Located in the heart of the Mediterranean, the islands of Malta have long been popular as a holiday destination and a destination for expatriates seeking to invest in or to establish their new home in Malta. In the past two decades, regulatory development, increased accessibility, reduced red tape and favourable tax regimes, have transformed Malta into an innovation-driven and competitive economy[1].
In addressing its dual role as a destination for individuals seeking to relocate their personal affairs and business to Malta, Malta has adopted a favourable regime which gives opportunities to both EU and non-EU nationals to purchase property in Malta. This is epitomized in the case of Special Designated Areas where no distinction applies between Maltese and non-Maltese citizens.
What are Special Designated Areas?
Special Designated Areas are prime residency areas where the conditions of acquisition are the same for Maltese and foreign residents. Property in Special Designated Areas is intended to provide top-end facilities and amenities such as restaurants, supermarkets, spas and marinas within the same area.
The current Special Designated Areas are the following.
- Portomaso Development, St. Julians, Malta;
- Portomaso Extension I, St Julians, Malta;
- Cottonera Development, Cottonera, Malta;
- Tigne Point, Tigne, Malta;
- Tas-Sellum Residence, Mellieha, Malta;
- Madliena Village Complex, Malta;
- SmartCity, Malta;
- Fort Cambridge Zone, Tignè, Malta;
- Ta’ Monita Residence, Marsascala, Malta;
- Pender Place, St. Julians, Malta;
- Metropolis Plaza, Gzira, Malta;
- Fort Chambray, Ghajnsielem, Gozo;
- Kempinski Residences, San Lawrenz, Gozo.
No permits necessary
Special Designated Areas provide an exception to the rules on residency permits in Malta, in that non-Maltese purchasers may buy property with the same rights as Maltese citizens, thus not requiring a permit from the Maltese government. Essentially this means that purchasers, whatever their nationality, are exempt from the requirement of obtaining an Acquisition of Immovable Property (AIP) permit. Once such property is acquired, it may be leased out without any restrictions.
On the other hand, certain acquisitions of property located outside Special Designated Areas necessitate an Acquisition of Immovable Property (AIP) Permit issued by the Ministry of Finance, Economy and Investment, which is issued according to the conditions set in Maltese Law.
Buying a holiday home
Special Designated Areas give EU nationals the possibility of buying a secondary home, typically a holiday home, in Malta without necessitating a permit.
This does not apply in the case of other properties in Malta, where EU citizens who have not resided in Malta for a minimum period of 5 years require a permit if the property being bought will not be used as the primary residence. In this context a distinction must be drawn between the terms “primary residence” and “first residence”, with the latter designating the first purchase whilst the former denotes a person’s main dwelling. Since a person can only have one primary residence at a given time, unless the purchaser will effectively live on a permanent basis in the place being bought, the property is not considered as a primary residence but a secondary one, in which case, an AIP permit is required.
Leasing your property when away
When acquiring a property through an AIP permit, restrictions on leasing of the property apply. Since such permit is granted for personal residential use, then it follows that the property may not be leased out. This is not the case with Special Designated Areas and thus, purchasers of such properties may opt to lease out their property in Malta, thus enjoy the capital growth and rental yields that these prime areas offer.
Immediate access to facilities
Another advantage from a practical point of view is the immediate access to facilities within close proximity that these areas offer. Having been built specifically to cater for the needs of non-Maltese residents, these developments offer close entertainment areas, the amenities of a metropolitan centre and increased accessibility to facilities with all the comfort and security of a very exclusive community.
Within the development, parking facilities are typically exclusive to the residents and their guests with access to the property being limited to private roads within the area itself.
Diversity in the property
Reflecting the diverse nature of Malta’s property market which offers different types of properties, ranging from single-bed room apartments to large villas, property in Special Designated Areas is varied giving prospective purchasers an array of options. Whilst the choice varies from one area to another, most areas typically have 1/2/3 bedroom apartments, penthouses, family units as well as villas.
Access to the High Net Worth Individuals Scheme
Launched in 2011, the High Net Worth Individuals Residency Scheme allows special tax status to non-Maltese nationals who meet a number of criteria, amongst which is a pre-determined value of the property. Irrespective of whether the purchaser is an EU national or otherwise, the property must have a value of not less than €400,000, and must serve as the applicant's habitual residence, and that of any accompanying family members.
Once other conditions such as health insurance and annual income thresholds are fulfilled, the permit holder is given the special tax status carrying the right to pay tax at a beneficial flat rate of 15% on foreign source income received in Malta together with the possibility of claiming double taxation relief.
In light of the fact that property in Special Designated Areas is on the higher end of the market, property bought in these areas gives purchasers the possibility of applying for this special and highly advantageous tax status.
[1] World Economic Forum, ‘Global Competitiveness Report 2011-2012’
