Once the purchaser selects the property of his choice, a preliminary agreement is signed between the purchaser and the vendor in the presence of a Notary Public. This agreement is locally known as a kunvenju and is written in either Maltese or English. This is a binding agreement whereby both parties bind themselves to buy or sell the property at the price and conditions agreed upon.
A deposit of 10% is usually paid by the purchaser and is held by the notary, estate agent or vendor depending on what has been agreed. The purchaser will also pay a provisional 1% of the 5% Stamp Duty due.Within 3 weeks of signing this promise of sale agreement, the Notary will register the said agreement with the Commissioner of Inland Revenue. A typical time frame between preliminary agreement and the final contract is between 3 and 6 months. The agreement could be subject to some conditions normally including Bank loan, architects approval, building permits, as agreed by the parties. Once the notary has carried out the searches on the title of the property, bank loan approved(if any), any outstanding debts cleared – then the final contract can be signed. At this stage the balance of both the purchase price ,the Stamp Duty,any taxes and all legal expenses are paid on the signing of the contract.
Buying Expenses and legal fees
Stamp Duty 3.5% on the first €150,000 of the immovable property price. The remaining balance is paid at 5%. This applies only on the purchase of one’s main ordinary residence (and subject to the purchaser having only one property in his name.) For any other property purchase, Stamp Duty is charged at 5% on the total value of the property.
No Stamp Duty is charged on the value of the movable property (furniture and fittings) .
Notarial fees are approximately 1% of the selling price .This does not include the searches and registration fees.
N.B. The above expenses are the liability of the purchaser, while brokerage fees due to the estate agent are due by the vendor.
Expenses on selling immovable property
Capital Gains Tax
A new Final Withholding Tax was introduced In January 2015 at the rate 0f 8% on the sale price,however if the property was purchased before 1st January 2004 then the rate applicable would change to 10%.
If the vendor ( not a property developer )has owned the property for less than 5 years the rate will be 5%.
This will not apply if the immovable property has been the registered main residence of the vendor for a minimum of three years and is being sold within a year of when it is being vacated.
Citizens of all European Union member states, including therefore Maltese Citizens, who have resided in Malta continuously for a minimum period of five years at any time preceding the date of acquisition may freely acquire immovable property without the necessity of obtaining a permit under Chapter 246 of the Laws of Malta.
Citizens of all European Union member states, including therefore Maltese Citizens, 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 under Chapter 246 of the Laws of Malta.
Citizens of all European Union member states, including therefore Maltese Citizens, who have not resided continuously in Malta for a minimum period of five years, require a permit under Chapter 246 of the Laws of Malta to acquire immovable property for secondary residence purposes.
Individuals who are not citizens of a European Member state may not acquire any immovable property unless they are granted a permit in terms of Chapter 246 of the Laws of Malta.
There are defined zones in Malta, 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. Different rules apply to the acquisition by bodies of persons.
The spouse of a citizen of Malta or another E.U. Member State, where such spouses acquire together immovable property in Malta, falls within the definition of a “resident of Malta”.
Acquisition by Bodies of Persons
A body of persons, other than a commercial partnership, established in and operating from a European Union member state may freely acquire immovable property that is required for the purpose for which it has been set up as long as it is directly controlled by citizens of a European Union member state.
A commercial partnership established in and operating from a European Union member state (therefore including Malta) may freely acquire immovable property that is required for the purpose for which it has been set up as long as such partnership is controlled by and at least 75% of its share capital is held by a person (or persons) who is a European Union member state citizen.
Any other body of persons will require a permit, which is only granted if the property is required for an industrial or touristic project or as a contributor to the development of the economy of Malta.