Buying, Selling and/or Renting Property can be quite a complicated process for starters! Here’s everything you should know before entering a property sale agreement in Malta. Here are the top 10 questions, answered!
Buying of Immovable Property:
When purchasing real estate, one must hire the services of a notary of their choosing. The primary responsibility of the notary is to inform potential buyers of the property’s legal status. The notary conducts the required searches and counsels the buyer appropriately. The deed of sale is then published by the notary and registered with the Public Registry and Land Registry.
At SBC Notaries we explain the method that will be followed throughout the entire buying process to the potential buyer(s) at our initial meeting.
- We start by looking to identify specific concerns that the potential buyer or buyers may have and offer guidance accordingly.
- Next, the promise of sale (konvenju), is signed where we ensure a fair and balanced agreement between the buyer(s) and seller(s).
- Then, in accordance with each individual’s needs, we diligently and promptly conduct the required searches.
- The next phase would be the publication of the final deed of sale, followed by the deed’s registration and timely payment of taxes as required by law.
We insist on being in constant communication with the potential buyer(s) throughout this process and give updates on any developments that occur. We also advise customers on the value of creating a will after purchasing a property.
1. What is the tax due by first-time buyers?
Persons purchasing their first home for residential use are required to pay stamp duty at a rate of 3.5% over the first €175,000 and a rate of 5% over the remaining amount. A person must be purchasing his first ever “inter vivos” title immovable property in order to qualify as a first-time buyer (i.e. by purchase or donation). As a result, a person who, for example, already owns another piece of real estate (even if it’s not a home, like a garage), will not be eligible.
We are preparing to spend €300,000 on a home. The furnishings and appliances in the property, which is being sold finished and equipped, are estimated to be worth €30,000.
Is stamp duty assessed on the whole €300,000 or should the worth of the furnishings and appliances be taken into account?
The value of the real estate is subject to stamp duty. As a result, one should subtract the value of all transportable items, including furniture and appliances. Tax would be required on €270,000 in the aforementioned situation.
2. What deposit should be paid on signing of the promise of sale. Should the money be kept by the notary?
The legislation does not require a fixed deposit to be made when signing the promise of sale. As a result, it depends only on the agreement between the vendor and the buyer. Even the absence of a deposit may be agreed upon by the parties. The choice of who keeps the deposit is totally up to the parties, as well. For example, the parties may determine that the deposit should be released to the vendor immediately or that it should be held by the notary (or another third party) until a certain time.
Is it necessary to record a promise of sale?
Yes. A promise of sale must be registered with the Commissioner of Revenue within 21 days of signing it; failure to do so will result in the promise of sale losing its legal standing.
3. Is tax due when the promise of sale is signed?
Yes, upon registration of the promise of sale, 20% of the total stamp duty in the contract of sale is due. Upon the official deed of sale being signed, the remaining 80% is paid.
Is the client eligible for a refund of the original stamp duty he paid if the promise of sale falls through?
Yes. After delivering a written declaration from the prospective seller and buyer stating that the transaction has expired and that the parties are waiving any claims they may have against one another, the notary will submit a request for a refund.
I will be paying the majority of the cost of the property my partner and I want to buy. Can two people buy a home in different shares?
Yes. There are no restrictions on how many people (or more) can purchase a property in separate shares. For instance, the property might be bought in accordance with an 80%-20% ratio or in another distinct ratio.
4. If one has entered into a promise of sale and he/she wants to give up his rights to a third property. Can this be done?
Yes, unless doing so was expressly forbidden by the promise of sale. Provisional capital gains at a rate of 7% are due on any gain attained from the cession of the rights.
5. Is the notary responsible for ensuring that the building permits are valid?
No. The notary’s searches won’t turn up anything about this, unfortunately. Therefore, before making a decision to buy a house, it is advised that a potential buyer hires an architect of his choosing to inspect the property and provide advice on such issues.
Selling Immovable Property:
Since the buyer/s often select the notary who will publish the deed of sale, we can help the seller/s by:
Advising sellers on the various tax rates and regimes they may use depending on their individual circumstances.
Defending the seller’s interests throughout the promise of sale and the final deed of sale to make sure that both parties get a fair and reasonable transaction.
Keeping an eye on the work’s development to make sure that deadlines are met and the transaction goes through without a hitch.
When a non-Maltese citizen sells real estate, we handle the procedure with the Inland Revenue Department for the issuance of the appropriate permit needed for such a sale to occur.
6. If I sell the house in which I reside, is any tax due?
Whether you have resided in the home for three years or longer will determine the answer. If so, no tax is owed. If not, varying rates of property transfer tax are owed based on when you purchased the property and under what title.
7. If I want to sell the house I inherited, which tax is owed?
This depends on whether the inheritance occurred before or after November 25, 1992. Tax is required at a rate of 7% of the selling price if it occurred prior to this date. If the death occurred after this date, one must determine what value was placed on the property in the decedent’s causa mortis declaration, which is how the property came to be registered in your name. One must then determine the difference between such value at the time of the inheritance and the selling price, and pay tax of 12% on the difference.
Which tax is owed in the case where a few years ago, one has acquired a house, and now he/she wants to sell it, however in the past three years he/she has NOT lived in this house?
The ultimate tax due will be 10% of the final selling price if you had purchased the property prior to January 1, 2004.
The ultimate tax due will be 5% of the selling price if you had bought the home within the previous five years.
The final tax due will be 8% if you bought the property more than five years ago, but not before January 1, 2004.
8. Is there a specific process that must be followed when a foreigner sells an immovable property they possess in Malta?
Yes, the Director General of Inland Revenue must be informed of the anticipated sale by the notary publishing the deed of sale, and the Director General of Inland Revenue will issue a permit for this use. The deed of sale cannot be published without this permission. As long as the vendor has no unpaid balances with the Inland Revenue Department, this permit will be provided.
Leases (Rent):
When leasing a property, both the lessor and the lessee must make sure that any agreement between them is expressly set up in writing to ensure that there are no ambiguities that might later cause problems.
Therefore, it is advised that the lease contract be drafted in front of an unbiased professional who can counsel the parties on the legal ramifications and guide them to reasonable and fair compromises regarding the lease conditions.
Since January 2010, a lease cannot be considered valid unless it is executed in writing and complies with all statutory criteria.
At SBC Notaries we:
- Give advice on lease-related issues
- Create lease contracts
- Act as witnesses on lease agreements
Loans:
At SBC Notaries we offer the below:
- Handling the paperwork necessary to obtain a bank loan, including conducting the searches required by the bank
- Drafting and publication of loan agreements with banks and between private parties.
- Registration of hypothecs on time
- Drafting of agreements for the cancellation of loans and hypothecs
- Contracts for the preservation of rights
Donations of Immovable Property:
9. What taxes are due, if one donates a property to one of his/her children?
When a parent donates property to a child, no tax is due by the parent.
On the other hand, the child might owe stamp duty. However, there is no stamp tax on the first €200,000 when the property is given for residential use and it is the first donation between a parent and child. Additionally, this exemption only holds true if the youngster affirms in writing that he does not own any other real estate. If the property’s worth is higher, 3.5% of the additional value is subject to stamp duty.
At SBC Notaries we offer the below:
- Advice on additional legal alternatives that might be available as well as the taxes associated with property donations.
- Drafting and publishing the contract of donation
- Timely payment of taxes and contract registration.
Exchange of Immovable Property
At SBC Notaries we offer the below:
- Advice on additional legal alternatives that might be available as well as the taxes associated with property donations.
- Drafting and publishing the contract of donation
- Timely payment of taxes and contract registration.
Still got questions? Contact or call us directly on +356 99446815 for an immediate appointment.
