Luxury Real Estate

By: Carl Peralta of 77 Great Estates

There aren’t specific incentives. An investment in immovable property in Malta would be due to the stability of such property’s value and as a good medium to a long term investment.

On the other hand, there might be various tax incentives for Malta companies set up to hold immovable property outside of Malta, usually through a company in such country. Whereas any income or gains from the immovable property, and the company holding it, will be taxed in accordance with the domestic law in that country – lex situs – where a Malta company holds at least 10% of the equity shares in such foreign company, other conditions can be satisfied – such as €1.1m investment – such would be considered a ‘participating holding’. Where the Malta company receives income from such ‘participating holding’ or gains from the disposal of shares in such participating holding, such profits will stand to be exempt at the level of the Malta company. Furthermore any subsequent dividend distribution to shareholders wherever they may be situated will not be subject to ant withholding tax in Malta. This creates a very interesting immovable property investment vehicle through a Malta company for investors around the world.

Other specific tax planning opportunities have in the past worked, for example with immovable property in Portugal. These can be considered on a case-by-case basis. One may look into setting up property funds in Malta, again for the purpose of allowing foreign investment in immovable property around the world.

A company incorporated in Malta must keep 5 tax accounts, amongst which the Immovable Property Account (IPA). Profits derived directly or indirectly from immovable property in Malta must be allocated to this tax account. There is a legal notice which details what is considered to be profits derived from immovable property in Malta; this is quite exhaustive. Such profits are taxed in various manners whether capital gains or as income – Art. 5A/Art 4 Income Tax Act (ITA). Either way the tax paid in Malta on such profits would be final since no refunds of tax are contemplated out of profits derived from immovable property in Malta and allocated to such IPA.

Please feel free to contact our real estate tax department on info@77GreatEstates.com or (00356) 2125 2455 should you require any further clarifications. We would be glad to analyse any specific transactions.