Taxes and Charges – What Can You Expect to Pay When Buying a Home in Malta?
Isabella Zammit, Friday, 15 November 2013
This article is part of a series of 8 articles about buying property in Malta. The other articles in the series cover the following topics:
If you’re thinking of buying a property in Malta, a complex part of the process can be the tax system. The tax you pay is determined by the value of a property. It’s expressed in the form of a percentage, rather than as a flat amount of money.
Accurate budgeting before you enter any agreement is essential for your financial health and peace of mind. Malta isn’t an expensive country, in terms of the added government taxes and charges. To some people, it’s even considered a tax haven.
Take a look at the taxes and charges you can expect to pay when buying a home in Malta.
Immovable Property and the Two Tax Systems
Whenever you buy a property in Malta, you will be taxed on what’s called ‘immovable property’. In other words, this is something like a house or an apartment. It’s in a fixed location and it can’t be moved anywhere.
There are two main capital gains tax systems for purchases of property in Malta. The new system of tax applies a 12% capital gains tax and applies to property purchases made over seven years ago. The old tax system charges 7% capital gains tax on the total value of the property. This only applies to the seller, though. Buyers should have nothing to do with capital gains tax on residential property.
The Provisional Stamp Duty
The provisional stamp duty is a tax on the value of the property paid when you sign the preliminary contract. The preliminary contract says you’re definitely going to buy this property, and it’s legally binding for both seller and buyer. The tax amounts to 1% of the total value of the property.
This 1% is actually a part of the whole stamp duty tax, which makes up 5% of the total value of the property. You pay the rest of the tax after the official transfer of the property.
Stamp Duty
The second part of your stamp duty is 4% of the total property value. You don’t have to pay this until the deeds to the property are officially transferred to you. You’ll pay it as part of your total transaction. It’s not a separate tax. It’s a simple way of allowing you to cover the stamp duty in two parts.
The 5% stamp duty is actually determined by the property value or the purchasing price. The higher value is used for the final tax. This is so people can’t evade the tax when transferring the property by lowering the purchasing price purposely, before making a private transaction outside of the buying process.
EU Perk
As a Maltese or European Union (EU) citizen, you’re entitled to a reduction in the stamp duty. For the first 116,500 Euros, as of this writing, you’re charged 3.5% in stamp duty. The 5% stamp duty applies to anything more than 116,500 Euros.
For example, if you bought a house worth 200,000 Euros, you would only pay 5% on 83,500 Euros. You must be intending on using the property as your sole primary residence, though, for this to apply.
Annual Property Taxes
Annual property taxes don’t exist for Maltese citizens. Foreign nationals immigrating to the island also don’t have to pay annual property taxes. This has led to the island gaining a reputation as a mini tax haven for wealth foreigners. Many other countries charge annual taxes on any property owned.
What about VAT?
You do have to pay the 18% VAT rate if your property purchase was facilitated with a private agent. This is 18% VAT on the 1% commission the buyer pays. The seller covers most of the commission at 3.5%.
There are no agent’s fees if you used a Registered Real Estate Agency to facilitate the purchase of your property.
Refunds of Duties
In some cases, you can actually receive a refund on the duties you pay. One such incident is where you buy a second residence on the island. If you buy a second residence, you gain access to a reduced rate of duty. This means you get a refund of the 1.5% difference paid in duty if you sell your original residence within a year of the transfer of the deeds on your new property.
You don’t get access to a refund of your duty if you decide to keep both homes. The Maltese government doesn’t want to encourage wealthy foreign nationals to purchase multiple homes, due to the chronic lack of property which can be built on the island.
Get Help
The professional helping you through the buying process will be able to aid you with any taxes or charges. They’ll be able to tell you if you qualify for any exemptions or reductions, such as if you’re an EU citizen.
Consider employing an estate agent which specialises in purchases for non-nationals. They might have an office in the UK. They’re best suited to guiding you through the three-month buying process.
This article is part of a series of 8 articles about buying property in Malta. The other articles in the series cover the following topics:
If you’re thinking of buying a property in Malta, a complex part of the process can be the tax system. The tax you pay is determined by the value of a property. It’s expressed in the form of a percentage, rather than as a flat amount of money.
Accurate budgeting before you enter any agreement is essential for your financial health and peace of mind. Malta isn’t an expensive country, in terms of the added government taxes and charges. To some people, it’s even considered a tax haven.
Take a look at the taxes and charges you can expect to pay when buying a home in Malta.
Immovable Property and the Two Tax Systems
Whenever you buy a property in Malta, you will be taxed on what’s called ‘immovable property’. In other words, this is something like a house or an apartment. It’s in a fixed location and it can’t be moved anywhere.
There are two main capital gains tax systems for purchases of property in Malta. The new system of tax applies a 12% capital gains tax and applies to property purchases made over seven years ago. The old tax system charges 7% capital gains tax on the total value of the property. This only applies to the seller, though. Buyers should have nothing to do with capital gains tax on residential property.
The Provisional Stamp Duty
The provisional stamp duty is a tax on the value of the property paid when you sign the preliminary contract. The preliminary contract says you’re definitely going to buy this property, and it’s legally binding for both seller and buyer. The tax amounts to 1% of the total value of the property.
This 1% is actually a part of the whole stamp duty tax, which makes up 5% of the total value of the property. You pay the rest of the tax after the official transfer of the property.
Stamp Duty
The second part of your stamp duty is 4% of the total property value. You don’t have to pay this until the deeds to the property are officially transferred to you. You’ll pay it as part of your total transaction. It’s not a separate tax. It’s a simple way of allowing you to cover the stamp duty in two parts.
The 5% stamp duty is actually determined by the property value or the purchasing price. The higher value is used for the final tax. This is so people can’t evade the tax when transferring the property by lowering the purchasing price purposely, before making a private transaction outside of the buying process.
EU Perk
As a Maltese or European Union (EU) citizen, you’re entitled to a reduction in the stamp duty. For the first 116,500 Euros, as of this writing, you’re charged 3.5% in stamp duty. The 5% stamp duty applies to anything more than 116,500 Euros.
For example, if you bought a house worth 200,000 Euros, you would only pay 5% on 83,500 Euros. You must be intending on using the property as your sole primary residence, though, for this to apply.
Annual Property Taxes
Annual property taxes don’t exist for Maltese citizens. Foreign nationals immigrating to the island also don’t have to pay annual property taxes. This has led to the island gaining a reputation as a mini tax haven for wealth foreigners. Many other countries charge annual taxes on any property owned.
What about VAT?
You do have to pay the 18% VAT rate if your property purchase was facilitated with a private agent. This is 18% VAT on the 1% commission the buyer pays. The seller covers most of the commission at 3.5%.
There are no agent’s fees if you used a Registered Real Estate Agency to facilitate the purchase of your property.
Refunds of Duties
In some cases, you can actually receive a refund on the duties you pay. One such incident is where you buy a second residence on the island. If you buy a second residence, you gain access to a reduced rate of duty. This means you get a refund of the 1.5% difference paid in duty if you sell your original residence within a year of the transfer of the deeds on your new property.
You don’t get access to a refund of your duty if you decide to keep both homes. The Maltese government doesn’t want to encourage wealthy foreign nationals to purchase multiple homes, due to the chronic lack of property which can be built on the island.
Get Help
The professional helping you through the buying process will be able to aid you with any taxes or charges. They’ll be able to tell you if you qualify for any exemptions or reductions, such as if you’re an EU citizen.
Consider employing an estate agent which specialises in purchases for non-nationals. They might have an office in the UK. They’re best suited to guiding you through the three-month buying process.
All types of property for sale in Malta by private sellers and estate agents. Find your perfect house or apartment in St. Paul’s Bay, Bugibba or Qawra. Or in Valletta and Mosta in the north of Malta
Anyone who buys a house in Malta worth at least € 350,000 will receive a passport as a gift. The Maltese Government wants to attract wealthy foreigners
and therefore offers citizenship when purchasing a luxury property. At the end of last year, more than 800 people had benefited from the scheme.
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