Contract Stages of Buying Property
When purchasing property in Malta there are several stages in the process that require understanding. Having this prior knowledge will undoubtedly benefit the buyer and reduce stress and unnecessary worry.
The stages are as follows:
1. Signing of the sale of contract (convenue/konvenju).
The Convenu/Konvenju is typically for three months, it will state everything that’s included with the sale plus the financial payments, terms and conditions. Make sure that you have been to your bank and enquired about mortgages and mortgage payments should you need one.
a. buyer pays 10% deposit of full price of property which is to be held with the notary
2. The notary will carry out the relevant searches during the term of the convenue/konvenju.
The Searches involve identifying the legal owner of property , official ground rent status, go through all legal ground work to ensure the smooth completion of the convenue/konvenju. During this time if anything comes up that could prevent the sale from happening then both parties are informed and are able to clarify the situation.
a. Buyer pays approximately 0.10% – 0.50% of the property price to the Notary for the searches carried out
b. Buyer pays 1 % Stamp Duty for Commissioner of Inland Revenue – the Notary deposits this money on account with the Commissioner of Inland Revenue and on behalf of the buyer
c. Seller pays 7% Stamp Duty for Commissioner of Inland Revenue – Notary deposits this aswell
3. The notary will draw up the final contract or amend the existing one.
The searches have been carried out, financing is in place and everything’s in order. All parties will meet together and the signing of the contract will take place. During this meeting the final payments will also be made:
a. Buyer pays remaining part of the stamp duty for the Commissioner of Inland Revenue. This is 4% (5% – 1% already paid on account)
If this property is the buyers main residential property then they would be charged 3.5% Stamp Duty on the first €116,468 (Lm50,000) and then 5% on the remaining amount.
b. Buyer pays remaining price of property which is the total value minus the 10% deposit paid
c. Buyer pays Notary Fees which are approximately 1% total value of the property
d. Seller pays Real Estate Agent their fee depending on whether it’s a Sole or an Open Agency.
Capital Gains Tax
Capital Gains Tax is a Tax for the seller and only if the property is sold less than 5 years of owning it. This is due to the property being perceived as an investment/business transaction rather than a residential home. Capital Gains Tax can be charged in one of the two following ways:
1. Flat Rate of 12% of total market value of property, or
2. At a progressive rate of 35% .
These are general guidelines so please use the information for rough estimate purposes only. They may somewhat vary depending on the company and their individual services they offer.
We hope that you have found this article to be useful and that it shed some light on the financial and legal side selling and buying a property.
In the next article we will discuss ”Three most common conditions you can buy a property in Malta‘.
January 11th, 2010 at 10:47 pm
A very informative and concise article. I have spent a lot of time in Malta as a tourist and now a seasonal resident with a property in Gozo. This really does provide an invaluable insight to anyone, specifically from the UK, needing information prior to purchasing.
Its not as daunting as it seems.
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