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Why Malta?

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Location:

The Republic of Malta consists of Malta, Gozo, Comino and two small uninhabited islands, and is situated in the middle of the Mediterranean Sea. Malta is 93km away from Sicily and 290km from North Africa.

Malta became a full member of the European Union on 1st May 2004 and joined the Schengen zone in 2007.

Malta is on Western Europe time which puts the Islands one hour ahead of GMT. Between the last Sunday in March and the last Sunday in October the clock goes forward to local Summer Time by an additional hour (bringing us 2 hours ahead of GMT).

The climate is warm and healthy with mild, moist winters and dry, hot summers. Frost and snow are unknown. Rain falls only for very short periods, averaging 580mm in a whole year. Temperatures for November – April average 14°C , and 23°C for the May – October period. Average daily sunshine hours for winter are 6.5 hours, and for summer 10.5 hours. The hottest period is from mid-July to mid-September. Malta’s perennial sunshine and unpolluted sea make it a holiday destination to which tourists like to return year after year.

www.maltaweather.com

Population and Language:

Today the Maltese population stands at 404,000.

The national language is the Maltese language, however, both Maltese and English are official languages, and English is also spoken and understood by most.

Flying Times and accessibility:

Malta – London 3.05hrs

Malta – Amsterdam 3.05hrs

Malta – Frankfurt 2.35hrs

Malta – Paris 2.35hrs

Malta – Rome 1.15hrs

Malta – Cairo 2.25hrs

Sicily (Catania) is 3 to 6 hours sailing time from Malta depending on the type of craft used.

The national airline, Airmalta, operates regular flights to and from all major airports in Europe, North Africa, the Middle East and the Gulf States. Other international carriers including low cost carriers operate regular scheduled flights to and from Malta.

There is a regular ferry service, which carries passengers and cars between Malta & Gozo. The ferry crossing takes about 30 minutes.

Malta has good sea connections with major destinations serviced through the Malta Freeport and the Grand Harbour.

www.airmalta.com

www.gozochannel.com

www.transport.gov.mt

www.maltafreeport.com

www.maltairport.com

Economy and Governance:

Tourism, together with the financial services drive Malta’s economic sector, which is doing quite well, compared to the EU average. Despite the fact that the island relay on imported goods for around 80% of its needs, it can show a surprisingly low unemployment rate, mainly because of the constant growth and because of policies encouraging continuous training for the labour force.

Malta does not have any natural resources and experiences a limited fresh water supply; and it only produces around 20% of the food requirements. Thus, the economy is dependent on the human resources and foreign trade. Malta’s economy is practically driven by financial services, tourism, real estate, development, Igaming and manufacturing, particularly of electronics. Other significant sectors are pharmaceuticals, information technology and call centres.

Malta has one of the fastest growing financial services industries in the world. Already accounting for 12% of the country’s GDP, it is expected to increase to 25% by 2015.

Globally, Malta ranks sixth in inward Foreign Direct Investment and amongst the top twenty among countries most likely to sustain economic growth over the medium and long term.

Malta joined the European Union in 2004 and the Eurozone in 2008.

When comparing the per capita GDP in the EU, the country falls just above the middle with respect to wealth. The Maltese Government has pursued a policy of gradual economic liberalization and privatisation, taking some steps to shift the emphasis in trade and financial policies from reliance on direct government intervention and control to policy regimes that allow a greater role for market mechanisms. While change has been very substantial by international standards, the economy remains fairly regulated and continues to be hampered by some longstanding structural weaknesses.

The tourist sector is one of the most important sectors of the Maltese economy with approximately 1,200,000 tourists visiting the islands every year. The British market represents 41% of this figure. This is followed by tourists from Germany, the Netherlands, France, Italy and other countries, mostly European.

Malta is a democratic republic and enjoys a stable political environment. The Head of State is the President of Malta and the elected Government is headed by the Prime Minister. Malta goes to the polls every five years and the latest election was held in March 2013. The current Government is lead by the Malta Labour Party.

www.gov.mt

www.visitmalta.com

www.mfsa.com.mt

www.borzamalta.com.mt

Taxation:

Malta offers a tax system that ensures a low effective corporate tax. As a general rule companies that are both resident and incorporated in Malta are chargeable to tax in Malta on a worldwide basis.

The overall effective tax rate applicable to taxable income of companies once distributed in 5%. This is based on the right that shareholders have to claim a refund, upon dividend distribution, of a sizable portion of the tax paid by the company on such distributed profits.

Individual tax rates depend on the source of the income of that individual. Individuals are taxed at progressive rates, with the highest currently set at 35%. Specific residence and domiciliation schemes provide specific advantageous flat tax rates.

2015 Tax Rates are as follows:

2015 Rates Single Computation Joint Computation Parental Computation
0%

0 – 8,500

0 – 11,900

0 – 9,800

15%

8,501 – 14,500

11,901 – 21,200

9,801 – 15,800

25%

14,501 – 19,500

21,201 – 28,700

15,801 – 21,200

25%

19,501 – 60,000

28,701 – 60,000

21,201 – 60,000

35%

60,001 +

60,001 +

60,001 +

Immoveable Property and Tax:

Transactions involving immoveable property are subject to tax. In the case of a sale of property, a Preliminary Agreement is signed between the seller and the buyer. This agreement is often referred to as the ‘Convenium’ or ‘Konvenju’ in Maltese and binds both parties to the transaction based on a set of mutually agreed terms and conditions. The Preliminary Agreement, which may be written in English or Maltese, is usually valid for some months which vary according to the requirements of and agreements between the seller and the buyer. After the signing of the Preliminary Agreement (but before entering into a final deed of sale), a Notary would be engaged by the buyer to carry out the necessary searches into the property to confirm everything is in order before proceeding. It is at this stage that 1% of the 5% total stamp duty fee is payable to the Inland Revenue and a 10% deposit is paid by the buyer. The remaining 4% of the stamp duty will be paid with the publication of the final deed.

Also note that the 1% of stamp duty will be refunded if the final deal fails to materialize and that the deposit agreed on during the signing of the Preliminary Agreement will be handed over to the seller if the buyer does not sign the final deed without a valid reason at law.

The following terms must be agreed before the Preliminary Agreement is signed:

  • Price
  • Ground Rent
  • Features included in the price
  • Payment terms
  • Works to be undertaken by the owner
  • Terms of promise of sale agreement

Once all the conditions of the preliminary sale agreement are complete and all duties fulfilled, all parties get together to sign the final deed. It is the responsibility of the Notary to draft the final deed and prepare it for signature. The normal procedure is as follows:

  • The final deed is signed at the bank if a mortgage is required by the buyer.
  • The final contract is read out and if both parties agree to the terms and conditions the contract will be signed.
  • Time to pay the balance (the purchase price less any deposits paid on account) to the seller.
  • Both parties must now confirm that they have settled all expenses in relation to the purchase and property.
  • The keys of the property are then exchanged.
  • The contract will now be registered at the Public Registry by the Notary.

Here are the additional costs that the buyer will have to pay as well as the agreed price with the seller:

Stamp Duty:

  • Stamp duty is payable by the Purchaser

  • 3.5% on the first €150,000 of the immovable property price. This applies only on the purchase of one place of residence and subject to the purchaser having the intention to establish within the property his or her ordinary residence. (This does not apply for non EU citizens). Until 30 June 2015, any person who never owned an immovable property, directly or indirectly, and acquires a property for residential purposes, is exempt from the payment of stamp duty on the first €150,000 of the immovable property price. The stamp duty on the balance of the price above the €150,000 is payable at the rate of 5%.

  • 20% of the total stamp duty is payable on the promise of sale agreement, and the balance is payable on deed of purchase.

  • The balance of the stamp duty is payable on the final deed of transfer.

  • All Non-EU Nationals have to pay 5% in Stamp Duty on the value stated in the Final Deed of Sale. However EU citizens taking up permanent residence in Malta and who have sold their overseas property and plan to use their Maltese home as their primary residence qualify to pay 3.5% on the first €150,000. Such persons may also qualify for the full exemption on the first €150,000 of the immovable property price mentioned above.

  • Upon a contract of division of immovable property where the owner acquires a share which has the same value as when it was undivided, no stamp duty will be payable.

Notary Fees

A Notary is a public official who acts for the government and is usually appointed by the buyer.

Notary Fees are normally about 1.5% to 2.5% of the property price and are normally paid in two stages – 33% on signing the preliminary agreement and the remaining 67% with the publication of the final deed of sale. Notary fees are calculated according to the Notarial Council Guidelines under www.notariesofmalta.org

Ground Rent

Where there is ground rent relating to a property, the buyer would normally have to pay a recognition fee, (which is 1 years ground rent) (known as the ‘laudemium’) to the ground rent owner, plus the ground rent for the property itself so in total there will be two ground rent payments in the first year.

Title Of Property

Title of property is established through searches that are carried out between the signing of the konvenju and the deed of transfer. These searches give the prospective buyer a clear understanding of the title of the property, any rights that third parties may have over the property, and whether the property is burdened with any liabilities. During this period, it is also essential that the buyer confirms whether the property is constructed according to building permits. These matters do not automatically fall within the remit of the Notary Public which will eventually publish the deed of transfer, and it is important for the buyer engages the services of a lawyer to verify all these critical matters.

Capital Gains Tax

On the other hand the seller has to pay Capital Gains tax on the sale of the property. Until 2014, this tax is paid (at the option of the seller if the sale is made within 12 years from date of acquisition) either at the progressive rate of 35% on the profit (with a 7% on sale price being paid on account of the final tax on the deed of transfer) or at the rate of 12% as a final withholding tax which is paid on the deed of transfer and computed on the transfer value. If the sale occurs after the established 12 years from date of acquisition, the seller does not have the option to pay Capital Gains tax on the profit but must pay the final withholding tax.

Capital gains tax is not charged when the property being sold has been the owner’s main residence for 3 consecutive years (preceding the date of transfer) and as long as it is sold within 12 months of vacating the property. Capital Gains Tax on an inherited property (Causa Mortis) is charged at a rate of 12% on the increased value since the original purchase price as declared in the deed of the Causa Mortis. If the property was inherited before the 25th November 1992, the tax rate will be 7% of the increase in value.

Inheritance Tax doesn’t exist in Malta but if a death occurs then a beneficiary will have to pay a 5% tax on the value of the property. If a property is jointly owned and a spouse or partner passes away then a 5% tax will only apply to half the value of the property.

As from January 2015, the general rule will be that a seller will pay an 8% final withholding tax, to be levied on the transfer value. However:

  1. Transfers of immovable property acquired prior to 2004 will be subject to a 10% final withholding tax; and

  2. Transfers of immovable property by individuals who are non-property traders within 5 years from the date of acquisition will be subject to a 5% final withholding tax.

Residence Schemes:

Any transfer of property taking place on or after the 1st January 2015 will be taxed under the current system only if the promise of sale regulating such a transaction was registered before the 17th November 2014.