Buying a house in Malta? There’s an extension on the reduced tax scheme
But be quick — it’s only until the end of July 2021.
Covid-19 has halted the world. It pushed the collective pause button and forced us all into a shared experience unlike anything most of us have lived through before.
Measures and structures needed to be put into place to ensure that the economy, the fabric of our society, survived.
That’s why Malta has chosen to extend one of their temporary covid-19 measures by four months, until the end of July 2021 (formerly March 2021). This provides for a reduced tax and duty rate of 5% and 1.5% respectively on the first €400,000 of immoveable property inter vivos (between the living).
What is immovable and movable property?
Simply put, anything that cannot be moved from one place to another is immovable property and ownership rights are attached to it. It usually means real estate such as houses, warehouses, manufacturing units and even trees or plants that are attached to the earth.
Moveable property is exactly that — anything that can be moved. Examples include jewellery, watches, computers and money.
There are several schemes allowing for the reduction in duty on the acquisition of immovable property.
Let’s take a look at some below.
The first-time buyer scheme
This incentive is for first time buyers of residential property. If made before the end of 2021, acquisitions of such property are exempt from duty on the first €200,000 (€175,000 for acquisitions made before 20 October 2020), or on a pro-rata portion in case of co-acquisition, of the aggregate value of the consideration paid for the acquisition of such immovable property. The incentive applies provided that:
- This is the first immovable property acquired inter vivos by such person as evidenced thereby and declared to the notary in writing. In other words, this is your first time buying a property.
- The ownership of a garage of not more than 30m2 is however ignored when determining whether the property being acquired is the first one, as long as certain duty relief has not been availed of at the time of the acquisition of the garage.
- The acquisition is made for the purpose of establishing therein or constructing thereon his/her sole ordinary residence. In plain English: you’re buying this home to live in it, not rent it out.
- The acquirer does not require a permit in terms of the Immovable Property (Acquisition by Non-Residents) Act.
- The relevant duty form reaches the Inland Revenue Department by 28 February 2022.
The scheme applies also to buyers of residential property even if they had previously acquired inter vivos an undivided share of immovable property representing less than 25% of the real value of the whole of such property.
The second-time buyer scheme
The second-time buyer scheme is targeted at people who, by 31 December 2021, replace their sole residential property with another within 12 months from vacating the first. Duty on the first €86,000, or the pro-rata portion in case of co-acquisition, of the value of the replacement property, is refunded. Such incentive applies provided that:
- The replaced property has been owned and occupied as own residence for a period of at least 3 consecutive years immediately preceding the date of transfer.
- The acquirer does not require a permit in terms of the Immovable Property (Acquisition by Non-Residents) Act.
- Replaced property must have been subject to a reduced rate of duty upon acquisition for the purpose of establishing therein or constructing thereon the sole, ordinary residence of the transferor.
- The replacement property is acquired by the transferee inter vivos for the purpose of establishing therein or constructing thereon his sole, ordinary residence but not through a donation from close relatives as defined.
- At the time of acquisition, the transferee must not own any other residential property acquired inter vivos other than the replaced property.
- If certain duty exemptions had been availed of on the replaced property, 5 years must pass before this incentive can be availed of.
- Whereas the relevant duty form must reach the Inland Revenue Department by 28 February 2022, the claim for duty refund must be made in writing within 6 months from the last contract.
Residential property in Gozo
This scheme is best suited to home-seekers who acquire residential property situated in Gozo by the end of 2021, including a garage, or land on which only one residential unit is to be built. This incentive reduces the rate of duty from the standard 5% to 2% on the higher of the consideration or value of the property. Such applies provided that:
- The final deed is notified to the Inland Revenue Department by 28 February 2022.
- The acquirer does not benefit from the part-exemption from duty available on the gratuitous transfer of property to descendants in the direct line for the purposes of establishing one’s sole ordinary residence.
- The acquisition is not made in the course of a trade or business or for the purpose of demolition and construction of more than one unit.
Need help? We’re here for you
The Curbsy team is around to help you find the right house and the right schemes to help you purchase it. Reach out at support@curbsy.com.mt or check out all our houses for sale here.
Economic recovery
These schemes are just a small example of some of the measures taken by the Maltese government to try and help their citizens with the financial burden of covid-19.
Malta, like the rest of the world, will slowly begin to recover from the ravages of the pandemic and with a population of just over half a million, they are the first European nation to require proof of vaccination for visitors 13 and up. As it stands, 79% of Maltese adults have now been fully vaccinated.
We will get there as we always have done — together.
