Buying Luxury property in Malta

Buying, selling or owning luxury property in your own country is something that is never done lightly. This major financial investment requires planning and research if the final purchase is to meet your wishes and to be acquired with the minimum number of problems.  Knowledge of the buying and selling process in your own country automatically helps to eliminate some problems, particularly if you are used to this kind of investment.

 

However, buying property in another country like Malta where you are not familiar with the laws, customs and culture requires more background research whether this purchase is your first large investment in another country and particularly if this is your first large investment, full stop. Whether you choose to buy your property through your company, or money manager or as an individual it is useful to be aware of what the process involves.  Knowing where and how your money will be invested, the legal and practical issues involved, understanding the small print and the details are obviously part of sound financial planning and execution even if you involve other professionals in the process.

 

However, cultural differences are potentially overlooked as you get caught up in the excitement of purchasing your dream marina apartment or your conference centre on a sprawling estate.

 

In the initial stages you will have addressed questions around whether the luxury property or real estate suits your needs .For example

 

 

·         The purpose of the property, a primary residence, business, second home.

·         The type of luxury property, a villa, country house, a castle, a chateau.

·         Is it within my budget?

·         Physical location, urban or rural area? Sea view or in land.

·         Will I be staying there all year round or just part of the year?

·         Will I need to employ staff from the locale to maintain my home/ property?

·         Will I need local staff to run my business?

·         Does the climate suit me?

·         What is available for me to build my social life?

·         Do I want this country to be my permanent residence?

·         Are there tax benefits?

 

And the list goes on…..But how can you really know the impact of local culture and custom on your new life or business in an unfamiliar country?  You can read books, get information by exploring the internet, take a few holidays, speak to a reputable real estate agent.  A great insight can be gained by reading about others who have pursued the same dream or investment project as yourself.

 

Articles and books highlight the joys and pitfalls of moving abroad whether the projects involve small or large financial investments.  A lot can be gained by learning from those who have already trodden the path.  Taking a few holidays in a particular place may have whetted your appetite and fired your enthusiasm to make a move to a new country. Whether you were led to invest abroad to live there or to diversify your portfolio, the bottom line is you will invariably meet and possibly work with people who experience the world in a different way. On a positive note, the food maybe different, the sights maybe different, the local customs and practices may intrigue and fascinate you if you are merely observers or enjoying the activities and services offered.  But can you always assume that people from other cultures work in the same way that you do, share the same values and morals as you, even have the same concept of time as you? Not everyone adheres to the time is money rule.

 

Do your homework, speak to a local real estate agent and look for a property that in the eventuality you might need to rent out for whatever reason.

 

Different cultures do business in different ways and may have varying ideas about the value of truth and integrity in the way they go about their lives.  People in rural areas may not even share the same view of the world as their own country folk working in big metropolitan cities.  The most obvious difference is language and it is at the heart of understanding all that has been mentioned previously.  Luckily in Malta 95% of the population speak in English.  Other Benefits of the country are as follow’s:

 

·         A pleasant climate and a hospitable English-speaking people.

·         Clear blue, Mediterranean Sea

·         A peaceful and safe environment with very little crime & a high standard of living.

·         A rich cultural and historical heritage.

·         Tax benefits.

·         Favourable, tax-friendly procedure for moving your possessions into and out of Malta.

·         Favourable double-taxation agreements with key countries.

·         A highly respected jurisdiction for incorporating low-tax companies

·         Excellent banking centre with the presence of major international banks

·         Excellent access by Sea and the Malta International Airport

·         Political stablility

·         Reasonable cost of living

·         Excellent English speaking schooling built on the UK system and standards

·         Very good residency conditions

 

If you are interested in buying a luxury property in Malta it is recommended to talk to a reputable real estate agent in Malta or Gozo.

 

 

Property in Lija, Malta

 

 

 

Capital gains tax on property in Malta

In Malta, Capital Gains Tax is actually a transaction cost and not a tax on capital gains. Capital Gains Tax is generally levied at a flat rate of 12% on the transfer value or the selling price of the property in Malta or Gozo. Only brokerage fees can be deducted from the selling price. During the sale, a provisional tax equal to 12% of the selling price must be paid to the notary public who will then pass it on to the Inland Revenue as payment of the tax liability.  Capital gains earned when the property was held for less than five years can be taxed in two ways. It can be taxed at a flat rate of 12% on the selling price or at progressive rates under the old system.

Under the old system, a provisional tax levied at 7% of the deed must be initially paid through the notary public, who will then pass this on to the Inland Revenue as initial payment. This amount is credited to the total tax payable.

The capital gains realized from the sale of the property in Malta must be declared on the income tax return and will then be taxed at progressive income tax rates. To calculate the capital gain under the old system, the following can be deducted:

• the price at which the property was acquired;
• the inflation element;
• any ground-rent paid on the property and for which a deduction has not been already claimed in any other way;
• a maintenance allowance at the rate of 0.4% for every year that the owner held the property;
• improvements carried out;
• any duty paid on acquisition;
• notary’s fees;
• brokerage fees;
• other expenses directly related to the transfer but not exceeding 5% of the selling price

However, a non-resident seller may be subject to tax on the gain in his country of residence. Normally he would have the right to claim double taxation relief in his country of residence. However, it is possible that the relief would only be granted if the tax paid in Malta were a tax on the gain.

To avail this, he needs to produce a notarized statement from the tax authorities in his country of residence confirming his residency and certifying that he is subject to tax in that country.

Consequently, residents of tax-haven countries and countries whose basis of taxation is the source of income and not the residency status of the taxpayer cannot avail of this option.

A real estate agent in Malta or a Notary Public will be able to provide you a more elaborate explanation.  It is recommended that before you plan on buying a property in Malta you look up a reputable real estate agent’s website or contact a Maltese Notary Public

Working with a Real Estate Agent in Malta

Local property prices in Malta have been steadily going up by between 6% and 10% annually since the 1960’s. And during the last decade, some areas/localities even recorded an annual percentage rise of up to 20%. These rocketing prices and increased competition between the local developers have combined to make the sale or purchase of a property in Malta one of the most stressful transactions a consumer will ever make.  And this is where the real estate agents start to play an important role.

 

A real estate agent is more of a “guide” than a “salesperson”.  They act on your behalf as your agent, providing you with advice and guidance and doing a job - helping you buy or sell a property.  There are also times when you need the most current information about what has sold or is for sale, and the only way to get that is with an agent. Remember that real estate agents in Malta or anywhere else are professionals who spend their days valuing properties, attracting prospects, arranging viewings and negotiating sales.

 

The trouble is that most people view real estate agents in Malta or for that matter anywhere else in the wrong light most probably because there is the element of commission involved. It is true that the seller and the buyer (indirectly) will be expected to pay a fee or commission if the property is sold. But in return, the real estate agent will offer helpful services, the value of which may easily exceed the commission price and which you may not be able to obtain otherwise.

 

Helping the Seller

 

The right asking price is perhaps the most essential ingredient in the selling strategy. It is always very tempting to ask a few friends and relatives for their opinion and finally determine the price. But if the asking price is too high, people will not even bother to view it and the result is that you won’t even reach the market place. Ask too little for your property in Malta or Gozo, and you are potentially giving away part of your assets! An experienced real estate agent can help you determine a reasonable asking price by giving you up-to-date information on what is happening in the marketplace and valuable information of competing properties. These are key factors in getting your property sold at the best price, quickly and with minimum hassle.

 

Once your property in Malta is on the market, the real estate agent might have an inventory of qualified buyers who may be interested in viewing your property. If you are lucky enough, you might even sell property within the first few weeks!

 

A real estate agency will also take care of your marketing plan. In most cases they will advertise your property free of charge. And if the buyer puts an offer that does not meet your asking price (as it happens in most cases!), the estate agent will use his expertise and negotiating skills to find a compromise and close the deal.  The agent should also assist in making sure the closing goes through as planned and the change of possession takes place as smoothly as possible.

 

Helping the Buyer

 

When you decide the time is right to invest in a property in Malta or Gozo, you’ll need to ask yourself how much you want to invest. The next logical step is to find the properties that fit your needs and requirements. But do you have the time, energy, sources of information, and market knowledge to find the right property for you? A real estate agent has many resources to assist you in the selection process by providing objective information about each and every property that meets you requirements.

 

A real estate agent will also:

 

•             Give you a wider choice by showing you a large selection of properties that meet your requirements

•             Explain all the procedures and expenses involved in buying a property in Malta

•             Negotiate the right price for you

•             Suggest a reputable notary

•             Keep you informed as new properties come onto the market

 

 Remember… a skilled and knowledgeable real estate agent will save you time and money

 

How should I select an agent?

•             Ask friends or relatives for recommendations.

•             Check the business directory or drive around the neighborhood in which you want to buy, looking for real estate agents who specialize in that area.

•             Look for an real estate agent with a good reputation.  Ask people who have bought houses in the neighborhood and see if they can give you any suggestions

•             Call well established real estate agencies

•             The cheapest is not always the best. Find an agent that gives the service you need and want.

 

You may also want to seek the services of two or three different estate agents so that you can compare what each of them has to offer.

 

A final word

Real estate transactions involve one of the biggest financial investments most people experience in their lifetime. Transactions today can easily exceed € 90, 000 for a good-sized apartment. If you had a € 90,000 income tax problem, would you attempt to deal with it without the help of a certified accountant? And if you had a € 90,000 legal question, would you deal with it without the help of a lawyer? Therefore, considering the small upside cost and the large downside risk, it would be foolish not to consider the professional assistance of a real estate agent when searching for a property in Malta!