From the series Living, Land & Law: Fortnight Insights – Article 9
What are the tax implications of buying or selling property in Malta, including stamp duty, capital gains tax and other property-related taxes?
Tax Implications for the Buyer
In Malta, unlike many other countries, there isn't a long list of taxes which are associated with purchasing a property. For instance, there are no VAT implications on the purchase or sale of any immovable property situated in Malta and there is also no local council or municipal tax.
Buyers are subject to pay stamp duty, which is set at a flat rate of 5% on the value of the consideration for the transfer of the property. However, some different rates are applicable in certain circumstances. When the immovable property is purchased as the primary and the sole residence of the buyer, the first €150,000 are chargeable at 3.5% whilst the excess is charged at the normal 5%.
When it comes individuals who buy the residential property in Gozo the stamp duty rate will be reduced to 2%. Similarly, buyers who purchase a property that is situated in an Urban Conservation Area, is built more than 20 years ago and has been vacant for more than 7 years, or otherwise, is newly developed but through Maltese traditional architecture can benefit from an exemption on stamp duty on the first €750,000 of the property.
Differently, the assignment of an immovable property between married spouses, or between formerly married spouses would result in a 0% stamp duty.
Without a doubt, the government prioritises first-time buyers. Indeed, the government offers various schemes for first time-buyers who are buying property, for the first time, and which will be used as their primary and sole residence. Firstly, in such scenario, no tax is payable on the first €200,000, whilst the flat rate of 5% is applicable for the excess.
Moreover, first-time buyers purchasing a property in Malta are also eligible for a one-time government grant of €10,000, distributed over a period of 10 years (paid in instalments of €1,000 per year). However, to qualify for this scheme the property's value must not surpass half a million.
Another scheme available to first-time buyers is the Deposit Payment Scheme, applicable if the value of the desired property does not exceed €225,000. This scheme is designed for couples or individuals eligible for a home loan but unable to provide the 10% down payment required at the signing of the promise of sale agreement. Under this arrangement, the buyer will pay the monthly instalment to cover the personal loan, whilst the Housing Authority finances the interest on the loan for a total period of 25 years.
First-time buyers can also apply for the UCA grant for first-time buyers, if the property sought after:
- is privately owned, serving a residential purpose;
- is situated within an Urban Conservation Area (UCAs);
- has been built for a period of more than 20 years; and
- has been vacant for more than 7 years.
The two last conditions can be done away with if the property, although is newly built, reflects a 'traditional' element.
If the above-mentioned conditions are met, the buyer is eligible for a €15,000 grant and a full tax exemption if the property is situated in Malta, and a €40,000 grant and a full tax exemption if the property is situated in Gozo.
Finally, if the above-mentioned conditions are met, first-time buyers can also receive a reimbursement for expenses related to renovation and restoration. This refund covers up to €54,000 on the first €300,000 spent on refurbishment and renovation works.
The expenses can cover a wide range of items, including the cost of materials, government charges, planning fees, as well as expenses for electricity and plumbing works, bathrooms, and internal and external doors. Professional fees, such as architect fees and specialist consultancy fees can also be taken into account, but these will be capped at a maximum rate of 10%.
The aim of these last two schemes is to incentivise the purchase of old vacant properties, safeguarding the traditional architectural Maltese buildings.
All these first-time buyer initiatives have been extended in the Malta Budget of 2025.
Tax Implications for the Seller
On the other hand, seller must pay the withholding tax, known also as the property transfer tax. This refers to a tax which needs to be paid by the seller from the funds collected after the sale of a property. This is usually 8% of the value of the property transferred, minus the agency fees. The withholding tax must be paid irrespective of whether the seller would have made any profit from the sale. Nonetheless, there are a number of exceptions to the withholding tax rate:
- If the immovable property sold within the first 5 years of purchase, the withholding tax rate will be reduced from 8% to 5%, as long as the property does not form part of a project. Nonetheless, this is not applicable if during the 5 years an application for a permit was required;
- If the property is transferred within 3 years from the date of purchase the withholding tax rate will be reduced to 2%. This is not applicable if the property forms part of a project and if the property was not purchased for the buyer's sole ordinary residence. Moreover, this is only applicable if the seller does not own any other residential property at the time of the sale.
Moreover, there are also other instances when the seller would be exempt from withholding taxes in Malta:
- If the property is transferred after three years from the date of purchase and within one year after vacating the property;
- If the property is donated to a spouse, descendant or other direct family member;
- If the property is assigned due to a separation or a divorce.
When it comes to taxes imposed on an inherited property, these are subject to a number of terms and conditions. If the property was inherited before the 25th of November 1992, then the withholding tax applicable is equal to 7% of the transfer value. On the other hand, if the property was inherited after the 25th of November 1992 the seller can either choose to pay a 12% withholding tax on the difference between the transfer value and the cost of acquisition or else the seller can choose to pay a final withholding tax of either 10%, 8% or 5% depending on what the year the property was purchased.
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.
