Budget 2021: Improved Incentives for First Time Property Buyers

UPDATE: The government plans to extend again the measure which reduced stamp duty to 1.5%. Acquirers will have until the end of July to sign a promise of sale and benefit from the reduced rate.

We’ll keep you posted about further announcements.

The existing scheme to aid buyers in purchasing their first home is being extended, with the property value eligible for duty exemption increased from the current upper-limit of €175,000 to €200,000.

This incentive and others affecting the real estate sector have been announced on Monday in the Budget 2021 speech. Yesterday’s budget also extended the reduced duties announced earlier this year as part of the COVID-19 economic regeneration plan.

Reduced stamp duty of 1.5% and Final Withholding Tax of 5% for Inter Vivos transfers will apply to promise-of-sale agreements made until March 2021, and until the end of 2021 for the signing of contracts of sale.

Other property incentives

Duty on property donations is also being eased, with the first €250,000 in the value of a property being exempt, an increase from the previous threshold of €200,000. Amounts in excess of €250,000 shall be subject to duty at the rate of 3.5%

The rate of duty on the acquisition of residential properties is being reduced to 3.5% on the first €200,000.

Reduction in duty for second-time buyers is also being extended to acquisitions made throughout 2021. This scheme allows individuals who sell their first residence to purchase another home to claim a duty refund of up to €3,000 if it is their sole property.

Extension of reduced duty rates on the acquisition of properties located in an Urban Conservation Area (UCA) or in Gozo. The current duty of 2.5% (down from the previous rate of 5%) will continue to apply during 2021

During 2021, all profits derived from the assignment of rights on a promise of sale relating to immovable property will be taxed at a final tax rate of 15% increased from the first €100,000.

UPDATED: Fiscal incentives for property buyers and sellers: Stamp duty reduced to 1.5%; final withholding tax to 5%

UPDATE: The government plans to extend again the measure which reduced stamp duty to 1.5%. Acquirers will have until the end of July to sign a promise of sale and benefit from the reduced rate.

We’ll keep you posted about further announcements.

The government announced temporary financial incentives for Maltese property buyers and sellers as part of a COVID-19 economic recovery package launched on 8th June 2020.

Legal Notices 240/2020 and 241/2020, concerning the payment of stamp duty and property transfer tax, provide for the following revisions to the fees that must be paid for contracts that occur by 1st April 2021:

  • Property buyers will see their stamp duty reduced to 1.5% from the present rate of 5%. Schemes that are currently in existence (such as First Time Buyers and UCA Scheme) can be used in conjunction with this rate of stamp duty.
  • Property sellers will pay a final withholding tax of 5%, a decrease from the 8% / 10% tax currently in place.

These reductions apply to property values up to a maximum of €400,000.

Properties valued over this amount will have the reduced rates applied to the first €400,000. Any fees due over and above this amount will be calculated at the normal rates.

Donations of immovable property (under Article 32C of the main Act) are not subject to the revised stamp duty rates.

The new measures apply to transfers of immovable property made on or after the 9th June 2020, but before 1st April 2021. These transfers will qualify for the reduced rates if the notice of the final deed is given to the Commissioner for Revenue by 30th April 2021.

In a related announcement, the government said it will also amend the First time Buyers Scheme so that people who had previously bought any property that doesn’t constitute a residence (e.g. a garage) will be able to qualify for this scheme when purchasing a new home.

Client’s Perspective: Signing a promise of sale

A notary public will be the second or third person involved in what will probably be the most important decisions in your life. 

Luckily, I worked with Veronica Mizzi Young before, so it was only natural that when the time came to signing a konvenju (promise of sale) as first-time homeowners, my fiancée and I would ask for her assistance again. If you’re in a similar position and don’t know a notary yet, then consider this a personal recommendation!

As a couple, we’ve always put a lot of time and thought into all our decisions; however, over time, we noticed that the world tends to surprise us with opportunities we would never have expected. 

Often, the more we try to plan things meticulously, the more likely they are bound to go spectacularly awry! In hindsight, many of these unforeseen outcomes end up being far better than anything we could have planned.

“Connections” is the name of the (Maltese) game

We found the perfect place by chance through a work colleague who put us in touch with an old schoolmate that was selling. We hadn’t been looking around seriously for very long; we had gone for only a couple of viewings before, and the kind of property we planned on buying was the complete opposite of this particular property for sale.

Nobody is really prepared to make a decision as hugely consequential as purchasing property for the first time. You can try to be as objective as you want—like we tried to do—but the final “yes” always comes from the heart. 

In our case, the property clicked with us immediately, but we wouldn’t admit it so readily. Directly after the viewing, we went to one of our favourite public gardens, and after a long and animated walk, we decided to buy that property.

Hitting a snag or two

Things are never as easy as they seem to be. We almost thought we had lost our chance as we had to delay signing the promise of sale by a week due to a trip abroad we had planned earlier. 

We had already contacted Veronica by then, who duly gave us a list of all the documents we needed to bring with us and a tentative date for our meeting. With no way to confirm things definitively, we had no choice but to leave everything up to fate.

Luckily, fate was on our side this time. Back in Malta and a few emails and phone calls later, the property was still available and we managed to set a date for the meeting. 

Veronica was incredibly patient with us, and despite already being familiar with some aspects the konvenju process (I helped write that article!), I suddenly found myself doubting everything I knew. I couldn’t believe we were actually about to sign on a property: our very own home-to-be!

Signing the deed

We signed the promise of sale at VMY’s office in Rabat. Always the consummate professional, with an eye for efficiency and simplicity, Veronica had already drafted the contract for us. All that was left was completing the customary KYC and GDPR forms that every notary has to provide to their clients. 

After reading the document together and filling in our personal information, we were finally ready to sign the deed. Veronica would keep the deposit for us and forward the provisional tax to the right department. The whole process took around an hour and when we left, we had all the signed paperwork safely tucked in a VMY folder.

Not quite over yet

Of course, the world couldn’t help itself one more cheeky jab in the ribs. Little did we know that we had signed our promise of sale on the verge of the COVID-19 outbreak in Malta. 

Thankfully, we found a great deal of support from the architect, the bank, and of course, Veronica herself. It’s easy to get lost amid land registry plans, Schedule 8 forms, and property valuation form, but all the professionals involved were eager to guide us and let us submit several documents electronically, or by post if that wasn’t possible.