The main sources of real estate law in Malta are the following:
Other sector-specific, area-specific legislation and subsidiary legislation promulgated under the above-mentioned laws regulate the real estate sector in Malta.
The cost of property in Malta has risen at a consistent rate for over a decade. However, a recent nationwide sector study conducted by a big four audit firm has indicated that in the last 12 months property prices have stabilised, with there even being a slight decrease in price in some areas towards the end of 2022.
There has been a significant increase in the acquisition of properties with the scope of demolishing and erecting high-rise buildings in areas in Malta, such as Imriehel, Ta’ Xbiex and St Julians, which are specifically designated for this purpose.
The COVID-19 pandemic does not seem to have had any continued impact on the real estate market in Malta. Rising inflation and increases in interest rates have made it more difficult for purchasers to obtain bank loans to purchase property and this has negatively affected their purchasing power.
The emergence of blockchain, decentralised finance, proptech and other disruptive technologies has not been prevalent in the real estate industry in Malta. It is unlikely that disruptive technologies such as these will have any significant impact on the real estate market in Malta in the next 12 months.
White Paper to Reform Agricultural Leases
Towards the end of 2022 the Maltese government published a white paper to reform and regulate the agricultural land market in the public interest “so as to make it fair to all parties, reduce speculation, protect rural areas and above all support farming in the focus of its importance in the food supply”.
The public consultation for this white paper ended in November 2022. It is unlikely that this law will be enacted before the end of 2023.
The property rights that can be acquired in immovable property under Maltese law are as follows.
The key laws that apply to the transfer of title of real estate are as follows:
The following legislation specifically regulates rights over residential property:
Leases of agricultural land are regulated by the Agricultural Leases (Reletting) Act (chapter 199 of the laws of Malta). Commercial leases are generally regulated by the Civil Code; however, leases entered into before 1995 are regulated by chapter 69 of the Laws of Malta, the Reletting of Urban Property (Regulation) Ordinance.
The transfer and/or establishment of real rights over property, such as a sale and purchase contract or a contract of emphyteusis, are published by a notary public by means of a public deed, whereas the transfer of real rights such as the letting of property may be done by private agreement.
The Land Registration Agency and the Public Registry are the entities which administer the Land Registry in Malta. Property which falls within the registration area must necessarily be registered at the Land Registry in order for the transfer of such property to become effective.
In a registration area:
shall not become effective with respect to third parties until the title to the immovable property which is being affected by any such contract, judgment, judicial sale, redemption or hypothec, is registered.
To complete registration, duty needs to be paid on the transfer of title as per the Duty on Documents and Transfers Act (chapter 364 of the laws of Malta). Residential lease agreements need to be registered with the Housing Authority to be valid and the registration thereof attracts a nominal fee. Obtaining title insurance is not common in Malta.
Before entering into a contract transferring title in immovable property, the buyer usually engages a warranted notary public to carry out property title searches. The notary’s job is to ascertain actual ownership of the property by ensuring that the vendor owns the right which is being transferred.
In commercial transactions of substantial value, each party to the transaction may carry out due diligence to ascertain the capacity of the other party to enter into the transaction. It is mandatory for sellers to disclose crucial details pertaining to the property. The seller guarantees his title of ownership over the property by means of a warranty for peaceful possession, and also an ex lege warranty against any latent defects. Besides the warranty for latent defects, the duties of the parties to the transaction are regulated by the terms and conditions agreed between the parties.
Remedies which are customarily included in a commercial real estate transaction for misrepresentations made by the seller are the rescindment of the contract, payment of pre-liquidated damages and payment of quantifiable damages including interest at the highest rate permitted under Maltese law (8% per annum). There is no cap on the damages the seller can seek compensation for, as long as such amount is quantified and justifiable in court.
Vendors generally guarantee the validity of their title by means of a general hypothec over all their property, both present and future, and may also provide special hypothecs over other properties to guarantee the validity of their declarations.
An investor considering purchasing real estate in Malta should consider the civil law provisions that may be applicable in the purchase of real estate in general, as well as those specific rules relating to certain types of real estate, the requirements which need to be satisfied in order to purchase the said property (particularly if the investor is a foreign national), the tax implications of the transaction, and the obligations relating to the payment of duty chargeable on the transfer of the property.
Under the Maltese Civil Code there is a general notion which provides that every person is liable for the damages caused through their own fault. A buyer of a real estate asset cannot be held responsible for soil pollution or environmental contamination unless this was caused through their own acts or omissions, unless they are in bad faith: for instance, they are aware of the said contamination and do not inform the buyer.
The Development Planning Act (chapter 552 of the laws of Malta) stipulates the rules relating to the zoning and planning laws in Malta. It also establishes the Planning Authority, which is responsible for the administration and enforcement of planning policies and regulations. By consulting a qualified architect, a real estate buyer would be able to ascertain what the permitted use of a specific piece of land is and whether an intended project falls within the zoning and planning permissions of such land.
The taking and/or expropriation of land by the government is possible in terms of the Government Lands Act (chapter 573 of the laws of Malta). Government is empowered to forcefully take over (expropriate) any private property that it may require for a public purpose such as, but not limited to, opening a new road or constructing a new government housing estate. In such instances the government may take over private property for a public purpose either by the absolute purchase thereof, or by taking possession and use thereof for not more than ten years.
The process is as follows.
The purchase and sale of real estate in Malta is subject to the provisions of the Income Tax Act (chapter 123 of the laws of Malta) and of the Duty on Documents and Transfers Act (chapter 364 of the laws of Malta). In Malta, the responsibility of paying capital transfer taxes on the transfer of any property lies with the seller, whereas the buyer is responsible for paying the stamp duty. The amount of tax and stamp duty paid for transferring a property in Malta is determined by various factors, such as the relationship between the buyer and the seller, the presence of any exemptions applicable to the transfer, and whether the transfer qualifies for any incentives available at the time of transfer.
Whilst various exemptions enacted by the government may apply, such as if an individual resides or will reside in the property in question, the buyer must pay stamp duty at the rate of 5% of the market value of the property, whereas the seller must pay capital gains tax of 8%. On the conclusion of a promise of sale agreement, the parties must pay 20% of the tax due on the final deed.
The acquisition of property by a non-resident of Malta necessitates an Acquisition of Immovable Property Permit (hereafter “AIP Permit”). When applying for an AIP Permit, a copy of the promise of sale agreement of the property needs to be included with the AIP application form. The promise of sale agreement would therefore need to be entered into before the application is filed. The property being acquired must meet certain minimum thresholds in relation to the value, depending on the type of property being purchased.
Acquisitions of commercial real estate are generally either financed:
The most common forms of security created to guarantee the repayment of financing obtained for the acquisition of commercial real estate are hypothecs and privileges. Hypothecs and privileges can both be either of a general or of special nature. A general hypothec/privilege is one that creates a right over the estate of the purchaser or of a third party, to the benefit of the lender. A special hypothec/privilege is one that gives the lender a right over the specific property, thereby giving the lender a right to the title of the land should the borrower default on their repayment obligations. A privilege is a right of preference that the lender has over other creditors.
The law does not establish any restrictions on the granting of security over real estate to foreign lenders. There are no restrictions on repayments being made to a foreign lender under a security document or loan agreement.
Securities over real estate such as hypothecs and privileges need to be registered in the public registry to become effective. These are registered by a notary public, who will charge a fee for the registration itself in the public registry, and for their own services.
Enforcement of the security, on the other hand, would require court proceedings to have the debt recognised through a court judgment. The costs incurred for such procedure would be calculated by the court registrar in a taxed bill of costs issued by the court registrar.
An entity giving security over its real estate asset must be duly incorporated in the country where it is registered and must necessarily have a valid legal title of ownership of the property over which the security is being granted.
Should a lender need to enforce the security in the case of a debtor in default of his repayment obligations, the lender would call upon the debtor, by means of a judicial letter filed in the court registry, to repay the debt. Should the debtor remain in default, the lender can apply to the court to have the debt recognised and consequently to have the security executed. The court’s decision takes the form of an executive title which can then be executed against the debtor through the executive warrants available under Maltese law. The rank of security interest of the lender vis-à-vis other creditors depends on the type of security obtained.
Should there be competing claims over the same property, the court will establish a ranking of creditors: generally speaking, entities who provide loans for the acquisition of property enjoy a better ranking than other ordinary creditors.
The time required to enforce and realise on real estate security is dependent on several factors such as, but not limited to, the type of security being enforced and how quickly it takes for the property to be sold by auction (should this be the case). There are no ongoing restrictions on a lender’s ability to foreclose or realise on collateral in real estate lending that have been implemented by governmental entities in response to the COVID-19 pandemic.
Among privileged debts, priority is regulated according to the particular nature of each privilege; whereas, in the case of hypothecs, debts are generally paid according to the order of registration.
Apart from voluntary offence, where one knowingly commits a crime against the environment, environmental crimes, which are stipulated in the Crimes Against the Environment Act (chapter 522 of the laws of Malta), may also be of an involuntary nature.
A individual or entity holding or enforcing security over real estate needs to ensure that, once possession of the property is obtained, they do not, through imprudence or negligence, commit any offence against the environment as stipulated in the law. If the lender is taking possession or ownership of real estate which is or was being polluted, it needs to take all necessary measures to ensure that, upon the enforcement of the security and taking possession of the land, the land is not polluted any further and that no further illegal damage is being caused to the property in question, to that of third parties or to the environment in general.
In the case that a borrower becomes insolvent and is put into liquidation, the lender will be included in the ranking of creditors. When the borrower’s assets are liquidated, the creditors are paid in accordance with the ranking of creditors. The rank of the lender in the ranking of creditors is determined by the type of security interests held by the lender against the borrower’s assets. Privileged securities take precedence over unprivileged ones.
No response has been provided for this jurisdiction.
The Development Planning Act (chapter 552 of the laws of Malta) established the Executive Council, which has certain monitoring and enforcement powers related to planning and zoning, amongst other areas. These powers include the right of entry to any premises to verify whether an illegal development or activity is taking or has taken place, and a general right to do anything that is ancillary or consequential thereto. The Executive Council has the authority to monitor all activities falling within the scope of the Development Planning Act, as well as licences, permits and certificates issued by the Planning Authority, to ensure that all such activities and development are carried out in accordance with the requirements of the law, and may for such purpose request and obtain the assistance of the Police Force, any local council, any department of government or any agency of government.
If it appears to the Executive Council that a development is being carried out without the grant of a permission and/or licence required under the Development Planning Act or that any conditions subject to which such permission was granted in respect of any such activity and/or development are not being complied with for such activity, the Executive Council shall issue a stop notice to any such person carrying out such an activity and/or development. The Executive Council has powers to take further steps should the discontinuance, stoppage or similar requirement have not been taken within the time specified in the enforcement notice.
The public may also file reports to the Planning Authority for any suspected illegal development.
The Development Planning Act establishes the Design Advisory Committee, which makes recommendations and provides professional and expert advice to the Planning Board with respect to development applications related to urban conservation areas and major projects. The Design Advisory Committee shall make available for public inspection any recommendation made by it to the Planning Board.
The Planning Authority can also issue plans, policies and guidelines, which may regulate the design, appearance and method of construction undertaken in development projects.
The Planning Authority is responsible for regulating the development and designated use of real estate in Malta. The Development Planning Act (chapter 552 of the laws of Malta), the subsidiary legislation issued thereunder and the plans, policies and guidelines issued by the Planning Authority are the main laws that regulate the development and designated use of real estate in Malta. The various categories of designated uses of real estate in Malta are those stipulated in subsidiary legislation 552.15 – the Development Planning (Use Classes) Order.
Any person wishing to carry out any development of real estate is required to apply to the Planning Board for a permit under the Development Planning Act. The Planning Board shall have the power to grant or to refuse a development permission. Any person may declare an interest in a development and, on the basis of issues relevant to environment and planning, make representations on the development.
The Planning Board shall give specific reasons for any refusal or for any particular conditions that may be imposed on any proposed development.
A development permit may be granted subject to certain conditions and/or for a limited period and cease to be operative if the development has not been completed within the period specified.
If an applicant considers that conditions imposed on the development permit are unreasonable, they may request the Planning Board or Planning Commission, as the case may be, to reconsider, without prejudice to their right of appeal.
If an applicant considers that the conditions imposed upon development permit, or a refusal of such a permission, or any other decision, is unreasonable, they may lodge an appeal before the Environment and Planning Review Tribunal. An interested third party may also lodge an appeal against a decision taken by the Planning Board or of the Planning Commission. The Tribunal shall have the power to confirm, revoke or alter the decision appealed from and give such directions as it may deem necessary.
It is possible that one may need to enter into agreements with various authorities or entities to ensure the provision of an adequate supply of utilities in a project, which might require, for instance, that a specific part of the development be reserved for the housing of an electricity substation.
Restrictions on development and designated use are enforced by means of the enforcement powers outlined at 4.1 Legislative and Governmental Controls Applicable to Strategic Planning and Zoning.
Apart from personal ownership of property, real estate in Malta can be held by limited liability companies, commercial partnerships or trusts.
Limited Liability Companies
Shareholders of a limited liability company (LLC) have limited liability, meaning their personal assets are not at risk if the company encounters financial difficulties. The liability of each shareholder is limited to the amount of their investment in the company. Generally, an LLC must have at least two shareholders and a maximum of fifty shareholders. The shareholders can be individuals or legal entities. An LLC must have at least one director, who must be an individual. The directors are responsible for the management of the company and must act in the best interests of the company and its shareholders.
Partnerships can be of two kinds: partnerships en commandite or partnerships en nom collectif. In partnerships en commandite, there are two types of partners: general partners who have unlimited liability and manage the partnership, and limited partners who have limited liability and do not take part in the management of the partnership. In partnerships en nom collectif, all partners have unlimited liability for the partnership’s debts and obligations, and all partners take part in the management of the partnership.
A trust is created by a settlor who transfers assets to the trustee. The settlor can be an individual or a company and can be a resident or non-resident of Malta. A trustee is a person or a company who holds and administers assets for the benefit of others. In Malta, a trustee must be licensed by the Malta Financial Services Authority (MFSA) and must meet certain requirements. A trust has a beneficiary, being the person who benefits from the trust. The beneficiary can be an individual or a company and can be a resident or non-resident of Malta.
The only entity that is required by law to have a minimum share capital is the limited liability company. A limited liability company must have a minimum authorised share capital of EUR1,164.69.
Limited Liability Companies
A limited liability company must be registered with the Registrar of Companies and have a memorandum and articles of association that set out the company’s objectives, share capital, and internal rules. An LLC must have at least one director who is responsible for managing the company. Directors have a duty to act in the best interests of the company and comply with the law.
The company must have at least one shareholder who owns the company’s share capital. An LLC must hold an AGM once a year, where shareholders can receive and approve the company’s financial statements and elect directors. Shareholders have the right to vote on important matters affecting the company.
The company is required to keep proper accounting records and prepare annual financial statements. The financial statements must be audited unless the company is exempt from this obligation. The company must also file an annual return with the Registrar of Companies, providing information on the company’s directors, shareholders, and share capital.
A partnership must be registered with the Registrar of Companies. The registration must include the names and addresses of the partners, the partnership agreement, and the partnership’s capital. A partnership must have a partnership agreement that sets out the terms and conditions of the partnership, including the rights and duties of the partners, the purpose of the partnership, and the share of profits and losses among the partners.
Partners must exercise a duty of care and loyalty when managing the partnership’s affairs. They must act in good faith and always in the best interests of the partnership.
A partnership is required to keep proper accounting records and prepare annual financial statements. The financial statements must be audited if the partnership meets certain criteria. A partnership is required to disclose certain information to the Registrar of Companies, including the names and addresses of the partners and the partnership’s capital.
A trust must have a trust deed that sets out the terms and conditions of the trust, including the purpose of the trust, the beneficiaries, and the powers and duties of the trustee. A trustee must be appointed, and they have a fiduciary duty to act in the best interests of the beneficiaries. The trustee must exercise a high degree of care, skill and diligence in managing the trust property.
The trustee must also comply with the terms of the trust deed and with the law. A trust must have identifiable beneficiaries who have a vested interest in the trust property. Trust property must be held separately from the trustee’s personal assets. The trustee is required to keep proper accounting records and prepare annual financial statements.
The annual maintenance costs and accounting compliance costs for each type of entity used to invest in real estate varies depending on various factors such as type and value of assets held by the entity, and the sort of operations that such entity in involved in.
Maltese law provides for the following rights that allow the use of a property, or part thereof, without full ownership:
The details of these rights are outlined in more detail at 2.1 Categories of Property Rights.
All commercial leases in Malta are regulated by the general provisions relating to leases contained in the Civil Code. Maltese law does not provide for different kinds of commercial leases. These leases differ slightly from leases of properties used for residential purposes, which are regulated by specific legislation, although, even in the latter case, certain provisions of the Civil Code would still apply.
Subject to the general provisions of the Civil Code relating to leases, commercial leases are freely negotiable. There are currently no ongoing regulations on lease terms which have resulted from the COVID-19 pandemic.
The typical terms included in commercial lease agreements generally depend on several factors including the type of property being leased, the intended use of the property, and the sector in which the lessee operates, amongst others.
Whether the rent remains the same for the duration of a commercial lease is something that the contracting parties may determine in their pre-contractual negotiations. It is not regulated by the law.
Any variation in the rent payable under a commercial lease agreement needs to have been catered for in the agreement itself unless the parties are willing to enter into a new agreement. This is not a matter that is regulated by legislation.
VAT at 18% is due on rent charged for commercial leases.
Contracting parties to a commercial lease agreement usually agree to a payment of a deposit by the tenant to the lessor and sometimes the lessor also requires the tenant to have an adequate insurance policy in place which covers damages that may be caused to the property during the course of the lease.
Expenses relating to the maintenance of areas which are co-owned by several owners are to be shared amongst such co-owners. Therefore, each of the co-owners may compel the other co-owners to share with them the expenses necessary for the preservation of the common property, saving the right of any such co-owner to be released from liability thereof by abandoning their right of co-ownership.
Expenses relating to utilities and telecommunications of property occupied by several tenants are to be shared between the tenants in the same manner as stipulated in 6.9 Payment of Maintenance and Repair.
This is not a matter regulated by law but one which is usually stipulated in the lease agreement signed between the owner and the tenant. The parties are free to determine contractually on whom the obligation to obtain insurance will be imposed, if at all.
The owner can restrict the tenant’s use of the property as they deem fit by including a clause in the lease agreement to that effect. The Civil Code provides that a clause stipulating the permitted use of the property is required in a lease agreement of any kind. Such proposed use, however, needs to be in line with any restrictions which may be imposed by the law for properties in the location where the real estate in question is situated.
The tenant of an urban tenement is responsible for all repairs other than structural repairs. If such repairs are not carried out appropriately and according to good workmanship, the owner has the right to request the Rent Board to authorise the carrying out of such repairs at the expense of the tenant. The tenant may not make any alteration in the property without the consent of the owner and is not entitled to claim the value of any improvements made without such consent. The tenant may, however, remove such improvements, restoring the property back to the condition it was in before such improvements were made. Provided that, with regards to improvements existing at the termination of the lease, the tenant shows that some profit can be obtained by taking them away, and provided the owner does not elect to keep them and pay to the tenant a sum equal to the profit which, by taking them away, the latter would obtain.
Residential leases are regulated by specific laws that impose more stringent criteria on what can and cannot be included in the lease agreement. The Private Residential Leases Act includes a list of clauses that must be incorporated in residential lease agreements and also includes a list of forbidden clauses that are deemed null and without effect if they are included in residential leases. These restrictions relate mainly to the duration of the lease, payment of expenses and how the rent may be increased, and are generally intended for the protection of the tenant’s rights. Other than the specific regulations relating to residential leases, other forms of leases are regulated by the general provisions of the civil code applicable to lease agreements.
A tenant’s insolvency and therefore inability to fulfil his obligations relating to the payment of rent in a commercial lease will lead to the lessor having the right to demand dissolution of the lease agreement.
A commercial lease agreement can include the payment of a deposit agreed to between the parties. This is usually paid to the landlord upon the signing of the lease and is retained by the landlord until the termination of the lease to cover any expenses for damages caused to property by the tenant which do not result from the normal expected use of the property. Apart from a deposit, which only offers limited protection to the landlord against a failure by the tenant to meet its obligations, other forms of security can be included in the lease agreement. However, the quantum and form such security takes would depend on several factors such as the monetary value of the lease agreement and the financial position of the parties. Other forms of security may include personal guarantees by the shareholders of a company, if the lessee is a limited liability company.
Upon the termination of a commercial lease agreement, unless there is a contractual right to extend the lease, the tenant would no longer have the right to occupy the leased property and must therefore vacate the property and return possession of the property back to the landlord.
Whether a tenant is permitted to assign its leasehold interest in the lease or sublease all or a portion of the leased premises is something that is regulated by the lease agreement. The law does not prohibit the inclusion of clauses permitting the right to assign the leasehold or to sublet the property to third parties.
A lease agreement shall be dissolved in any of the following events:
Residential leases are the only leases that need to be registered with the Maltese Housing Authority under Maltese law. Other forms of lease agreements do not need to be registered in any manner.
A tenant who is in default of payment obligations under a lease agreement may be evicted if they remain in default despite being demanded for payment by means of a judicial letter and following the landlord’s application to the court to demand that the court orders them to pay and/or be evicted. The process to evict a tenant who is in default can take months or longer if there is a dispute which is being litigated in court.
Unless the lease agreement contains a clause allowing a third party to terminate a commercial lease agreement for any reason, the only other scenario where a lease agreement may be terminated by a third party is if that third party is the government of Malta, which is expropriating the land being leased. The government has a general right to expropriate land for a public purpose, subject to certain conditions stipulated in the Government Lands Act (chapter 573 of the laws of Malta). In the case of expropriation, the government is obliged to compensate the owner of the land accordingly. The law does not provide for compensation of the tenant in such cases. It can take at least several months for an expropriation to lead to the termination of the lease.
Works are usually based on bills of quantities and a fixed price will generally be provided, although if there are significant changes in costs, which are not attributable to breaches by the contractor, the relative contracts would usually include mechanisms to cater for a change in the price.
Responsibility in construction projects is usually assigned contractually to the extent that it is permitted at law. Certain parties must necessarily bear the responsibility for their work: such parties include the architect, the builder and the contractor.
Indemnifications, warranties, limitations of liability and waivers of certain types of damages may all be used as tools to manage the risk involved in construction projects, to the extent that the law permits. For instance, no limitation of liability can be imposed for damages arising out of the death of an individual as a result of the actions of another.
Contracting parties in a construction project are permitted to include clauses to the effect that monetary compensation is due to the owner if certain milestones are not met and/or the completion date is not adhered to. Penalties of this kind usually take the form of daily penalties which begin to run after a certain milestone was not achieved at a predetermined date.
It is not uncommon for owners to require personal guarantees and performance bonds to guarantee a contractor’s performance on a project.
Under Maltese law architects, contractors, masons and other workmen are deemed to have a privileged credit for the debt due to them for the expenses incurred and the works carried out. Such privilege extends over the property constructed, reconstructed or repaired and needs to be registered for it be effective. The privilege over the property can be reduced or totally cancelled with the consent of the creditor by means of a public deed, or by virtue of a judgment given in the competent court.
Upon completion of construction, a compliance certificate needs to be issued by the Planning Authority before any utility supply of water and electricity can be provided. An Energy Performance Certificate issued by an assessor registered with the Building and Construction Authority is also required for all buildings.
Malta is accorded a derogation in terms of Article 387 of the EU Sixth Recast VAT Directive (VAT Directive 2006/112/EC) to continue to exempt the supply before first occupation of a building, or parts thereof, or of the land on which it stands and the supply of building land. This is transposed in item 1(2), Part 2 of the Fifth Schedule to the VAT Act (chapter 406 of the Laws of Malta). Therefore, a transfer of immovable property in Malta is in principle either outside the scope of VAT or exempt without credit according to the specific circumstances.
The acquisition of immovable property situated in Malta would be subject to stamp duty in Malta in terms of the Duty on Documents and Transfers Act. In principle, a provisional duty is levied at 1% by the notary on the promise of sale contract. The final levy of stamp duty is then levied by the notary on the transfer deed, with the default rate being 5%.
The government of Malta does provide for special schemes for the mitigation of stamp duty on the acquisition of immovable property, including special rebates for purchases in urban conservation areas or vacant buildings. This is only to the extent that such an acquisition by the foreign investor would not require an AIP permit. The requirement of this special permit in Malta for non-residents needs to be evaluated in terms of the specific circumstances of each individual case.
Malta does not have municipal taxes and only levies direct and indirect taxation at a national level.
A foreign tax-resident lessor accruing or deriving rental income on immovable property situated in Malta can for the most part either elect to be subject:
In terms of the final withholding tax regime, there are no exemptions. However, the law does allow abatements for long residential leases. Similarly, in terms of the default regime there are certain allowances for the default regime (eg, maintenance allowance).
A foreign tax-resident alienator accruing or deriving income from the alienation of immovable property situated in Malta, not being a project, can either elect to be subject:
On the one hand, property transfer tax is levied by the notary on the deed of transfer. The default tax rate for the property transfer tax is 8% but there are special rates, limited deductions and exemptions which may apply.
On the other hand, unless exempted, in terms of the capital gains tax regime, a 7% non-refundable provisional tax is levied on the gross proceeds by the notary on the deed of transfer. Thereafter, in the year of assessment, tax on the capital gains is levied in terms of the applicable progressive rates for individuals or the statutory corporate income tax, which is currently fixed at 35%. This tax on capital gains allows for a wider set of tax deductions which are stipulated in the law.
A foreign investor must evaluate which tax regime would be the most beneficial according to the specific circumstances, keeping in mind that turnover taxes (eg, property transfer tax) might limit the right for a double tax relief in their residence jurisdictions.
The ownership of immovable property may result in a higher effective tax leakage in certain circumstances and therefore each case needs to be seen within its proper context. However, Malta does not levy capital taxes and ownership of immovable property is encouraged.
Subject to certain limitations, Malta does allow for capital allowances deductions for an industrial building or structure against trading income which is being produced through that qualifying industrial building or structure. This may be subject to balancing adjustments once such an immovable property is disposed of.
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