Discovering Malta’s Appeal for Property Investment
The Mediterranean archipelago of Malta offers a unique blend of natural beauty, a favorable climate, and investment-friendly policies that make it a rewarding place to live and invest for both locals and foreigners. Beyond Malta’s renowned 300 days of sunshine and crystal-clear blue seas, the island’s steady GDP growth and favorable tax environment have made it a top choice for foreign investors, especially in the real estate sector.
Unlike many other countries, Malta simplifies property transactions by having minimal taxes associated with property purchases. Notably, there is no VAT on the sale or purchase of immovable property in Malta or Gozo, and neither are there local council or municipal taxes.
Stamp Duty and Property Transfer Tax in Malta
In Malta, buyers are subject to Stamp Duty (link to stamp duty page), and sellers pay a Property Transfer Tax or Withholding Tax on immovable property sales.
What is Withholding Tax in Malta?
Withholding Tax is an income tax levied on the sale of immovable property in Malta, typically calculated at 8% of the property’s value after deducting brokerage/agency fees. This tax applies whether or not the seller profits from the sale.
Exceptions to Withholding Tax in Malta
Certain circumstances allow for a reduced withholding tax rate, provided the seller qualifies. These include:
- Selling within Five Years of Purchase
If the property is sold within five years of purchase, the withholding tax may be reduced to 5%, provided it isn’t part of a larger project. - Selling within Three Years of Purchase
Properties sold within three years may qualify for a reduced tax rate of 2%, provided they were declared as the seller’s sole residence and no other residential properties are owned at the time of sale. - Properties in Urban Conservation Areas (UCA)
Properties situated in UCAs or areas scheduled for restoration by the Planning Authority may be eligible for a zero tax rate with the required permits and certifications. - Properties Purchased Before January 1, 2004
For properties purchased before January 2004, the withholding tax rate is generally 10%, but if the promise of sale notice was filed before November 17, 2014, it increases to 12%.
Withholding Tax Exemptions in Malta
Certain scenarios make sellers eligible for withholding tax exemptions:
- Selling After Three Years
Sellers are exempt from withholding tax if the property is sold after three years and within one year of vacating. - Property Donations
Donating a property to direct family members, such as a spouse or children, exempts the transfer from withholding tax. - Property Assignments in Divorce or Separation
Transfers due to marital separation or divorce are also tax-exempt.
Withholding Taxes on Inherited Property
Selling inherited property in Malta involves specific tax conditions:
- Properties Inherited Before November 25, 1992
Properties inherited before this date incur a 7% final withholding tax on the transfer value. - Properties Inherited After November 25, 1992
For properties inherited after this date, the seller can either pay a 12% withholding tax on the gain or choose a final rate of 10%, 8%, or 5%, depending on the property’s purchase date.
Why Partner with Belair Property?
Partnering with a knowledgeable and accredited real estate company like Belair Property ensures that your property transactions in Malta are handled with expertise. Belair Property can connect you with the right professionals to help navigate Malta’s tax regulations, ensuring compliance at every step. For more information on property taxes in Malta, please refer to our tax table here (link to tax table). ADD LINK TO MALTA PROPERTY TAX EXPLAINED
