For first-time homebuyers in Malta, purchasing property can be an exciting yet daunting experience, particularly when it comes to the financial aspect. One of the significant costs in the property-buying process is stamp duty, a tax levied on the transfer of property. Fortunately, the Maltese government offers stamp duty reductions to help ease the burden for first-time buyers.
In this blog, we’ll explain what stamp duty is, how it affects first-time buyers, and the potential reductions available to help you save money when buying your first home.
What is Stamp Duty?
Stamp duty is a tax imposed on the purchase of property in Malta. It is calculated as a percentage of the purchase price or the market value of the property, whichever is higher. Typically, the stamp duty rate for property transactions in Malta is 5%.
However, for first-time buyers, there are specific reductions that can significantly lower this cost.
Stamp Duty Reductions for First-Time Buyers
1. Standard Stamp Duty Reduction
First-time buyers in Malta can benefit from a reduced stamp duty rate of 2% instead of the usual 5%. This reduction applies to the first €200,000 of the property value.
This means that first-time buyers can save up to €6,000 on the purchase of a home.
2. Full Exemption on Properties in Gozo
If you are a first-time buyer purchasing a property in Gozo, you may qualify for a full stamp duty exemption on properties with a value up to €150,000.
This is a significant benefit for first-time buyers looking to invest in Malta’s sister island, as Gozo offers a more tranquil lifestyle at a lower cost compared to Malta.
3. The “First-Time Buyer” Status
To qualify for these reductions, the buyer must be purchasing the property as their primary residence. This means that the home must be occupied by the buyer and not rented out to tenants.
Additionally, the buyer must not have previously owned property in Malta or abroad, making them eligible for the “first-time buyer” status.
Conditions to Qualify for Stamp Duty Reductions
To benefit from the stamp duty reduction, there are certain conditions that must be met:
1. Purchase Price Limits
The stamp duty reduction is applicable only to properties with a purchase price up to €400,000. For properties above this value, the reduced rate applies only to the first €200,000, and the remainder will be subject to the standard 5% rate.
2. Timeframe for Occupancy
To qualify for the reduction, first-time buyers must occupy the property within a certain period. The property must be used as the primary residence for at least 5 years. Failure to meet this requirement could result in a claw back of the reduced stamp duty amount.
3. First-Time Buyer Certification
Buyers need to apply for first-time buyer certification through the Malta Tax Department to claim the reduction. This certification proves that the buyer has never owned property before.
How to Apply for Stamp Duty Reductions
If you’re eligible for the stamp duty reduction, you’ll need to apply through the notary handling the property sale. The notary will submit the necessary paperwork and ensure the correct reduction is applied to the transaction.
It’s important to note that timely submission of the relevant documents and correct completion of the forms is essential to avoid delays or issues with the stamp duty payment.
Final Thoughts
Stamp duty is one of the most significant upfront costs when purchasing property, but as a first-time buyer in Malta, you can benefit from valuable reductions that will make buying your first home more affordable. By understanding the rules around stamp duty reductions and meeting the requirements, you can save money and make your property investment more accessible.
At BENESTATES, our team of experts is here to guide you through the entire process, from understanding stamp duty to finding your dream home. Contact us today to explore our property listings and start your journey towards homeownership with confidence.
