Investing in Malta’s real estate market remains an attractive proposition in 2024, thanks to the island’s strategic location, robust economy, and high quality of life. However, understanding the property taxes and fees involved is crucial for making informed investment decisions. This guide will help you navigate the complexities of property taxes and fees in Malta, ensuring a smooth and transparent buying or renting experience.
1. Stamp Duty Fees
For Buyers
One of the primary taxes that property buyers in Malta need to consider is stamp duty. Typically, the stamp duty rate is 5% of the property’s purchase price. However, there are certain exemptions and reduced rates available:
- First-Time Buyers: First-time buyers benefit from an exemption on the first €200,000 of the property’s value.
- Second-Time Buyers: Individuals selling their primary residence to buy another one can benefit from stamp duty refunds under certain conditions.
- Urban Conservation Areas: Properties in designated urban conservation areas may also qualify for reduced rates. See here for more information on UCA’s.
For Sellers
Sellers are generally not liable to pay stamp duty, but they should ensure that the buyer’s obligations are met to avoid any legal complications.
2. Capital Gains Tax
For Sellers
Capital gains tax is applicable to profits made from selling property. The standard rate is 8% of the selling price, but there are several exemptions and conditions:
- Primary Residence: If the property has been the seller’s primary residence for at least 3 consecutive years, and the sale occurs within 1 year of moving out, the sale may be exempt from capital gains tax.
- Inherited Property: Special rules apply to properties acquired through inheritance.
3. Property Transfer Tax
Instead of capital gains tax, a property transfer tax is sometimes applicable. This tax is usually 12% of the property’s selling price but may be lower for properties sold within 5-years of acquisition or under other specific conditions.
4. VAT on Property Transactions
In Malta, the purchase of residential property is generally exempt from VAT. However, VAT is applicable to the services related to property transactions, such as:
- Legal Fees: Legal services involved in property transactions are subject to VAT.
- Architect Fees: Professional services for property valuation or modifications also incur VAT.
5. Notarial Fees
Notarial fees in Malta typically range between 1% and 3% of the property’s purchase price. These fees cover the drafting and registration of the sale contract. It’s customary for the buyer to cover these costs, which include:
- Contract Drafting: Preparing the final deed of sale.
- Registration Fees: Registering the property sale with the Public Registry.
6. Ground Rent (Cens)
In Malta, some properties are sold on a Freehold basis, while others are subject to ground rent (also known as ‘cens’ in Maltese). Ground rent is an annual fee paid to the landowner, which can range from a nominal amount to a more substantial figure depending on the terms of the property title.
Freehold vs. Perpetual or Temporary Ground Rents
- Freehold: The buyer owns the property outright, with no recurring payments to a landowner.
- Perpetual or Temporary: The buyer owns the property but pays ground rent to the landowner. Some ground rents can be redeemed by paying a lump sum to convert the property to freehold.
7. Additional Fees
Agency Fees
When engaging a verified agency such as BENESTATES, expect a commission fee over and above the original selling price set by the seller. In Malta, agency fees are usually around 5% + vat of the property’s sale price. For rental properties, the fee will be equivalent to 1 month’s rent.
8. Property Valuation
A professional property valuation can cost between €150 and €500, depending on the property size and complexity. This valuation is crucial for securing a mortgage and ensuring you’re paying a fair price.
Understanding the various property taxes and fees in Malta is essential for any prospective buyer or renter. These costs can significantly impact your overall investment, so it’s important to budget accordingly and seek professional advice when necessary. By being aware of these expenses, you can make informed decisions and enjoy a smooth and successful property transaction in Malta.
For expert advice and the latest property listings, contact us today! Our team of professionals is here to help you navigate the Maltese real estate market with ease and confidence.
