being acquired is intended exclusively for residential use and the transfer occurred on or after 5 November 2013 but before 15 October 2019.

For transfers taking place between 15 October 2019 and 20 October 2020, the duty-exempt portion increases to €175,000. This amount is further raised to the first €200,000 for transfers made between 20 October 2020 and 1 January 2026.

Furthermore first-time buyers will also benefit from a €10,000 grant which is payable over a ten-year period. Second time buyers will find that they too can benefit from tax relief measures implemented by the government. 

Second Time Buyers Scheme in Malta

Second time buyers are responsible for the full 5% stamp duty, however second time buyers who sell their first residential property and purchase another one within 12 months are eligible for a duty refund on the first €86,000 of the new properties value.

Tax Exemptions on Certain Property Transfers When Buying Property in Malta

The Maltese Government has extended several property-related tax reliefs and incentives, providing continued financial benefits for buyers, sellers, and investors in Malta and Gozo. These reliefs, as outlined in the Relief from Income Tax and Duty on Documents and Transfers on Certain Property Transfers Rules (S.L. 123.203), will remain in place for another year.

• Old, Vacant Property: Properties that are at least 20 years old and have been vacant for at least 7 years are eligible for an exemption from both capital gains tax and stamp duty on the first €750,000 of the property’s value.
• Property in an Urban Conservation Area (UCA): Properties located in a UCA are eligible for the same exemptions from final withholding tax and stamp duty on the first €750,000 of the value.
• Properties Developed in Accordance with Approved Criteria: Newly built properties with traditional Maltese architectural features may qualify for exemptions from stamp duty on the first €750,000. Additionally, a refund is available if the property meets the approved development criteria.
  
  

Additionally, first-time buyers of these properties will also receive a grant of €15,000 for properties in Malta or €40,000 if the property is in Gozo.

Inheritance Property Tax in Malta

Inheritance property tax in Malta is governed by the Donations and Gratuitous Transfers Duty. Taxes are based on the relationship between the donor and recipient, with exemptions available for transfers to spouses and direct descendants. Inheritance duty is applied to the market value of the property in cases of inheritance due to death (causa mortis).

Typically, a standard 12% capital gains tax applies to the sale of a property acquired through causa mortis - calculated on the difference between the transfer value and the acquisition value stated in the inheritance deed. This applies only if the inheritance occurred after 24 November 1992. The same tax rate also applies to properties received as donations, provided the donation took place more than five years prior to the transfer date.

A 7% capital gains tax is charged on the transfer value of a property inherited before 25 November 1992. This rate also applies if the inheritance occurred after that date but the property is being transferred through a judicial sale by auction.

Property Valuations in Malta

The Commissioner for Inland Revenue is responsible for conducting property valuations in Malta for tax purposes. This valuation takes into account factors such as location, size, condition, and amenities. Property owners must submit a self-assessment form to initiate the valuation process.

It is important to note that Malta does not apply any annual property tax or yearly council tax to properties.  

Quick Facts on Tax when Buying Property in Malta

• VAT is not payable when purchasing property
• The standard Stamp Duty on property purchased in Malta is 5% of the purchasing price with 20% payable upon signing of the POS and the remaining 80% payable on the final signing of the deed of sale.
• First time property buyers in Malta benefit from a reduced stamp duty rate on the first 150,000
• Malta has no annual property tax and no yearly council tax on property.
• Additional reduced stamp duty rate and exemptions for property purchasers may apply in certain circumstances.

For detailed advice and to ensure compliance with local regulations, it is essential to consult with professionals. Malta Sotheby’s International Realty is a registered and accredited real estate company in Malta.  By understanding the tax landscape, both buyers and sellers can optimize their investments in Malta’s flourishing real estate market. For more information on buying property in Malta click here, or take a look at the additional property tax information we have available.