Following Malta’s accession to the EU, the Maltese Islands have become increasingly popular both as a place of permanent residence as well as a hub for international business transactions. Malta boasts numerous advantages including an ideal climate, high standard of living, superior healthcare and education, political and economic stability, a safe environement, a well-educated workforce, accessibility and much more.
Muscat Azzopardi & Associates advise on all property-related matters, acting for owners, developers, funders, investors, contractors, banks, and financial institutions. Closing a deal within the financial and other constraints of the property market demands a pragmatic approach to the structuring of complex transactions. We cover:
- commercial leasing
- compulsory purchase
- development finance
- forward funding and sale agreements
- equity sharing leases
- finance- and tax-driven leases
- institutional investment and funding
- investment sales and purchases
- property finance structures
- property taxation and VAT
- rent reviews
- secured lending
- corporate rescues property litigation
We employ innovative financing and development techniques across a wide spectrum of real estate holdings, and have extensive experience in financing matters. We advise on all aspects of construction projects, from bid documents to financing, financial support arrangements, concession contracts, joint ventures, construction contracts, sub-contracts, technology supply and licence agreements, technical service agreements, project management agreements, operational management agreements, contract administration, claims, disputes, alternative dispute resolution techniques, and arbitration.
Our success is the result of team involvement, a commercial understanding, flexibility, and an attention to detail and to cost-effectiveness in a one-stop-shop approach.
- Are there legal restrictions on ownership of real estate by non-resident persons?
Chapter 246 of the Laws of Malta (Immovable Property (Aquisition by non-residents) Act), regulates the acquisition of immovable property by non-residents and outlines the instances when an Aquisition of Immovable Property (AIP) Permit is required by such persons. The basic rules relating to foreign freehold ownership can be divided into three categories: –
1) Rules for EU citizens who have lived in Malta for at least five years: People who originate from another EU Member State but who have lived continuously in Malta for at least the last five years can purchase more than one property in Malta and do not require permission to do so.
2) Rules for EU citizens who have not lived in Malta for at least five years: Those who are citizens of another EU Member State and who reside elsewhere other than in Malta or who have lived in Malta for less than five years can buy a single residential property for the purposes of permanent or semi-permanent residence and can purchase business premises and they do not require permission to do so.
3) Rules for Non-EU citizens: The latter can purchase one piece of real estate in either Malta or Gozo after they have received permission to purchase in the form of an AIP Permit or ‘Acquisition of Immovable Property by Non-Residents Permit’ from the Ministry of Finance.
The above rules however, do not apply to a number of selected high-value areas and thus no permit is required for the acquisition by any person of any number of properties in such areas.
- On a land sale, when is title (or ownership) transferred to the buyer?
Once the price has been agreed upon it is usual for both the vendor and purchaser to sign the preliminary agreement (Promise of Sale). The preliminary agreement actually commits both parties to the sale subject to the conditions of the agreement being met. This agreement usually has a valid duration of three months. Once everything is in place for the sale to proceed to closing, the final contract of sale will be drawn up. Transfer of ownership occurs when the final contract is published and signed, at the same time, by the vendor, purchaser and the notary public.
- Which parties (in addition to the buyer and seller and the buyer’s finance provider) would normally be involved in a real estate transaction in Malta? Please briefly describe their roles and/or duties.
Property agents may be involved in the transaction as a link between the buyer and the seller in so far as the sale results from their introduction.
Lawyer’s services are most often sought relating to vetting of searches in relation to title and contract drafting and negotiation. Moreover, a lawyer’s assistance is advisible in terms of both general as well as specific legal advice as well as in the case of commercial and residential leases.
A notary’s service is mandatory in a real estate transaction of sale or purchase in Malta as the final contract of sale cannot be published without the notary’s signature.
- Are transfers of real estate subject to a transfer tax? How much? Who is liable?
When property is transferred, stamp-duty of 5% is payable by the buyer, and capital gains tax or final witholding tax (either or) is paid by the seller. Capital Gains tax is payable at 35%on the profit made on a transfer, while final withholding tax is of 12 % on the whole amount.
In the case of final withholding tax, the seller pays tax on the deed of transfer. However if the sale relates to a property that the seller would have acquired within a 5 year period preceeding the transfer s/he may opt to pay provisional income tax at the rate of 7% (on the whole amount), then pay at the rate of 35% on the actual profit made at the end of the fiscal year (deducting the provisional income tax which would have been paid at the time of the transfer).
The standard rate of stamp duty payable by the buyer is of 5% however this is subject to exceptions – such as when one is purchasing his sole ordinary residence in which case part of the amount (at present €116,468.67) is taxed at 3.5% and any amount above the stated amount is taxed at 5%.
- Please briefly describe the main laws that regulate leases of business premises.
The contract of lease in Malta is regulated by the Civil Code and there is no legal distinction between types of lease agreements. Hence, the nature of each lease may be said to be purely contractual and it is left entirely within the discretion of the parties to negotiate conditions therein.
- What taxes are payable on rent either by the landlord or tenant of a business lease?
There is no tax on the lease as such, therefore, the landlord includes any rent received with his annual income tax computation. Article 14(1)(a) of the Income Tax Act states that rent paid by any tenant of land or buildings, occupied for the purposes of acquiring income related to the business, is a deductable expense.