Buying a Piece of Malta, An Investment You Will Not Regret!

If you are thinking of investing and buying residential real estate in the Mediterranean where the sun shines 365 days a year, you have come to the right place. 

Buying a Piece of Malta and becoming a resident involves purchasing residential property in Malta or Gozo. Choosing to invest in a home on the Maltese islands and purchasing a rental investment offers a variety tax advantages which will be discussed in greater detail in this article.

Malta foreign investment policies

Malta invites international investors to set up shop in the country. This foreign investment strategy is bolstered by, among other things, a favourable tax structure.

Foreign residents in Malta are solely taxed on Maltese source income and foreign income earned in Malta, not on their worldwide earnings.

Under the Residents Permit Regulations, foreigners who become residents of Malta are taxed at a fixed rate of 15%. Other foreigners are subject to standard income tax rates.

There are no net wealth or real estate taxes in Malta, and while there is a capital gains tax on real estate sales, it does not apply to the sale of one’s primary house provided it has been owned and inhabited for at least three years.

Introduction to Malta

The Maltese archipelago is made up of three islands, three of which are inhabited: Malta, Gozo, and Comino.

The Maltese Islands are located in the Mediterranean Sea, approximately 100 kilometres south of Sicily and 300 kilometres east of Tunisia.

Malta is the major island, and Valletta, the capital city, is a UNESCO World Heritage Site. Malta also contains two more UNESCO World Heritage Sites, as well as a 7,000-year history and culture. Malta has a Mediterranean climate, which is pleasant and healthy, with a prevailing north-westerly breeze.

Winds aren’t howling, there’s no fog, no snow, and no frost. The average annual rainfall is 550mm.

Despite long periods of foreign dominance, the people of Malta have evolved certain distinguishing qualities over the ages. The natives are peaceful people with a strong feeling of welcome and a positive attitude.

Malta’s language is mostly Semitic in origin, with a considerable Arabic component. Assimilations from Italian and English, on the other hand, have improved the language. It’s written in the Latin alphabet.

• Population: 410,290 (December 2007)
• Statehood: Independent since 1964

Republic since 1974 European Union member since 2004

• Area: 316 km2
• Capital: Valletta
• Languages: Maltese and English (both official) – English is also the main medium of official documentation in banking and commerce
• Currency: Euro
• Time Zone GMT +1
• International telephone code: +356

Source: National Statistics Office

Why Malta?

• Excellent communication links and transport networks with Europe and beyond;
• Malta is an ideal hub for combining business and pleasure;
• A warm temperate climate;
• An enjoyable Mediterranean lifestyle with a diversity of restaurants, a good social life and quality cultural events.

Read more reasons why people fall in love and buy property in Malta.

Residents Scheme Regulations, 2004

A certificate from the Inland Revenue Department is required to take up residence in Malta. The certificate is valid for an infinite duration as long as certain requirements are met on an annual basis. 

Holders can stay in Malta forever and arrive and depart whenever they choose without having to go through any extra formalities. In accordance with the Residents Scheme Regulations, the following incentives and benefits are available to holders of a certificate:

• Malta’s tax legislation provides for double taxation relief, whether through negotiated double tax treaties with a large number of nations throughout the world or unilateral provisions.
• In Malta, there is no real estate tax. In Malta, there is a tax on capital gains originating from the sale of real estate, however residents are free if they have occupied the property investment as their primary residence for three years and it is sold within one year of abandoning it.
• Duty, at 5%, is however chargeable when you buy a property in Malta.

Conditions for Application

If you are a foreign investor purchasing a rental investment, you must have a global capital of at least €349,000 (or similar) or an annual income of at least €23,000 (or equivalent) derived from sources other than Malta. The permit holder must additionally pay €13,950 per year into Malta (plus €2,300 for each dependent, including the spouse). The bare minimum of remittances must not be sent outside of Malta. In addition, a holder of a Residents Scheme certificate must acquire or lease property in Malta that meets the following minimal requirements:

• Purchase of apartment: €69,000;
• Purchase of house: €1 16,000;
• Lease of residence: €4,150 per annum.

Application Process

The application process in order to invest in a property for sale has to be accompanied by the following documents:

• A copy of the applicant’s birth certificate or marriage certificate, as applicable;
• Three passport-size photographs in respect of the applicant and his or her spouse and dependants (where applicable);
• A police conduct certificate in respect of the applicant and his or her spouse (where applicable) from the police authorities nearest to the place of residence. (UK applicants must submit a “Subject Access Enquiry Certificate”);
• A copy of the personal details page in the applicant’s passport as well as that of his or her spouse;
• A financial certificate from the applicant’s bankers, accountants or a financial institution, stating that the applicant has an annual income in excess of €23,000 (or equivalent) or a minimum capital of €349,000, and is able to transfer €13,950 (or equivalent) per annum. The €13,950 must be increased by €2,300 for each dependant whose name appears on the application (e.g. for an applicant and spouse the amount required is €16,250);
• A self-declaration stating that the applicant shall remit to Malta the minimum amounts required.
• A copy of either the deed of purchase or the lease/rent agreement if the applicant already owns or rents/leases property in Malta. If the applicant does not already own/lease property in Malta a copy of such deed/agreement is required to be produced at the point in time when one actually takes up residence in Malta this being not later than 12 months after the date of issue of the residence permit.

All the above documents must be certified by a Notary and apostilled by the Ministry of Foreign Affairs in the country of nationality.

Timing

A certificate to buy-to-let property in Malta as a foreign investor usually takes three months to be issued from the date of application. The minimal tax must be paid within thirty days of the application’s acceptance and will be applied to the tax owed for the first year of residency. A permit holder must begin living in the country within 12 months of receiving the permit.

Other Residents

An individual may also take up residence in Malta by declaring his intention within three months of arrival in Malta and must complete and submit a form with the relevant authority. 

An individual who is economically self-sufficient must prove to the authorities that he or she is in receipt of an annual income of €23,000 if married and €14,000 if single. 

An individual may also become a resident of Malta as a consequence of taking up employment in Malta. A foreigner taking up such employment would require employment permission, which would be applied for by his employer.

Taxation

For tax purposes an individual is normally regarded as being resident in Malta for a particular year if, in that year, his stay in Malta exceeds 183 days. The applicable income tax rates are, however, the normal rates of income tax applicable to residents, which are as follows:

Married couples may also opt for “single” rates individually on certain income.

Household Effects

EU citizens may bring their personal belongings (except cars) into Malta without paying VAT or import charges. Customs may initially ask a deposit or a bank guarantee for the amount of VAT/duty in question from non-EU nationals. Any such deposits or bank guarantees are reimbursed or cancelled with the expiration of 200 cumulative days of stay in Malta, provided that the period of stay can be shown upon request. Read more about the citizen investment criteria needed before investing in property for sale or rent in Malta or Gozo.

Inheritance and capital transfer tax

There is no general inheritance tax system in Malta. However, upon the transfer or transmission (upon death) of:

• Real estate or shares in a company owning mainly real estate a duty of 5% is payable;
• Marketable securities (mainly shares in Maltese companies) a duty of 2% is payable.

Source: Income Tax Act

Investing in Malta

RE/MAX Malta is the fastest growing and most professional real estate agency in Malta and is part of a network of 100, 000 associates and over 7000 real estate offices around the world, including Sweden, Germany, Italy, Portugal, UK amongst others.

If you are interested in investing in a property for sale or rent in Malta contact one of our offices or go directly to our homepage.