Property Taxation

1. For European Union Citizens

The tax rules applicable to European Union (EU) citizens when purchasing property are as follows:

Stamp Duty: EU citizens who buy property in Malta are required to pay stamp duty, which is generally 5% of the property’s purchase price.
First-Time Buyer Exemption: If an EU citizen purchases their first home, an exemption applies whereby the first €200,000 of the property purchase is tax-free. The remaining portion of the purchase price is taxed at the 5% rate.
Resident Status: If an EU citizen is a resident of Malta or is applying for residency, they may be eligible for additional tax benefits, such as lower stamp duty rates, especially if the property being purchased is intended as their primary residence.
Capital Gains Tax: Malta does not impose capital gains tax on the profit from the sale of a property if it has been the individual’s personal residence for at least three years and is sold before the end of a five-year period.

Other Important Taxes and Costs for EU Citizens:

Notary Fees: Typically range from 1% to 2% of the property’s value and must be paid during the formalization of the property transaction.
Registration Fees and Other Charges: In some cases, small registration fees may apply for the registration of property ownership.

2. For Citizens Outside the European Union

The tax rules applicable to citizens outside the European Union (EU) when purchasing property are as follows:

Stamp Duty: The stamp duty rate for non-EU citizens purchasing property is also 5% of the property’s purchase price, but additional conditions and restrictions may apply.
AIP Permit (Acquisition of Immovable Property Permit): Non-EU citizens must apply for an AIP permit to purchase property in Malta if the property is not located in specially designated areas (Special Designated Areas – SDA). This permit is typically required for the purchase of property for personal use.
Exemption in Special Designated Areas (SDA): In special designated areas, such as Portomaso, Tigne Point, and Madliena Village, non-EU citizens may freely purchase property without an AIP permit. The same tax rates apply as for EU citizens.
Lack of Tax Benefits: Non-EU citizens are not entitled to the first-time homebuyer tax exemption (as EU citizens are), meaning that the entire value of the property is subject to the 5% stamp duty.

Other Important Taxes and Costs for Non-EU Citizens:

Notary Fees: Similar to EU citizens, notary fees for non-EU citizens range from 1% to 2% of the property’s purchase price.
Capital Gains Tax: The same rules apply to non-EU citizens as for EU citizens. Capital gains tax is imposed if the property is sold less than five years after purchase or if it has not been the individual’s personal residence.
AIP Permit Application Costs: Additionally, non-EU citizens should consider the costs associated with applying for the AIP permit, which are usually administrative fees but may vary depending on the value and intended use of the property.

3. Property Taxation When Purchasing Property in Malta Through a Company

Company Location and Owners

When purchasing property in Malta, it is essential to determine whether the property is acquired by:

A company registered in Malta, whose owners are EU citizens.
A company registered abroad (outside Malta), whose owners may be either EU or non-EU citizens.

Different rules and tax benefits may apply depending on where the company is registered and whether the property is purchased for investment, commercial use, or personal use.

Stamp Duty

Companies Registered in Malta: If the property is purchased through a company registered in Malta, the general stamp duty rate is 5% of the purchase price.
Foreign Companies (Outside Malta): If the property is acquired by a company registered outside Malta, a 5% stamp duty also applies. However, it is important to note that additional requirements and documentation may accompany transactions involving foreign companies, especially if the company is from a non-EU country.

AIP Permit (Acquisition of Immovable Property Permit)

If the company is registered in an EU country, no AIP permit is required, provided the property is purchased for business purposes, such as real estate investment or generating rental income.
If the company is registered outside the EU, an AIP permit is required to acquire property unless the property is located in special designated areas (Special Designated Areas – SDA), where all foreign companies can purchase property without restrictions.

Capital Gains Tax

Companies Registered in Malta: When a company sells property, capital gains are taxed at 8% of the sale price. If the property has been owned by the company for less than five years and is sold, an additional tax applies.
Foreign Companies: The capital gains tax rules are the same when a foreign company owning property sells it in Malta. However, additional tax liabilities may arise depending on the double taxation avoidance agreements between the company’s country of registration and Malta.

Value Added Tax (VAT)

Generally, VAT does not apply to property transactions in Malta, including the sale of residential or commercial properties.
VAT on Commercial Property: If a company purchases property for business purposes (e.g., office building, retail space), VAT may apply to certain services or property development. The VAT rate in Malta is 18%.

Other Costs and Taxes

Notary Fees: Typically, notary fees range from 1% to 2% of the property purchase price. These costs apply to all property transactions, regardless of whether the buyer is a company or an individual.
Registration Fees: The fees for registering property ownership are lower, but they must be paid upon the transfer of property ownership.

Property Management and Rental Income Taxation

If a company owns property in Malta and generates rental income, the rental income is taxed at the corporate tax rate, which is 35% in Malta. However, Maltese companies may reclaim part of the taxes paid on profits distributed as dividends, reducing the overall tax burden.
Foreign companies may be required to pay rental income tax in their country of registration if there is no double taxation avoidance agreement between Malta and the company’s country.

Special Designated Areas (SDA)

In special designated areas (e.g., Portomaso, Tigne Point, Madliena Village), foreign companies can freely buy and sell property without additional restrictions. For transactions involving this type of property, the standard 5% stamp duty applies, and transactions conducted through a company do not require additional permits.

Property Taxation

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