Malta Budget 2024
The Malta Budget 2024 was unveiled in Parliament on October 30, 2023, by the Minister for Finance and Employment. This annual fiscal plan outlines various proposals that, upon approval by Parliament, will directly influence the real estate market in the Maltese islands in the coming year.
First-Time Buyer Grants
First-time property buyers, as in the previous year, will continue to benefit from an annual government grant of €1,000 for a period of 10 years. This program aims to encourage individuals to step onto the property ladder in a market where property prices have seen substantial increases over recent years.
Income Tax and Stamp Duty Exemptions
In addition, all property purchasers, not limited to first-time buyers, will continue to enjoy an income tax and stamp duty exemption on the first €750,000 of the higher of the property’s value or the consideration paid for it. This exemption applies to properties that meet the following criteria:
- The property has been constructed for 20 years or more before the property transfer date.
- The property has been vacant for more than 7 continuous years immediately preceding the property transfer date.
- The property is situated in an Urban Conservation Area (UCA).
This incentive will apply to properties within UCAs and to properties that have been constructed for more than twenty years and remained continuously vacant for the last seven years.
Preserving National Heritage
The incentive to preserve Malta’s national heritage will also continue for an additional year. Homeowners of qualifying properties, which includes properties constructed for 20 years or more, vacant for 7 continuous years, and located in a UCA, will be eligible for a refund of VAT on expenses incurred. This refund can go up to €54,000 on the first €300,000 of the property’s total purchase price. This initiative encourages homeowners to invest in the restoration of Malta’s oldest buildings, preserving the country’s cultural heritage.
This “property restoration” incentive is further enhanced for first-time buyers of a UCA or vacant property in Gozo, who will receive an additional grant of €10,000, totaling €40,000. The equivalent grant for UCA or vacant properties in Malta remains unchanged from the previous year, amounting to €15,000.
Changes in Gozo Stamp Duty
In the previous Budget 2023, a reduction of stamp duty on property purchases outside a UCA in Gozo was introduced, dropping the rate from 5% to an incentivized 2%. This move aimed to boost economic activity in Gozo, especially following the challenges posed by the pandemic. However, concerns were raised by various NGOs about the impact this had on the development and increase in sales of holiday or buy-to-rent apartments by non-resident buyers in sensitive localities.
This incentive will come to an end on December 31 and revert to the standard 5% rate, effective January 1, 2024. While this change might be perceived as an attempt to control overdevelopment in Gozo, it may lead to a rush of property buyers eager to secure deals by the end of the current year.
Housing Authority Scheme
Another proposal in the 2024 budget introduces a Housing Authority scheme benefiting property owners who have leased their property to the Housing Authority for a set number of years or have paid subsidised rent. Under this scheme, qualifying property owners will be exempt from capital gains tax and stamp duty on the first €200,000 of the rented property value when they transfer the property to their tenants. The social objective of this program is to provide stability to tenants who acquire the leased properties, allowing them to continue living within their community, while also incentivizing property owners to sell their occupied residential properties without incurring taxes on the property transfer.
Real Estate Investment Trusts (REITs)
The Budget 2024 signals the government’s intention to release a series of fiscal incentives applicable to Real Estate Investment Trusts (REITs) with the aim of strengthening the existing regulations. These incentives are designed to allow small investors the opportunity to invest in company shares holding a portfolio of rental properties. REITs commit to distributing at least 85% of their profits in dividends every year.
The specifics of these planned fiscal incentives are yet to be revealed, and the industry will closely monitor this development in the REIT sector.
What is the purpose of the annual €1,000 grant for first-time property buyers in Malta?
The grant aims to encourage individuals to enter the property market and address the rising property prices.
Who is eligible for income tax and stamp duty exemptions on property purchases in Malta?
All property purchasers can benefit from these exemptions if the property meets specific criteria, such as being located in an Urban Conservation Area.
How does the property restoration incentive work in Malta?
Homeowners of qualifying properties can receive a refund of VAT on expenses incurred during property restoration, up to €54,000 on the first €300,000 of the property’s purchase price.
What are the changes in Gozo’s stamp duty rates introduced in the Malta Budget 2024?
The incentive reducing the stamp duty rate on property purchases in Gozo from 5% to 2% will end on December 31, 2023, reverting to the standard 5% rate.
How does the Housing Authority scheme benefit property owners in Malta?
Property owners who have leased their property to the Housing Authority and later transfer it to their tenants are exempt from capital gains tax and stamp duty on the first €200,000 of the property value.
What is the government’s objective in releasing fiscal incentives for Real Estate Investment Trusts (REITs) in Malta?
The government aims to strengthen existing regulations and allow small investors to invest in rental property portfolios through REITs.
How will the fiscal incentives for REITs benefit small investors in Malta?
The incentives will provide small investors with the opportunity to invest in shares of companies holding rental property portfolios while ensuring regular dividend distributions.
When will the changes in Gozo’s stamp duty rates take effect in Malta?
The stamp duty rate in Gozo will revert to the standard 5% rate starting on January 1, 2024.
What criteria must a property meet to qualify for the VAT refund under the property restoration incentive in Malta?
The property should be constructed for 20 years or more, remain vacant for 7 continuous years, and be located in an Urban Conservation Area (UCA).
Why is there a need for incentives to preserve national heritage in Malta’s real estate sector?
These incentives encourage homeowners to invest in the restoration of historic properties, preserving the country’s cultural heritage and architectural legacy.
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