Introduction
Prior to purchasing an immovable property in Malta, it is important to keep in mind that such an acquisition may be subject to certain requirements. The application or otherwise of these conditions is determined by specific characteristics that are central to the acquisition at hand, namely:
- characteristics associated with the person acquiring the immovable property; and
- characteristics associated with the intended use of the immovable property being
acquired; and
- other pre-established characteristics arising independently of the person acquiring the immovable property, or the intention with which the property is being acquired.
The above factors will determine whether a person is entitled to acquire the immovable property in Malta without any pre-requisite formality, or whether he requires an AIP permit[1] to do so. These instances are regulated by the Immovable Property (Acquisition by Non-Residents Act).[2]
Definitions
In order to understand the conditions associated with the acquisition of immovable property in Malta, it is important to take cognisance of the following terminology used in this context:
- Primary Residence Purposes: this refers to the dwelling house a person habitually resides in, or intends to habitually reside in, where the property is used as the principal place of abode, whether in Malta, or elsewhere.[3]
- Secondary Residence Purposes: any purpose with the exception of:
- a primary residence purpose;
- cases where the property is acquired for the carrying out of business activities, or for the supply of services;[4] or
- where the property is acquired by a legal person[5] and the property is required for the purpose of carrying out the activity for which the legal person has been set up.[6]
When is a person exempt from requiring an AIP Permit to purchase immovable property in Malta?
Physical Persons
It is necessary to ascertain two important characteristics about the person acquiring property in Malta:
- Whether he is a citizen of Malta or of any other EU Member State; and
- Whether he has resided in Malta for a continuous period of five years.
If a person satisfies both of these conditions, then he will be deemed to be a resident of Malta for AIP purposes,[7] and is entitled to acquire any immovable property in Malta without the need of acquiring an AIP permit beforehand. In this case, the intended use of the immovable property is not an issue.[8] Moreover, he can acquire as many properties as he likes and he is also free to lease such properties to third parties.
In the case of a Maltese / EU citizen who has not resided in Malta for a continuous period of five years, the intended use of the property becomes an important factor. In such a case, the person acquiring the property is exempt from requiring an AIP permit only if he intends on using it for:
- primary residence purposes; or
- the carrying out of business activities or the supply of services.[9]
If the property is not being acquired for these purposes, then the Maltese / EU citizen will require an AIP permit to purchase the immovable property in Malta.[10]
Legal Persons
A body of persons[11] established in and operating in a European Union member state may freely acquire immovable property in Malta, so long as it is required for the purpose for which the legal entity has been set up. The only requirement in this regard is for the legal entity to be controlled by citizens of a European Union member state.[12]
On the other hand, in the case of a commercial partnership established and operating in a European Union member state may freely acquire immovable property that is required for the purpose for which it has been set up. In this case, at least 75% of its share capital has to be held by persons who are EU citizens.[13]
Other legislative exemptions
The law also contemplates other objective scenarios which exempt any persons from acquiring an AIP permit prior to acquiring immovable property in Malta. These legislative exemptions are not dependent on any characteristic dependent on the person acquiring the immovable property, or its intended use. On the other hand, they are inevitably linked to the nature of the thing being acquired or the nature of the transaction in question.
These exemptions include situations involving:
- the acquisition of a grave, or a site for a grave by a non-resident person;
- the redemption of any ground-rent, or any other burden encumbering an immovable, by a non-resident person if the property in Malta was lawfully acquired;
- the inheritance of immovable property by any person provided that the person from whom the property has devolved acquired it in accordance with the law;
- the acquisition of immovable property in a special designated area,[14] independently of where the person acquiring it previously resided;
- the acquisition of any further divided or undivided shares in immovable property by any person, provided that the shares currently owned were acquired lawfully;
- the transfer of immovable property in an inheritance between co-heirs;
- the partition of immovable property between co-owners;
- the acquisition of immovable property by a company from one or more of its members holding over 50% interest of its share capital;
- the donation of immovable property to a spouse, descendant or an ascendant in the direct line and their relative spouses (or to brothers and sisters in the absence of descendants), provided that the property was acquired lawfully.[15]
Special Designated Areas
The term ‘special designated area’ refers to the zones prescribed by the First Schedule to the Immovable Property (Acquisition by Non-Residents) Act and other zones that the Minister responsible for finance may order in the Government Gazette. These areas include the following:
- Fort Chambray;
- Portomaso Development;
- Cottonera Development;
- Manoel Island / Tignè Point;
- Tas-Sellum Residence (Mellieħa Project);
- Madliena Village Complex;
- Smartcity;
- Fort Cambridge Zone, Tignè;
- Ta’ Monita Residence, Marsascala;
- Pender Place and Mercury House site;
- Kempinski Residences, San Lawrenz, Gozo;
- Metropolis Plaza, Gzira;
- Portomaso Extension I, St Julians;
- Pender Place and Mercury House site, Extensions I, II, III, IV and V, St Julians.
An AIP permit is not required to purchase property that is located within a special designated area. This rule still applies no matter how many immovable properties are purchased within a special designated area, or within multiple special designated areas. Moreover, owners of properties located in an SDA are also free to lease such properties to third parties.
What is an AIP Permit and when is it required?
An AIP permit is a permit issued by the Minister of Finance (or his delegates)[16] to persons who are not otherwise legally capable of acquiring immovable property in Malta due to some incompatibility with the above conditions. This permit will grant the person holding it the possibility of acquiring immovable property despite the prior inadmissibility.[17]
The permit is quite specific – it applies solely to the properties indicated in the permit without granting its holder absolute permission to purchase any immovable property in Malta. Moreover, it is not lawful for the holder of the permit to use the property in a manner other than that indicated in the permit.[18]
Instances where the permit must be issued
Although it is ordinarily within the discretion of the Minister (or his delegates) to ascertain whether the permit should be issued as a result of a public, or otherwise appropriate interest, the law provides for the mandatory provision of the AIP permit in cases where an application is made in line with such policies as may be in place from time to time:
- the immovable property is required for an industrial or touristic project approved by the Government of Malta, or for any other project similarly approved in view of its contribution to the development of Malta’s economy;
- despite the fact that the person acquiring the immovable property is not a resident of Malta, the immovable property is a building with a minimum value of €70,000 in case of an apartment, and €117,000 with respect to any other immovable property. In this case, the vendor has to be purchasing the property with the intention of using it as a residence for himself and his family;[19]
- the immovable property being acquired is either:
- a garage situated within five hundred metres from the applicant’s previously acquired residence; or
- an adjoining parcel of land, or a building intended to be used as an extension of a previously acquired residence.[20]
In these cases, the permit may only be withheld if the acquisition of the immovable property in question is considered to be of historical importance.[21]
Instances that are dependent on the issuer’s discretion
If a case involves citizens of states outside of the EU attempting to acquire immovable property in Malta, these persons always require an AIP permit unless they qualify for one of the exemptions listed above, regardless of the intended use of the property in question.[22]
This also applies to any Maltese / EU citizens seeking to purchase property which is intended to be used for secondary residence purposes.[23]
Applying for a permit
When applying for a permit, all applicants are required to:
- Fill in the respective application form, depending on whether the applicant is a natural person or a legal person;
- Produce a copy of the promise of sale agreement of the immovable property being acquired, if it has been entered into.
First-time applicants will also need to:
- Produce two passport-size photographs in the case of non-resident applicants;
- Produce a photocopy of the passport showing the applicant’s particulars.
On the other hand, applicants that already own immovable property in Malta are required to produce a copy of the deed of sale of the previous immovable property.
Where the applicant is a limited liability company, it needs to:
- Produce the Memorandum and Articles of Association of the company;
- Give details of the shareholding directors;
- Produce evidence showing that the purpose of the company is for the development of the economy of Malta.
Upon the approval of the application, the applicant, or respective mandatary, will be informed by a notice. After this, the applicant will be issued with the permit against the payment of €232.94. Following the acquisition of the permit, the applicant may finally enter into a contractual agreement to purchase the property.[24]
[1] The release of this permit is subject to the discretion of the Minister of Finance or any person with the delegated authority to issue such permits.
[2] The Immovable Property (Acquisition by Non-Residents) Act (Chapter 246 of the Laws of Malta).
[3] Article 2 of the Immovable Property (Acquisition by Non-Residents) Act.
[4] Articles 2 and 3(2)(b) of the Immovable Property (Acquisition by Non-Residents) Act.
[5] A legal person is a person that is created through the appropriate registration with the proper authorities of the State. This person would have a separate juridical personality, and would include a limited liability company.
[6] Article 3(3) of the Immovable Property (Acquisition by Non-Residents) Act.
[7] Ibid.: A “resident of Malta” is defined by the law as “a citizen of Malta or another Member State who has been resident in Malta for a minimum continuous period of five years at any time preceding the date of acquisition.” This also extends to “the spouse, of whatever nationality and wherever resident, of a citizen of Malta or another Member State where such spouses are acquiring together on the same deed.”
