Malta Vat on Property

Dr Anton John Mifsud | 22 Oct 2012

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Even though Malta is a small island and it has limited resources, property is still considered to be one of the less risky but lucrative investments on the island. The good news regarding immovable property in Malta is that our legal system does not impose wealth and/or property taxes and VAT. These are important factors that one needs to consider and appreciate when buying and selling property in Malta. The same holds good in relation to leasing as well as developing property in Malta.

The following are some Important facts and VAT implications when:

·         Buying and selling Malta property:

No VAT implication arise on any party to a contract of sales/acquisition of a property situated in Malta. In fact, such transaction is considered to be an exempt without credit supply and thus not subject to any VAT.

·         Leasing Malta property.

Leasing property in Malta is generally considered to be an exempt without credit supply, meaning that no VAT is chargeable on the lease of such property. Having said this, the lessor will not be able to claim any VAT on expenses incurred in maintaining such property.

Exceptions to this general rule do exist, meaning that certain property leasing can be considered to be a supply with credit. In such case, the taxable person will be obliged to charge VAT according to the applicable rate, and will be able to claim VAT on the expenses incurred and which are directly related to the leasing of the property. These exceptions are:

-       Letting for the purposes of accommodation in any hotel or guest house or similar establishment or in any holiday camp or camping site. The chargeable VAT rate is 7%.

-       Letting of accommodation in holiday flats required to be licensed in virtue of the Malta Travel and Tourism Act. The chargeable VAT rate is 7%.

-       The letting of immovable property by a tax-registered person to another tax-registered person for the economic activity of that registered person. VAT chargeable on such transaction will be 18%, but 

·         Development of property e.g. renovation and re-sale of existing buildings, development projects etc.

Property development in Malta is one of the most attractive sectors for contractors. Unfortunately, there is very little planning that one can do when it comes to VAT because such economic activity is considered to be an exempt without credit supply. On the other hand, this can be seen as an advantage. This is because contractors are freed from any VAT obligations, meaning that there is no requirement to register for VAT - nor is there an obligation to abide by any other VAT statutory filings.


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