MALTA Law and Practice Contributed by: Damien Degiorgio and Ramona Galea, Fenech Farrugia Fiott Legal
8. Tax 8.1 VAT and Sales Tax
7.5 Additional Forms of Security to Guarantee a Contractor’s Performance It is common for owners to seek personal guar - antees and performance bonds as a form of guarantee for the contractor’s performance of the works on a construction project. 7.6 Liens or Encumbrances in the Event of Non-payment The Civil Code, Chapter 16 of the Laws of Malta provides that architects, contractors, masons and other workmen are deemed to have a privi - leged credit for the debt that is due to them in respect of the works and expenses furnished by them. This privilege extends over the property that has been constructed or repairs and must be registered for it to have effect. The privilege can be reduced or totally cancelled by means of a public deed, provided that the creditor has given their consent, or otherwise by means of a judgment delivered by the competent court. 7.7 Requirements Before Use or Inhabitation On completion of the construction works, the cli - ent (ie, the person for whom the works have been carried out) shall submit to the Chief Executive Officer of the Building and Construction Author - ity, within two weeks from the completion of the works, a certificate of completion of the con - struction works as approved by the responsible architect. The certificate shall then be published on the Authority’s website by the Chief Executive Officer, and the responsible architect shall have two weeks to notify all the owners and occupiers of the properties, for which a condition report on the property shall have been drawn up and sub - mitted together with the details of the certificate regarding the project completion.
Malta is accorded a derogation in terms of Arti - cle 387 of the EU Sixth Recast VAT Directive (VAT Directive 2006/112/EC) to continue to exempt, the supply before first occupation of a building, or parts thereof, or of the land on which it stands and the supply of building land. This is trans - posed in item 1(2), Part 2 of the Fifth Schedule to the VAT Act (Chapter 406 of the Laws of Malta). Therefore, a transfer of immovable property in Malta is in principle either outside the scope of VAT or exempt without credit, according to the specific circumstances. 8.2 Mitigation of Tax Liability The acquisition of immovable property situated in Malta would be subject to stamp duty in Malta in terms of the Duty on Documents and Transfers Act. In principle, a provisional duty is levied at 1% by the notary on the promise of sale con - tract. The final levy of stamp duty is then lev - ied by the notary on the transfer deed, with the default rate being 5%. The government of Malta does provide for spe - cial schemes for the mitigation of stamp duty on the acquisition of immovable property, including special rebates for purchases in urban conserva - tion areas or vacant buildings. This is only to the extent that such an acquisition by the foreign investor would not require an AIP permit. The requirement of this special permit in Malta for non-residents needs to be evaluated in terms of the specific circumstances of each individual case. 8.3 Municipal Taxes Malta does not have municipal taxes and only levies direct and indirect taxation at a national level.
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