MALTA Law and Practice Contributed by: Damien Degiorgio and Ramona Galea, Fenech Farrugia Fiott Legal
Agreement”, with the balance payable on com - pletion of the final deed of purchase. The rate of 5% stamp duty represents the total tax due and is ultimately equivalent to 1% of the final price. Once a promise of sale is signed, it must be presented to the Capital Transfer Duty Section at the office of the Commissioner for Revenue within 21 days. Here, a provisional duty of 1% is paid by the purchaser based on the market price or transfer as per the contract, whichever is the higher. Once payment is received, a receipt for provisional stamp duty will be issued to the taxpayer confirming the above. Here, it is necessary to mention that non-resi - dents wishing to acquire immovable property in Malta may only do so after having acquired an Acquisition of Immovable Property Permit (the “AIP Permit”), whereby applicants would need to submit the relevant application together with a copy of the promise of sale of the immovable property intended to be purchased. In the case of a dwelling house, such applicant must primar - ily fulfil a number of conditions, as follows: • property must be solely used as residence by the applicant and their family; • acquisition must be effected within six months from the date of issue of the AIP Permit, save the granting of any extension as may be applied for; • a certified copy of such deed must reach the office of the Commissioner for Revenue within three months from publication of the deed; and • the immovable property may not be sold in part, or otherwise converted into more than one dwelling house.
Similar conditions shall apply where the property being acquired is either a garage or other adjoin - ing property, or else a plot of land. 2.11 Legal Restrictions on Foreign Investors As stated in 2.10 Taxes Applicable to a Trans- action , foreign investors may acquire real estate in Malta only by means of an AIP Permit, which shall require applicants to fulfil a number of requirements.
3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate
Acquisition of commercial real estate can be financed either by means of a direct payment by the purchaser from his own assets, by means of a bank loan or otherwise through a consortium. If the purchaser chooses to obtain a bank loan, the purchasers would be required to place the estate as collateral in the event of non-payment of the loan and would be subject to a hypothec or a privilege. Alternatively, if the purchaser chooses to proceed with setting up a consortium, the pur - chaser will need to determine, together with the other members, the applicable terms and condi - tions, including but not limited to, the financial contribution to be given by each member. 3.2 Typical Security Created by Commercial Investors Generally, security in the form of hypothecs and privileges are created to ensure the repayment of borrowed funds. A general hypothec may be cre - ated in favour of the borrower over the buyer’s property or that of a third-party guarantor, both present and future, provided that the property is not sold. Alternatively, a special hypothec can be created over one or more specific properties of
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