The right to buy property in Malta is governed by the Acquisition of Immovable Property (AIP) Act. Echoing the restrictive stance of earlier legislators, a general clause prohibits non-residents from acquiring immovable property by or under any title and in any manner which constitutes a transfer of real rights.[1]
Over the years, such restrictions have been lifted in order to adapt to Malta’s shift towards a country that is increasingly welcoming new start-ups, that is a leader in key industries and hosts an increasing number of expatriates seeking to locate their personal and business affairs to Malta.
The text below seeks to outline the key principles that outline the right of Maltese and non-Maltese citizens to acquire property in Malta, highlighting the instances where an AIP permit is required.
What is an AIP permit
Non-residents purchasing property in Malta require a permit issued under the Acquisition of Immovable Property Act (AIP Permit). An AIP permit allows non-residents to buy property in Malta subject to a number of conditions.
Maltese and EU citizens
Under Maltese law, citizens of Malta and the European Union (EU) residing in Malta for a minimum of 5 years preceding the acquisition have a right to purchase an unlimited amount of properties.
This does not extend to Maltese and EU citizens who have not resided in Malta for at least five years prior to the purchase. In this case, Maltese law makes a distinction between primary and secondary residences; no limitations apply in the event that the property is being purchased to serve as a primary residence ergo the residence where the purchaser lives the majority of the time.[2] In the case that the property being purchased will be a secondary property, that is, a residence used for vacationing or secondary living purposes, an AIP permit is required.
Spouses of Maltese and EU citizens
The rules applicable to Maltese and EU citizens are extended to spouses if the spouses are acquiring the property on the same deed.[3] In this case, the nationality or residency of the spouse is irrelevant and thus, the requirements of an AIP permit or otherwise would depend on the criteria set for the Maltese/EU nationals.
Non-EU citizens
A non-resident may not acquire immovable property in Malta unless the transaction is made in accordance with the criteria set in Maltese legislation.
Non-EU citizens seeking to purchase property in Malta must obtain an AIP permit which is granted in the case of either of 2 conditions:
- Minimum value of property:
- villa or town house having a value of €163, 905;
- apartment or maisonette having a value of €98,370.
If the property is in shell form or unconverted, finish costs are taken into account for the purposes of determining the value of the property.
- Property purchased must be destined:
- for personal residential use of the applicant only; or
- for other purposes approved by Government of Malta; or
- for an approved industrial or touristic project; or
- for any other project or purpose which is considered to contribute to the development of the Maltese economy.
Companies
Reflecting provisions applicable to individuals, the AIP Act makes a distinction between resident and non-resident companies, with the latter requiring an AIP permit for the acquisition of property in Malta. Under the AIP Act, a company is deemed as being a non-resident if:
- it is not constituted or registered under laws of an EU Member State; or
- its registered address, principal place of residence or business is not in an EU Member State; or
- 25% or more of the shares/capital is owned by non-resident; or
- it is directly or indirectly controlled by non-resident persons.
In the above cases, an AIP permit is granted if the property is destined for:
- an approved industrial or touristic project; or
- any other project or purpose which is considered to contribute to the development of Maltese economy, or
- other purposes approved by the Government of Malta.
Echoing the criteria for the determination of Maltese residency or otherwise, limited liability companies that apply for a permit are required to give details of shareholding directors and produce the Memorandum and Articles of Association of the company.
Trusts
Supporting the solid position that the institute of trusts[4] has within the Maltese legal framework, Maltese legislation foresees also the acquisition of property through trusts. By virtue of the AIP Act, an AIP permit is required for acquisition of property by trustees which are deemed as being non-resident.
A trustee is deemed to be:
- a non-resident person unless all the beneficiaries of the trust are determined and are residents of Malta.
- a non-resident person in case of a discretionary trust, unless the power of appointment or any discretion may be exercised only in favour of residents of Malta.
A resident trustee is deemed to be:
- a non-resident of Malta where any of the beneficiaries are non-resident persons;
- a non-resident person in case of a discretionary trust, where the power of appointment or any discretion may be exercised in favour of any non-resident person.
Property in Special Designated Areas
Special Designated Areas provide an exception to the rules on residency permits in Malta, in that non-Maltese purchasers may buy property with the same rights as Maltese citizens, thus not requiring a permit from the Maltese government. Aside from targeting individuals who are non-EU citizens, this exception is of particular relevance to EU nationals who have not resided in Malta for a continuous period of five years but who wish to buy a secondary home.
Essentially this means that purchasers, whatever their nationality, are exempt from the requirement of obtaining an AIP permit.
The current Special Designated Areas are the following.
- Portomaso Development, St. Julians, Malta;
- Portomaso Extension I, St Julians, Malta;
- Cottonera Development, Cottonera, Malta;
- Tigne Point, Tigne, Malta;
- Tas-Sellum Residence, Mellieha, Malta;
- Madliena Village Complex, Malta;
- SmartCity, Malta;
- Fort Cambridge Zone, Tignè, Malta;
- Ta’ Monita Residence, Marsascala, Malta;
- Pender Place, St. Julians, Malta;
- Metropolis Plaza, Gzira, Malta;
- Fort Chambray, Ghajnsielem, Gozo;
- Kempinski Residences, San Lawrenz, Gozo.
Use of the property
The AIP Act makes it clear that property acquired by virtue of an AIP permit may only be used for the purpose for which the AIP permit was granted. Thus, individuals who acquire property for primary residency permits may not lease out the property. In addition, the emphasis on the condition that the property is being used for primary residency means that the property may not be used only as a holiday home. Since a person may only have one primary residence at a given point in time, the acquisition of property for the purpose of primary residence implies that the owner has moved his centre of activity to Malta and is considered as a legal residence for the purpose of Income Tax.
Similarly, companies acquiring property through an AIP permit must comply with the purpose for which the permit was granted.
Reflecting the principle that property acquired by non-residents in Special Designated Areas is acquired on the same terms as residents, the aforementioned does not apply to property acquired in these areas. Thus, owners of property in Special Designated Areas may use the property as a secondary residence, a holiday home or lease it out to take advantage of the rental yields that these prime areas offer.
Malta’s Residency Schemes
Individuals who are not citizens of Malta may become residents of Malta by virtue of two main schemes, namely the Ordinary Residence Scheme and the High Net Worth Individuals Scheme.
This scheme is currently available to individuals seeking to physically live in Malta who have suitable financial means to adequately sustain themselves. Aside from availing themselves from relatively low tax rates, Malta allows European nationals that become Ordinary Residents to take up gainful employment and business activities in Malta.
To be eligible for the scheme, applicants must be covered by a local or international health insurance policy to ensure non-recourse to the local health and social security system. Upon successful application for the scheme, applicants must purchase or lease property that serves as their primary residence. In so doing, they become subject to Malta’s competitive tax rates.
The tax system applicable to ordinary residents of Malta is a remittance-based system of taxation. Accordingly, an ordinary resident is chargeable to tax only on foreign source income that is remitted to Malta and on local source income. Thus, no tax is paid on foreign source income not remitted to Malta and foreign source capital gains, whether remitted to Malta or otherwise.
Launched in 2011, this scheme is available to EU and non-EU nationals who meet certain basic requirements and who do not necessarily wish to spend long periods in Malta but who wish to avail themselves of the competitive tax rates that Malta presents.[5]
Applicants from the EU or EEA as well as Swiss Nationals must have stable and regular resources. They must either purchase property of a minimal value of €400,000 or rent property at a minimum of €20,000 per annum. This property must not be shared with anyone except the applicant and his family members. Furthermore, the applicants must possess health insurance and pass a fit and proper test which includes an international due diligence exercise.
To be eligible, EU, EEA or Swiss nationals must pay at least €20,000 in tax with an additional minimum tax of €2,500 per dependant.
In the case of third-country nationals aiming at becoming long-term residents, these must have a financial bond of €500,000 with an additional €150,000 per dependant, payable on an annual basis, to cover potential social costs. Applicants must also be fluent in one of Malta’s official languages of Malta that is Maltese and English.
Third-country nationals who are already long-term residents in Malta may also apply for this scheme.
To be eligible, third-country nationals must pay a minimum tax of €25,000 and an additional minimum tax of €5,000 per dependant.
In all cases, persons holding a High Net Worth status must retain the qualifying property holding, insurance and stable resources. One must not become a Maltese domiciliary, must reside in Malta for a minimum of 90 days and must not stay in any other jurisdiction for more than 183 days becoming a tax resident therein.
The application for the Special Tax Status must be undertaken by an Authorised Registered Mandatory and is subject to a fee of €6,000.
[1] AIP Act, Article 4(1)
[2] While the criteria for a primary residence typically consist of guidelines rather than hard rules and is determined on a case-by-case basis, a person may only have one primary residence at a given point in time.
[3] In light of Article 2 of the AIP Act, spouses fall within the definition of a resident when acquiring with such resident on the same deed.
[4] In terms of the Trust and Trustees Act, a trust is described as “existing where a person (called a trustee) holds, as owner or has vested in him property under an obligation to deal with that property for the benefit of persons (called the beneficiaries), whether or not yet ascertained or in existence, or for a charitable purpose which is not for the benefit of the trustee, or for both such benefit and purpose afore-said”.
[5] Whilst Maltese law poses no restriction as to the length of that person’s physical presence in Malta there is a requirement that an individual does not spend 183 days in another jurisdiction
The right to buy property in Malta is governed by the Acquisition of Immovable Property (AIP) Act. Echoing the restrictive stance of earlier legislators, a general clause prohibits non-residents from acquiring immovable property by or under any title and in any manner which constitutes a transfer of real rights.[1]
Over the years, such restrictions have been lifted in order to adapt to Malta’s shift towards a country that is increasingly welcoming new start-ups, that is a leader in key industries and hosts an increasing number of expatriates seeking to locate their personal and business affairs to Malta.
The text below seeks to outline the key principles that outline the right of Maltese and non-Maltese citizens to acquire property in Malta, highlighting the instances where an AIP permit is required.
What is an AIP permit
Non-residents purchasing property in Malta require a permit issued under the Acquisition of Immovable Property Act (AIP Permit). An AIP permit allows non-residents to buy property in Malta subject to a number of conditions.
Maltese and EU citizens
Under Maltese law, citizens of Malta and the European Union (EU) residing in Malta for a minimum of 5 years preceding the acquisition have a right to purchase an unlimited amount of properties.
This does not extend to Maltese and EU citizens who have not resided in Malta for at least five years prior to the purchase. In this case, Maltese law makes a distinction between primary and secondary residences; no limitations apply in the event that the property is being purchased to serve as a primary residence ergo the residence where the purchaser lives the majority of the time.[2] In the case that the property being purchased will be a secondary property, that is, a residence used for vacationing or secondary living purposes, an AIP permit is required.
Spouses of Maltese and EU citizens
The rules applicable to Maltese and EU citizens are extended to spouses if the spouses are acquiring the property on the same deed.[3] In this case, the nationality or residency of the spouse is irrelevant and thus, the requirements of an AIP permit or otherwise would depend on the criteria set for the Maltese/EU nationals.
Non-EU citizens
A non-resident may not acquire immovable property in Malta unless the transaction is made in accordance with the criteria set in Maltese legislation.
Non-EU citizens seeking to purchase property in Malta must obtain an AIP permit which is granted in the case of either of 2 conditions:
- Minimum value of property:
- villa or town house having a value of €163, 905;
- apartment or maisonette having a value of €98,370.
If the property is in shell form or unconverted, finish costs are taken into account for the purposes of determining the value of the property.
- Property purchased must be destined:
- for personal residential use of the applicant only; or
- for other purposes approved by Government of Malta; or
- for an approved industrial or touristic project; or
- for any other project or purpose which is considered to contribute to the development of the Maltese economy.
Companies
Reflecting provisions applicable to individuals, the AIP Act makes a distinction between resident and non-resident companies, with the latter requiring an AIP permit for the acquisition of property in Malta. Under the AIP Act, a company is deemed as being a non-resident if:
- it is not constituted or registered under laws of an EU Member State; or
- its registered address, principal place of residence or business is not in an EU Member State; or
- 25% or more of the shares/capital is owned by non-resident; or
- it is directly or indirectly controlled by non-resident persons.
In the above cases, an AIP permit is granted if the property is destined for:
- an approved industrial or touristic project; or
- any other project or purpose which is considered to contribute to the development of Maltese economy, or
- other purposes approved by the Government of Malta.
Echoing the criteria for the determination of Maltese residency or otherwise, limited liability companies that apply for a permit are required to give details of shareholding directors and produce the Memorandum and Articles of Association of the company.
Trusts
Supporting the solid position that the institute of trusts[4] has within the Maltese legal framework, Maltese legislation foresees also the acquisition of property through trusts. By virtue of the AIP Act, an AIP permit is required for acquisition of property by trustees which are deemed as being non-resident.
A trustee is deemed to be:
- a non-resident person unless all the beneficiaries of the trust are determined and are residents of Malta.
- a non-resident person in case of a discretionary trust, unless the power of appointment or any discretion may be exercised only in favour of residents of Malta.
A resident trustee is deemed to be:
- a non-resident of Malta where any of the beneficiaries are non-resident persons;
- a non-resident person in case of a discretionary trust, where the power of appointment or any discretion may be exercised in favour of any non-resident person.
Property in Special Designated Areas
Special Designated Areas provide an exception to the rules on residency permits in Malta, in that non-Maltese purchasers may buy property with the same rights as Maltese citizens, thus not requiring a permit from the Maltese government. Aside from targeting individuals who are non-EU citizens, this exception is of particular relevance to EU nationals who have not resided in Malta for a continuous period of five years but who wish to buy a secondary home.
Essentially this means that purchasers, whatever their nationality, are exempt from the requirement of obtaining an AIP permit.
The current Special Designated Areas are the following.
- Portomaso Development, St. Julians, Malta;
- Portomaso Extension I, St Julians, Malta;
- Cottonera Development, Cottonera, Malta;
- Tigne Point, Tigne, Malta;
- Tas-Sellum Residence, Mellieha, Malta;
- Madliena Village Complex, Malta;
- SmartCity, Malta;
- Fort Cambridge Zone, Tignè, Malta;
- Ta’ Monita Residence, Marsascala, Malta;
- Pender Place, St. Julians, Malta;
- Metropolis Plaza, Gzira, Malta;
- Fort Chambray, Ghajnsielem, Gozo;
- Kempinski Residences, San Lawrenz, Gozo.
Use of the property
The AIP Act makes it clear that property acquired by virtue of an AIP permit may only be used for the purpose for which the AIP permit was granted. Thus, individuals who acquire property for primary residency permits may not lease out the property. In addition, the emphasis on the condition that the property is being used for primary residency means that the property may not be used only as a holiday home. Since a person may only have one primary residence at a given point in time, the acquisition of property for the purpose of primary residence implies that the owner has moved his centre of activity to Malta and is considered as a legal residence for the purpose of Income Tax.
Similarly, companies acquiring property through an AIP permit must comply with the purpose for which the permit was granted.
Reflecting the principle that property acquired by non-residents in Special Designated Areas is acquired on the same terms as residents, the aforementioned does not apply to property acquired in these areas. Thus, owners of property in Special Designated Areas may use the property as a secondary residence, a holiday home or lease it out to take advantage of the rental yields that these prime areas offer.
Malta’s Residency Schemes
Individuals who are not citizens of Malta may become residents of Malta by virtue of two main schemes, namely the Ordinary Residence Scheme and the High Net Worth Individuals Scheme.
This scheme is currently available to individuals seeking to physically live in Malta who have suitable financial means to adequately sustain themselves. Aside from availing themselves from relatively low tax rates, Malta allows European nationals that become Ordinary Residents to take up gainful employment and business activities in Malta.
To be eligible for the scheme, applicants must be covered by a local or international health insurance policy to ensure non-recourse to the local health and social security system. Upon successful application for the scheme, applicants must purchase or lease property that serves as their primary residence. In so doing, they become subject to Malta’s competitive tax rates.
The tax system applicable to ordinary residents of Malta is a remittance-based system of taxation. Accordingly, an ordinary resident is chargeable to tax only on foreign source income that is remitted to Malta and on local source income. Thus, no tax is paid on foreign source income not remitted to Malta and foreign source capital gains, whether remitted to Malta or otherwise.
Launched in 2011, this scheme is available to EU and non-EU nationals who meet certain basic requirements and who do not necessarily wish to spend long periods in Malta but who wish to avail themselves of the competitive tax rates that Malta presents.[5]
Applicants from the EU or EEA as well as Swiss Nationals must have stable and regular resources. They must either purchase property of a minimal value of €400,000 or rent property at a minimum of €20,000 per annum. This property must not be shared with anyone except the applicant and his family members. Furthermore, the applicants must possess health insurance and pass a fit and proper test which includes an international due diligence exercise.
To be eligible, EU, EEA or Swiss nationals must pay at least €20,000 in tax with an additional minimum tax of €2,500 per dependant.
In the case of third-country nationals aiming at becoming long-term residents, these must have a financial bond of €500,000 with an additional €150,000 per dependant, payable on an annual basis, to cover potential social costs. Applicants must also be fluent in one of Malta’s official languages of Malta that is Maltese and English.
Third-country nationals who are already long-term residents in Malta may also apply for this scheme.
To be eligible, third-country nationals must pay a minimum tax of €25,000 and an additional minimum tax of €5,000 per dependant.
In all cases, persons holding a High Net Worth status must retain the qualifying property holding, insurance and stable resources. One must not become a Maltese domiciliary, must reside in Malta for a minimum of 90 days and must not stay in any other jurisdiction for more than 183 days becoming a tax resident therein.
The application for the Special Tax Status must be undertaken by an Authorised Registered Mandatory and is subject to a fee of €6,000.
[1] AIP Act, Article 4(1)
[2] While the criteria for a primary residence typically consist of guidelines rather than hard rules and is determined on a case-by-case basis, a person may only have one primary residence at a given point in time.
[3] In light of Article 2 of the AIP Act, spouses fall within the definition of a resident when acquiring with such resident on the same deed.
[4] In terms of the Trust and Trustees Act, a trust is described as “existing where a person (called a trustee) holds, as owner or has vested in him property under an obligation to deal with that property for the benefit of persons (called the beneficiaries), whether or not yet ascertained or in existence, or for a charitable purpose which is not for the benefit of the trustee, or for both such benefit and purpose afore-said”.
[5] Whilst Maltese law poses no restriction as to the length of that person’s physical presence in Malta there is a requirement that an individual does not spend 183 days in another jurisdiction