The acquisition of immovable property in Malta by non-resident persons is regulated by Chapter 246 of the Laws of Malta, namely the Immovable Property (Aquisition by Non-Residents) Act, which originally came into force on 9th August 1974 (the “Act”). As the name suggests, the Act seeks to establish the requisite formalities involved in the acquisition of immovable property in Malta by non-residents, and the instances in which these apply, and when an acquisition of immovable property permit (“AIP Permit”) is required, and when it isn't.
Who are non-residents?
Third-country nationals (excluding those holding long-term resident status in terms of the Immigration Act) and citizens of Malta or other Member States who have not resided in Malta for a minimum continuous period of five years prior to the date of acquisition (amongst others), are classified as falling under the definition of “non-resident persons” in terms of Article 2 of the Act.
Who requires an immovable property permit under the Act?
The provisions of the Act enable citizens of Member States of the European Union, including Maltese citizens, to freely acquire immovable property without the necessity of obtaining an AIP Permit, provided that they have resided in Malta for a minimum continuous period of five years prior to the date of acquisition.
Having said that, any of the above-mentioned persons who have not resided in Malta for a continuous period of five years may still purchase immovable property in Malta, albeit less freely, without the necessity of obtaining an AIP Permit, so long as the property being acquired is intended to be used as one's primary residence or for one's business activities or supply of services.
The obligation on citizens of the European Union (and impliedly on Maltese citizens) to obtain an AIP Permit comes into play when, not having resided in Malta for a continuous period of five years prior to the date of acquisition, said persons intend on buying immovable property for a secondary, not primary, residence purpose. The Act defines the term “secondary residence purpose” to broadly mean a purpose other than for primary residence or for the carrying out of business activities or the supply of services by any person.
In Article 4 of the Act one finds a ‘blanket' prohibition on the acquisition of immovable property by non-resident persons, whether by act inter vivos or causa mortis, so much so that any deed, will or other act purporting to transfer immovable property to a non-resident person is null and void and without effect for all purposes of law. Article 6, however, allows the Minister responsible for Finance (the “Minister”) the discretion to grant an AIP Permit to non-residents for the purpose of buying immovable property, which permit is mandatory on all fronts, that is, whether said immovable property is being acquired as one's primary or secondary residence, or otherwise. The Minister may refuse to issue an AIP Permit to a person who is not of good conduct.
Article 6 of the Act, however, specifies the instances in which the Minister may not withhold the granting of an AIP Permit, provided that the application is in line with the relevant policies and regulations, if he is satisfied that:
- The immovable property in question is required for an industrial or touristic project approved by the Government or for any other project or purpose likewise approved in view of its contribution to the development of Malta's economy; and
- In the case of an individual who is non-resident, the immovable property is a building the value of which is not less than eighteen thousand five hundred euro (€18,500) and which is intended to be used by the non-resident person as a residence for himself/herself and his/her family and such person does not own (or hold under any other title) any other immovable property in Malta other than immovable property which is subject to the exemptions mentioned in Article 4(2) and Article 5 of the Act;
- The immovable property is either a garage situated within five hundred (500) metres from the applicant's previously acquired residence or an adjoining parcel of land or building intended to serve as an extension to and be integrated with, the applicant's previously acquired residence.
A number of exemptions apply under the Act in respect of which non-resident persons shall not be bound by the requirement to obtain an AIP Permit. These exemptions concern:
- Any immovable property devolving causa mortis on any person, wherever resident, provided that the person from whom the property devolves had acquired such immovable property, where applicable, in accordance with the provisions of the Act;
- The acquisition of immovable property by any person, wherever resident, in a special designated area (further detail below);
- The acquisition of any further divided or undivided share in immovable property by any person, wherever resident, where such person had previously lawfully acquired a share in such immovable property;
- The transfer of immovable property in an inheritance between co-heirs;
- The partition of immovable property between co-owners;
- The acquisition of immovable property by a company or other commercial partnership, not being a non-resident person, from one or more of its members holding over fifty percent interest in, or of its share capital;
- The donation of immovable property to a spouse, descendant or an ascendant in the direct line and their relative spouses, or in the absence of descendants to a brother or sister and their descendants, provided such immovable property had been acquired in accordance with the provisisions of the Act, where applicable.
It is worth mentioning that the ‘blanket' prohibition on non-residents for the acquisition of immovable property is also not applicable where the property to be acquired refers to a grave or a grave site, and to the redemption of any ground-rent or other burden encumbering any immovable property lawfully acquired by such non-resident person.
Where any of the foregoing exceptions apply, the acquirer or the person on whom immovable property shall be assigned or devolve, is required to declare on the deed that the acquisiton or assignment, as the case may be, is covered by any one of the exceptions found in Article 5. The Notary publishing the deed shall warn said person of the importance of the truthfulness of his/her declaration and must proceed by recording in the deed that he/she has complied with said requirement. Failure to put down in writing the declaration as aforesaid and to warn the parties as to the importance of the truthfulness of the declaration (and/or to record the adherance of said requirement) shall be liable to a fine (multa) of not less than two thousand three hundred euro (€2,300) and not more than twenty-three thousand euro (€23,000).
Special Designated Areas
The First Schedule of the Act sets out certain defined zones across Malta and Gozo, referred to as special designated areas (“SDAs”) in respect of which no AIP Permit shall be required in the same manner for European Union citizens, Maltese citizens or third-country nationals for the acquisition of immovable property. Amongst others, SDAs include Fort Chambray, Portomaso Development and Cottonera Development. In total, the Act establishes eighteen (18) SDAs.
Any immovable property in respect of which an AIP Permit was duly obtained by the permit holder may not be used for any purpose other than that indicated in the application for such permit.
The fee to be levied in respect of an AIP Permit for the acquisition of immovable property by non-residents, payable to the Minister responsible for finance, is that of two hundred and thirty-two euro and ninety-four cents (€232.94).
Can a non-resident person acquire multiple immovable properties?
A non-resident person may not acquire more than one immovable property in Malta except insofar as the immovable property in question is not in a Special Designation Area.
Can an immovable property acquired by virtue of an AIP Permit be used for any purpose other than that indicated in the application?
An immovable property may not be used for any purpose other than that indicated in the application for the AIP Permit.
Can I rent my immovable property acquired by virtue of an AIP Permit to third parties?
Immovable property acquired by non-resident persons by virtue of an AIP Permit may not be rented out under any circumstance.
What is the full list of SDAs?
The SDAs are updated from time to time. Currently they consist in Fort Chambray, Portomaso Development, Cottonera Development, Manoel Island, Tigne Point, Tas-Sellum Residence (Mellieha Project), Madliena Village Complex, SmartCity, Fort Cambridge Zone (Tigne), Ta' Monita Residence (Marsaskala), Pender Place and Mercury House Site, Kempinski Residences (San Lawrenz Gozo), Metropolis Plaza (Gzira), Portomaso Extension I St. Julians, Vista Point (Marsalforn Gozo), Quad Business Towers (Mriehel), Southridge (Mellieha) and Mistra Heights.
How does one apply for an AIP Permit?
A non-resident person wishing to acquire immovable property in Malta in terms of the Act is required to submit a form with the Commissioner for Revenue containing such particulars and accompanied by such documents as may be prescribed in the form.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.