Special Designated Areas in Malta

Updated: July 30, 2020 | 12 minute read

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Investing in Special Designated Areas in Malta

Located in the middle of the Mediterranean Sea, the Maltese Islands have been an attractive tourist destination for over two decades.

As a result of a stable market and excellent return on investment, Malta has garnered a coveted reputation for itself as a lucrative opportunity to invest in property.

Several other encouraging factors, such as the favourable tax structure, regulatory development, increasing accessibility and diminishing red tape, appears to be very appealing to EU nationals as well as expatriates across the globe who are seeking to invest in a thriving Real Estate sector such as Malta’s.

One thing worth noting, which attracts many foreigners to take up residence in Malta, is that immovable property still benefits from no tax on ownership or wealth. Several measures have been implemented by the Maltese government to entice more investment in property, effectively enhancing the market to what it is today.

As there are some restrictions on acquiring property in Malta, we shall be explaining how foreigners can buy multiple properties in Malta, the process of acquiring property in Malta as well as the opportunities in selling and renting such properties.



What are Special Designated Areas?

Special Designated Areas (SDAs') are defined zones where no restrictions to acquire a property apply. This means that a foreign citizen wishing to buy property in these areas can do so with equal rights as that of a Maltese citizen.         

Typically, property located in these zones provides luxurious amenities such as gyms and spas, marinas, swimming pools, shopping malls and supermarkets as well as restaurants for its residents.

Listed below is a comprehensive index of all current Special Designated Areas in Malta and Gozo:

  1. Portomaso Development, St. Julian’s, Malta;

  2. Portomaso Extension I, St. Julian’s, Malta;

  3. Cottonera Development, Cottonera, Malta;

  4. Manoel Island / Tigne Point, Tigne/ Gzira, Malta;

  5. Tas-Sellum Residence, Mellieħa, Malta;

  6. Southridge, Mellieħa, Malta;

  7. Madliena Village Complex, Malta;

  8. Smart City, Malta;

  9. Fort Cambridge Zone, Tignè, Malta;

  10. Ta’ Monita Residence, Marsascala, Malta;

  11. Pender Place and Mercury House Site, Paceville, Malta;

  12. Metropolis Plaza, Gzira, Malta;

  13. Quad Business Towers, Mrieħel, Malta;

  14. Pender Place and Mercury House Site, Extensions I, II, III, IV and V, Paceville, Malta;

  15. Fort Chambray, Ghajnsielem, Gozo;

  16. Kempinski Residences, San Lawrenz, Gozo;

  17. Vista Point, Marsalforn, Gozo; and

  18. Mistra Heights.

What are Special Designated Areas?

 

Advantages of Buying Property in Special Designated Areas

#1. No Permits required for Buying Property in SDAs

As previously mentioned, when buying a property in Special Designated Areas, one does not need a permit to be able to buy the property, irrespective of nationality. Furthermore, after the property has been obtained, it can also be leased without any limitations.  

In the instance that the property is located outside SDAs, then the buyer will be required to obtain an AIP permit issued by the Ministry of Finance, Economy and Investment as stipulated by the laws of Malta. If the property is purchased under an AIP permit, then it cannot be sublet.

In terms of Chapter 246 of the Laws of Malta, the following table represents the various requirements for the acquisition of immovable property in Malta:

 

Maltese and EU Citizens –  both with 5 years continuous residence in Malta

Maltese and EU Citizens – without 5 years continuous residence in Malta

Non-Maltese and Non-EU citizens

Primary Residence

No restrictions – No need to apply

No restrictions – No need to apply

Prior authorisation is required*

Secondary Residence or any other immovable property

No restrictions – No need to apply

Prior authorisation is required*

Prior authorisation is required*

Property in a Special Designated Area**

No prior authorisation is required and no limit

No prior authorisation is required and no limit

No prior authorisation is required and no limit

Immovable Property required for the person’s business activities’ or supply of services by such person

No prior authorisation is  required and no limit

No prior authorisation is required and no limit

No permit granted unless required for an industrial or touristic project or as a  contributor to the development of the economy of Malta


*An AIP permit would need to be applied for where indicated.

An AIP permit will not be granted if the applicant has already acquired immovable property in Malta – an exception however lies with ‘Special Designated Areas’.

#2. Renting of Property in SDAs

As outlined above, purchasing real estate through an AIP permit comes with some limitations on its possibility for renting out.

When buying real estate in a Special Designated Area, one of the benefits is that it can be rented out at any time, without any limitations or unnecessary difficulty. This is especially advantageous to enjoy rental income and capital growth.

Property in Malta which is rented out, might be taxed at a beneficial flat rate of 15%.

#3. Quick access to Facilities

Ordinarily, real estate located in SDAs' provides many luxurious amenities aimed at catering for most needs of foreigners who reside there, with the additional benefit of proximity. These include:

  • Gyms and spas;

  • Swimming pools;

  • Shopping malls;

  • Supermarkets;

  • Restaurants and coffee shops; and

  • Marinas.

#4. Access to Special Residency Programmes

The Maltese Immigration programmes are sought after when opting to acquire second citizenship or residence. Two of those programmes are the Malta Residence and Visa Programme (MRVP) and the Malta Global Residence Programme (GRP). Specific criteria are outlined to be eligible for these programmes, one of which is to buy or lease a property in Malta valued at a certain amount.

A bonus of investing in SDAs' is the fact that since such properties are usually at the top end of the market, this allows buyers the opportunity of applying and qualifying for these programmes.

Access to Special Residency Programmes

 

Process for Buying a Property in Malta

Non-Maltese residents who wish to buy a property in Malta need to:

  • Fill in an Acquisition of Immovable Property (AIP) permit application form. If the property is situated in one of the Special Designated Areas, then an AIP permit is not required.

  • Present a copy of the preliminary agreement or promise of sale of the immovable property being acquired, if entered into.

Cost for buying a Property in Malta - The Fees

Below is an outlay of all the expenses you can expect to incur while acquiring a property in Malta:

#1. Stamp Duty on Documents

Upon the acquisition of immovable property in Malta, 5% of the value of the property is due, by the buyer,  as stamp duty.

If this is the buyer’s first acquisition of real estate worldwide, then the stamp duty is subject to a reduced rate of 3.5% on the first €150,000 of the price of immovable property. If the cost of the property is more than €150,000, the regular 5% applies.

It is important to note that the reduced rate of 3.5% on the first €175,000 is contingent on the purchaser’s declaration that such property is the first property being purchased as a residence worldwide. The reduced rate does not apply to those persons who require an AIP permit.

Stamp duty at the rate of 1% of the value of the property is payable upon signing the promise of sale agreement. The balance is payable on the deed of the purchase at the rate of 5%.

Those persons who are not EU nationals must pay 5% in stamp duty on the value stated in the final deed.

#2. Legal fees

1% (approximately) of the purchase price payable in two stages:

  • 33% with the signing of the preliminary agreement; and

  • 67% with the publication of the final deed.

#3. A variable fee

This fee covers the researches into title, liabilities etc.. and is dependent on the volume.

#4. €232.94 for the Acquisition of Immovable Property (AIP)

This is the government permit which a non-resident must obtain if they wish to purchase property in Malta.

#5. Real Estate Agency fees

In the case that you made use of the services of a Registered Estate Agency in the search for your property, then brokerage fees are due by the seller. On the other hand, if you found the property through the services of a private agent, then 1% is due to a brokerage fee.

 

 Cost for buying a Property in Malta - The Fees

 

Selling a Property in Malta - The Procedure

Although the process of selling a property in Malta is relatively clear and direct, it is always beneficial to be aware of the rights of the sellers throughout. It is required to get guidance from legal experts.

  1. Defining the correct price of the property is one of the most critical factors. The right pricing not only draws potential buyers but is also crucial from a financial perspective as the sale price of the property would also determine the taxable value of the said transaction.   

  2. Once the prospective buyer is found, and all the terms and conditions relating to the sale price are agreed upon, the next step is to sign the Promise of Sale agreement with the buyer.

  3. The Promise of Sale agreement is crucial when buying the property as it states the conditions under which the property will ultimately be purchased. Based on prior discussions, the agreement is typically settled between the legal representatives of both the parties.

  4. The Promise of Sale agreement is drawn by the Notary and binds both the parties until the final deed of sale is signed.

  5. 10% of the property value is usually deposited with the Estate Agent or the Notary by the buyers after signing the Preliminary Agreement. If the buyer fails to sign the final deed for no valid reasons at law, the deposit will be forfeited in the sellers' favour.

  6. Usually, the validity of the agreement is 3 months, but its duration is decided and agreed upon between the parties.

  7. During this period, the Notary will register the Preliminary Agreement in terms of the law, carry out searches into the title and apply for any permits if necessary.

  8. Mainly in the case of foreign citizens, before signing the final deed of sale, the Notary would apply for clearance from the local tax authorities as the entire sale price including sale proceeds of movables may be repatriated abroad.

 

Property Transfer Taxation System in Malta

The tax rates levied on a person transferring property to a new buyer are very attractive to foreigners wishing to invest in real estate in Malta. All information regarding the tax rule is filed under article 5A of the Income Tax Act.

For transfers of Immovable Property situated in Malta, the rate of 8% final withholding applies, except for the following situations where various withholding tax rates apply as shown in the table below:

Final Withholding Tax Rate

Context

2% of the transfer value

Property transferred, which, immediately before the transfer was owned by an individual or two co-owners who had declared in the deed of acquisition that such property had been acquired to establish therein, or constructing thereon, his/her or their sole ordinary residence and the transfer is made not later than three years from the date of acquisition.

5% of the transfer value

Where the property being transferred does not form part of a project, as defined, and the property is transferred within five years from the date of acquisition.

5% of the transfer value

Transfer of property situated in Valletta, which was acquired before the 31st December 2018, and where such property has been restored and/or rehabilitated, and works are certified by the Malta Environment and Planning Authority (MEPA) before the 31st December 2018. Such transfer must not be made more than five years from the 31st December 2018.

7% of the transfer value

The restored property where a notice of promise of sale has not been given prior to the 17th November 2014.

10% of the transfer value

Property acquired prior to 1st January 2004 and for which transfer of a promise of sale has not been presented to the Commissioner of Revenue before 17th November 2014.


In the case of transferring inherited immovable property, that property will remain contingent on 12% tax on the final difference between the cost of acquisition and the transfer value. If the property was inherited before 25th November 1992, then the tax applicable is 7%.

Any profits made on the transfer of immovable property acquired through a donation, are subject to 12% tax if the transfer is made more than 5 years after the date of donation.

A person who is not resident in Malta and who is resident for tax purposes in another country may opt-out of the final withholding tax system if that person produces to the notary who publishes the deed of transfer a statement signed by the tax authorities of the country of that person’s residence that confirms that person’s residence in that country and that certifies that that person is subject to tax in that country on gains or profits derived from the transfer of immovable property situated in Malta. In such a case the profits made on the sale of the property would still be subject to taxation in Malta. A 7% provisional tax on the transfer value would have to be paid, which is not refundable, even if the tax on the gain is less than such amount.

Property Transfer Taxation System in Malta

Related:
 

Renting a Property in Malta

Rental income in Malta may opt to be taxed at a flat rate of tax of 15% on the gross rental income.

Method of Payment of Tax

The 15% tax which is due, must be paid no later than the 30th April of the following year, along with the appropriate form which the Commissioner may require, indicating the gross rental income received for the relevant calendar year.

You might also be interested in Guide to Malta Corporate Tax.

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