• August 2015
    Written by Dr Mark Bencini B.A., M.A. (Fin. Serv.), LL.D., Dip. Tax.

    John Dawson may very well be a fictional character, but the benefits enjoyed in Malta are nothing other than real.

    • House hunting has always been an activity that steered up great excitement for Anna Dawson. Her parents, being relatively adventurous with their investments, had purchased a number of properties in Continental Europe throughout her youth. Her father would often return from a trip holding photo albums containing collections of pictures of properties that he had visited during his exploratory journeys. They would go through the albums together and he would describe every detail of the properties seen and the villages visited. It is now her turn to travel overseas in search of a place where she could escape to when the city life became too overwhelming. 

      Anna’s first task was to get informed. She had read a number of articles about Malta after John, her husband, returned from one of his business trips, excited to take her and the children to visit this beautiful Mediterranean island that in his opinion ticks all the boxes for investment opportunity. In a nutshell, Malta’s financial outlook is positive. 

  • Core industries including property development, tourism, financial services and online gaming are performing very well. 

    Demand for immovable property is high and Malta, being a small island, will always have a limited supply of property in comparison to the demand. One article in particular explained how Maltese property prices have been rising for the past 6 quarters, after a short slump in late 2012. The house price index rose by 7.58% during the year to Q3 of 2014 and the value of property prices rose by 1.30% during Q3 of 2014. 

    John is already well acquainted with the island. Indeed, he travelled to Malta on a regular basis to oversee the operations of his local trading company. He often boasts about the professional service that he receives by his team in Malta and most of all that Malta offers the best net effective tax rate in Europe. Once they arrive on the island the Dawson family spend the first few days travelling around so that Anna and the kids can acquaint themselves. It does not take Anna long to get on board with John’s wish to but a property in Malta. It is now a matter of finding the property that suits them best. But before this, they pay a visit to their Advocate in Valletta. 

    Whilst the offices are rather formal, John’s advocate welcomes them in a casual and very hospitable manner. After some small talk, John gets to the point and requests a brief explanation about the legal and fiscal conditions involved in buying property in Malta. Their advocate receives his request with pleasure and explains that being Citizens of the EU, but not having resided in Malta for a period of 5 years at any time preceding the date when they would buy the property, means that they may purchase their primary residence or any immovable property required for their business activities or supply of services without the necessity of obtaining a specific permit called the Acquisition of Immovable Property (AIP) Permit. Should one day they actually and physically reside in Malta for a period of 5 years they would be free to acquire any number of properties that they may wish without the need of such permit. 

    Had they not been citizens of the EU, it would be necessary to obtain the AIP Permit prior to the acquisition of any property unless the property falls in a Special Designated Area (SDA). Indeed, SDAs are luxury residential developments that qualify for international investment and thus are exempted from the AIP rules. 

    Property is purchased through a notarial deed. Therefore, John and Anna shall have to engage a Notary to publish a public deed of sale/purchase. Whilst there is no tax imposed on property ownership in Malta, 5% Duty on Documents is imposed on the purchase price of the immovable property. Indeed, being a public officer, the Notary is entrusted to collect the taxes and deposit these with the Tax Authorities. A discount is applicable if the Dawsons, being European Union Citizens, declare on the deed that they shall reside in the property being purchased as their sole ordinary residence. Should this be the case, a preferential rate of 3.5% is applied on the first €150,000 of the price. 

    Should they chose to sell the property, the sales tax applicable depends on the duration of their ownership of the property and typically varies between 8% and 10% of sale value minus certain qualified expenses. 

    Since the purchase of property in a foreign jurisdiction is always a matter to be dealt with caution, before leaving the office John requests their advocate to assist them throughout the entire process should they find the right property and such request is accepted with gratitude. 

    Anna is exhilarated. She walks out of the legal offices situated in Valletta’s principal road and observes the historic limestone buildings around her, wondering whether she will find her own little space on this charming island. She now fully understands the reason why her father loved investing in property abroad. Pity he never had the occasion to visit Malta.

    The above is a fictional story that includes true facts about the benefits that foreigners and expats can enjoy by setting up gaming companies in Malta.
  • This Article was first published in Il-Bizzilla, AirMalta's in-flight magazine.