Property purchase by non-residents

The sale of property to non-residents has always been popular, especially with British residents. This is mostly due to the long history and affinity between the two countries.

However in recent years Malta has witnessed an influx of people of other nationalities from the continent, who purchase property in Malta as a holiday home, a retirement residence or due to work exigencies. The procedures for foreigners purchasing property in Malta or Gozo are very straightforward.

A high percentage of the properties sold to foreigners in Malta are holiday homes.

Owners of holiday homes do not even need to obtain visas and they may reside on the island for up to three months at a time. Longer stays are also considered, however each case is treated on its own merits.

The advantages of buying property in Malta are numerous. All funds and profits from the sale of any property (except for capital gains tax) may be repatriated to any country or currency of choice. Non-residents can make use of all local mortgage facilities offered by the major banks. All deeds and documents are read and published in English and therefore can be easily understood.

Special concessions are given on the importation of personal effects and pets. Non-residents are not subject to local income tax, and there are no rates or local council taxes. Furthermore, properties with swimming pools and in special designated areas may be rented out.

Non-residents buying property in Malta are however subject to a number of conditions. When buying property, a promise of sale agreement must be signed undertaking to purchase a property of not less than Lm30,000 in the case of an apartment or maisonette and not less than Lm50,000 for any other type of residential property.

Another requisite is an AIP (Acquisition of Immovable Property) permit, which costs Lm100 and can be acquired from the Ministry of Finance. The property being purchased must be solely for personal use by the purchaser or his/her immediate family, unless within a special designated area.

Other conditions include that, non-residents have to provide documented evidence to the local exchange control authorities showing that the funds used for the acquisition of the property have originated from an external source.

Applicants may only own one property in Malta or Gozo at any given time (except in special designated areas), but should they wish to purchase another home, permission is normally granted subject to the first property being sold within a reasonable time.

A non-resident may sell his/her property to another non-resident, provided that efforts have been made to find a local buyer. Non-residents may not purchase properties having historical value or listed as part of the island's heritage. This however does not apply to most farmhouses and houses of character.

For permanent residents the conditions vary slightly. In the case of permanent residents, applicants must produce evidence of an annual income of Lm10,000 or over, or capital assets of Lm150,000 or over. In either case, the whole amount is not required to be brought into the country. In the case of rented property the annual rent cannot be less than Lm1,800 per annum. Furthermore each applicant must import a minimum of Lm6,000 per annum with an additional Lm1,000 for each dependant.

In respect of taxation all income remitted to Malta or generated locally is subject to a flat tax rate of 15 per cent, and the minimum amount payable is Lm1,000 per annum. Overseas capital funds invested locally are, of course, only taxed locally on any interest or dividends paid thereon. Some permanent residents also benefit from double taxation agreements which exist between Malta, most European countries, Canada and Australia.

Owners of properties in special designated areas or properties enjoying the use of a swimming pool are permitted to rent them out provided that such properties are licensed as holiday accommodation by the Malta Tourism Authority (MTA).

Such rental income is, of course, subject to the flat tax rate of 15 per cent. If a property is purchased in one's name, the heirs of the deceased are liable to pay seven per cent provisional tax on the value of the property in question. In the case of joint ownership, if one of the title owners passes away, provisional tax of seven per cent is paid on only 50 per cent of the local estate.

Andrew Gatt is operations director at Dhalia Real Estate Services. For more information visit www.dhalia.com