Acquisition of Immovable Property in Malta as from 1st of May 2004

As from 1st of May 2004, Malta became a full member of the European Union. From this date, the following laws and regulations should be noted.

- Citizens of all EU countries including therefore Maltese citizens who have resided in Malta continuously for a minimum period of 5 years at any stage of their lives, may freely acquire immovable property, without the necessity of obtaining a permit (AIP) under Chapter 246 of the Laws of Malta.

- Citizens of all EU countries who have not resided continuously in Malta for a minimum 5 years may only purchase their primary residence or any immovable property required for their business activities or supply of services without the necessity of obtaining a permit (AIP)under Chapter 246 of the Laws of Malta.

- Individuals who are not citizens of a European Member state may not acquire any immovable property unless they are granted a permit (AIP) in terms of Chapter 246 of the Laws of Malta.

- There are defined zones in Malta, referred to as special designated areas (presently these are Portomaso St Julians, Tigne Point Sliema, Cottonera Waterfront, Tas-Sellum Mellieha and Chambray in Gozo) where there are absolutely no restrictions to acquisition for either EU citizens or others.

 - Different rules apply to acquisition by bodies of persons and commercial companies. For further information on this, please contact Homes in Malta directly and we will be happy to advise.

Conditions needed to satisfy granting of a permit to acquire property from the Ministry of Finance (AIP)

EU and other citizens who require permission from the Ministry of Finance to acquire property in Malta must satisfy the following conditions: - Value of property purchased may not be less than Euro 99,000 for a flat and Euro 165,000 for a house. These values may be subject to revision as they are index linked.

 - The property purchased must be solely used as residence for the applicant and his/her family. It can be rented to third parties if it is a villa or house of character with swimming pool or a first class quality flat. The relative Letting Licence from the Malta Tourism Authority must first be obtained.

- Documentary evidence that the funds used to purchase property have originated from overseas. It is however possible to obtain up to 90% mortgage from a local institution.

- All proceeds from the sale of the immovable property may be repatriated overseas. Applicants may only own one property unless the second property is in a specially designated area. Permission to purchase a second property will be granted subject to the first property being sold in a stipulated time.

Please Note: The information provided above is for guide purposes only. As the purchase of any property in Malta is a commitment not to be taken lightly, Homes in Malta recommend that you ALWAYS use the services of a notary. We can obviously recommend the services of a competent notary with many years of experience of dealing with both Maltese citizens & overseas buyers should you require one.

Mortgages are widely available to both Maltese citizens & overseas buyers as long as certain criteria are met. Banks operating in Malta include  HSBC Bank Malta p.l.c., Bank of Valetta p.l.c., APS Bank Ltd & Volksbank Malta Limited.

Homes in Malta have excellent relationships with all the banks on the island & we are more than happy to facilitate an introduction to a suitable mortgage lender. Home Loan facilities are generally offered under the following terms: - Up to 90% of purchase price or cost of construction (dependent on currency selected) - Competitive interest rates - Monthly repayments not to exceed 30% of your gross income - Flexible loan repayment terms of up to 30 years (providing your age does not exceed 65 years)

What documentation is generally required?

Maltese citizen:
- A copy of the preliminary agreement together with an architect's estimate of property value is always required
- Character reference, unless applicant is already an account holder
- Photocopy of means of identification (ID Card)
- All loans need to be supported by a minimum requirement of proof of income, i.e. pay slips or FS3 / certificate from a reputable qualified accountant
Overseas buyer:
- A copy of the preliminary agreement together with an architect's estimate of property is always required.
- Character reference, unless applicant is already an account holder
- Photocopy of means of identification (passport)
- All loans need to be supported by a minimum requirement of proof of income, i.e. if employed
- copies of your last three month's payslips & copies of your latest P60/Employer's Reference together with copies of your last 6 month's Personal Bank Statements will be required. Or alternatively if you are self-employed - copies of your last three years Audited Accounts & copies of both your last 12 month's Business and last 6 month's Personal Bank Statements will be required on application.

INVESTMENT & LEGAL SERVICES

Becoming a Maltese Resident The Maltese Permanent Residence Scheme 1988 was designed to attract foreigners or retirees who wish to settle or retire to Malta. Over the years, however, this Scheme has however also generated much interest amongst business people and high net worth individuals who travel frequently and accordingly spend virtually little time in their home jurisdiction, specifically from an international tax planning point of view. It is possible for a person of a foreign nationality to reside in Malta beyond three months only if he is the holder of a residence permit issued in his favour under section 7 of the Immigration Act (Cap. 217). The Maltese Permanent Residence Scheme 1988 offers a number of incentives to holders of such permit as discussed hereunder:

-15% flat tax rate is paid by the holder of a permanent residence only on income which he receives or remits to Malta

- a minimum of Euro 4,200 net of double tax relief, must be paid on annual basis by way of Income Tax. There is no obligation on the Permit holder to remit all his foreign-source income to Malta - such obligation applies limitedly to the equivalent of Euro 14,000 of his income plus an additional Euro 2,300 per dependant on an annual basis. Capital gains arising outside Malta and remitted to Malta will not be chargeable to tax in Malta provided the Permit holder does not become domiciled in Malta. Any capital brought into Malta not spent by the holder of a permanent residence permit and any income earned from it whilst residing in Malta may be repatriated back to his country. In addition, the residence permit holder may repatriate any proceeds from the sale of his Maltese Residence; Household, personal effects, furniture and other domestic items may be imported free of duty and VAT if imported within six months from date of arrival of the residence permit holder to take up residence in Malta. Any Residence permit holder may freely travel to Malta without the requirement of a visa.

Tax Advantages

- A low flat tax rate on any income remitted to Malta or received in Malta - The holder of a Permanent Residents permit who is domiciled in Malta is not subject to tax on world wide income
- Malta has negotiated double tax treaties with 39 countries Tax - A permanent resident pays income tax in Malta at a flat rate of only 15% on all income remitted or received in Malta. There is a minimum tax payable of Euro 4,200 after double taxation relief.
- There are no property taxes in Malta. A tax on capital gains arising from the sale of property in Malta does exist but residents are exempt after the lapse of a three year period of ownership of that property, if it is their main residence. Conditions for Application
- One must own world wide capital of Euro 350,000 or have an annual income of Euro 23,000
- One is required to remit to Malta Euro 14,000 per annum (plus Euro 2,300 for each dependent)
- A permanent resident is also required to purchase or lease a property in Malta and the minimum values are Euro 99,000 for an Apartment and Euro 165,000 for a house or villa. The minimum lease value per calendar month is Euro 420

Application Process
A permit is normally granted within 3 months of submission of application. An application must be completed and submitted with the following documents.
- Three passport type photographs of the applicant and his or her spouse (if applicable)
- A marriage certificate in the case of a married applicant and a birth certificate in the case of a single applicant.
- A police conduct certificate in respect of the applicant and of his or her spouse (if applicable)
- A copy of the personal details contained in the applicants passport and that of spouse (if applicable)
- A financial certificate from ones bankers or accountants stating that the applicant has an annual income in excess of Euro23,000 and is able to transfer into Malta Euro14,000 per annum (plus Euro2,300 per dependent) or a certificate stating that the applicant has world wide capital in excess of Euro350,000 and is able to transfer Euro14,000 per annum (plus Euro2,300 per dependent) Business & Investment

Opportunities in Malta
The following are salient features of the corporate vehicles available under Maltese law. i. The International Trading Company (ITC) is a standard limited liability company established in terms of the Companies Act. A company qualifies as an International Trading Company for income tax purposes when it solely undertakes trading activities with non-resident persons. ii. The so-called International Holding Company (IHC) is also a standard limited liability company regulated by the Companies Act that is focused primarily on the tax efficient holding of investments outside of Malta. An IHC's sources of income will typically be dividends and capital gains from equity holdings in foreign companies, rental income, interest, royalties, and the like - income from these sources will be allocated to the IHC's Foreign Income Account for tax purposes. An IHC may also be used to hold the shares of an ITC. Both the ITC and the IHC are fiscally resident in Malta and are taxed on their corporate profits at the full 35% rate of tax - the quantum of tax payable may be reduced through the various forms of double tax relief available in terms of Maltese law. However, all shareholders may be entitled to refunds of Malta tax as applicable to their particular circumstances immediately following a distribution of a dividend. In simple terms, this can mean that the total net tax paid in Malta by the shareholder is at an effective rate of 4.17%. For further information on how this tax refund may affect your particular circumstances, please do feel free to contact us & we will arrange a discussion with our legal partners. iii.

The BPA company - should the company's objects fall within the qualifying activities and/or target sectors in terms of the Business Promotion Act - these include typical manufacturing and industrial activities as well as a number of service sectors, including IT and other up and coming service industries - the company may opt to benefit from a number of fiscal and non-fiscal measures provided in terms of this law. This incentive package may lead to very significant tax savings. iv. The shipping company - the company may be used to own or operate a Maltese-flagged vessel and may therefore be of interest to ship or yacht owners wishing to flag or re-flag under the Maltese flag that is currently the 5th largest ship register in the world. Companies owning or operating (including under bare boat charter) Malta-flagged vessels may apply for a 100% exemption from Income Tax on the resultant profits; companies owning or operating Malta-flagged yachts outside of Malta may apply for a ruling as to ITC status above. Our legal partners would be at your disposal to provide all assistance relative to the flagging of the vessel or yacht concerned. v. Company re-domiciliation - Malta offers a very attractive solution for persons wishing to re-domicile their companies to a jurisdiction like Malta that offers "inter alia" a well regulated financial system, an EU-based company law, an efficient tax regime that is acceptable to high tax jurisdictions and a network comprising a substantial number of Double Tax Treaties.

Trusts in Malta
Welcome Trusts are legislatively regulated in Malta by virtue of the Trusts Act 1988 (Laws of Malta, Cap.331) and the Recognition of Trusts Act 1994 (Laws of Malta, Cap.374). The latter provides for the recognition of foreign trusts in accordance with the ratified Hague Convention on the Law Applicable to Trusts and their Recognition. In very basic terms, trusts are intended to cater for the circumstance which arises when one person holds property as owner, but for the benefit of another. This in fact may be said to be the building block for the use of trusts. Trusts can be governed either by Maltese or Foreign Law, by virtue of Malta's ratification of the Hague Convention on the Recognition and Enforcement of Foreign Trusts.. Maltese Trusts are governed by the Trusts Act and are registered with the Malta Financial Services Authority (MFSA). Registration does not however imply publicity, and such Trusts are nevertheless enveloped in confidentiality and secrecy. Foreign trusts may be governed by the settlor's choice of law in accordance with the freedom of choice allowed by the Hague Convention on Trusts in this regard. Registration of such foreign trusts is not mandatory, but if opted for, will render the foreign trust in question also eligible for the benefits under the Trusts Act. Registration however also implies that the trusts in question abide by the conditions stipulated in the law. The property of a Maltese trust can not include immovable property situated in Malta. Moreover the settlor and the beneficiaries must be qualified persons and to this extent they must not be resident in Malta at the time of the creation of the said trust. Under the present legal scenario, at least one of the trustees must be a Maltese licensed Trust Company and beneficiaries should be identifiable by name or at least ascertainable by reference to a class or a relationship to a person. The settlor may also be a beneficiary. These three persons in fact are the three main players in a trusts scenario. The Trustee's role is naturally central, since it is the trustee who acts as full owner of the trust assets in his dealings with third parties albeit in the interests of the beneficiaries and in accordance with the trust instrument. The trustee may also delegate his powers. Moreover, any third parties who acquire trust property from a trustee in good faith and under onerous title will be considered to have acquired with full title. It is worth noting that a revision of Trust Law in Malta is currently taking place. Such revision is intended to establish a more unified and integral regulation of Trusts under Maltese legislation, given that Malta is a civil law jurisdiction with strong English juridical influence. Whereas until now, trusts were not dealt with at all in the Civil Code, and therefore had an offshore feel to them, it is hoped that the amendments will result in a new Title being added to the Civil Code, dealing with all types of fiduciary obligations. Informal drafts have been circulated, and, if enacted, they will certainly be seen as a major enhancement to the Trust law of Malta. At present, Malta can already be seen as an advantageous seat for trusts. Such advantages include the following: - Foreign trusts may be registered like an ordinary Maltese trust with the MFSA, and may thus benefit from the same advantages as trusts governed by Maltese law; - Malta has adopted the Hague Convention on the law applicable to trusts; - Confidentiality is assured; - Total income tax liability of a registered Trust is Lm200 (approx.US$600); - Property held under trust is exempt from customs duty on importation; - Duty on documents and transfers do not apply, and - Facilitating certificates, which are particularly helpful for a trust carrying out transactions in civil law countries, can be obtained. Setting up a trust may today serve far beyond its traditional use as an institution primarily intended for estate planning. With the right guidance and a proper understanding of the legal and practical implications of trusts, persons may enjoy their benefits, in a flexible, confidential and yet regulated and transparent environment. Trust Formation Our legal partner is a licensed trust company providing Trustee services. In fact one of its professionals teaches regularly on issues related to trust law, and the law firm has developed a sizeable practice around trust law and practice. By way of general information, both Maltese and foreign trusts can be registered with the Malta Financial Services Authority in order to enjoy the benefits of Maltese law. It is worth noting that Malta has adopted the Hague Convention on the law applicable to trusts into its domestic legislation. They can assist in the setting up of both Maltese and foreign trusts, which service ranges from the drafting of the relevant trust deeds, to acting as trustees of the same trust, thus ensuring full confidentiality to our client.

Work Permits
Our partner can assist our clients to obtain work permits in Malta on a very regular basis. They assist them particularly in the compilation of the Application Form, vetting of supporting documentation re. Application, liaising with the Government Department concerned, chasing up the processing of the Application, up to the issue of the Permit as well as maintenance of the Permit thereafter. Work permits take normally between two to three months to be processed and issued. Entry permits/ Visas In this respect, our partner assist people who wish to enter Malta with the compilation of the relevant Visa Application Form For Entry into Malta, liaising with the Central Immigration Office, chasing up the processing of the Application, up to the issue of the Visa.

Back-Office Administration & Management
Our partner has the necessary expertise to assist you throughout the whole process of company formation and establishment, as well as to provide all requisite support services thereafter as required. Three teams of professionals - the legal support team, the accounts management team as well as the Operations Support Unit - come together to provide our corporate and Trust clients with a full range of services relating to incorporation and maintenance of companies and trusts, corporate law matters, accounts, back-office management and administrative support personnel recruitment, payroll and so forth. The staff is multi-disciplinary numbering several lawyers, accountants and professional managers with significant experience in this sector within its ranks.