OCTOBER AWARDS

SALES CONSULTANT OF THE MONTH - ARLETTE Brilliant performance!
BEST PERFORMER - DAVID MIRASOLE
RENTAL CONSULTANT OF THE MONTH - AUDREY Great work!
SECRETARY OF THE MONTH - ALISON
OFFICE OF THE MONTH - VALLETTA Congratulations once again Arlette!
INNOVATIVE IDEA OF THE MONTH -
TESTIMONIALS - EDITH

OVERVIEW OF THE PROPERTY MARKET PART 2

Last week we started having a look at this market of ours and we discussed issues concerning new built properties. Today I would like to take a closer look at re-sale properties and their pricing.

Property is definitely one of the most secure and largest single investment that the average person owns, accordingly, there are a number of important considerations one must make before placing one’sproperty on the market. Naturally, when selling, we would all hope to get the best possible price for this jewel we have been working so hard for. However, it is neither our emotions, nor our personal tastes or opinions or those of others that determine the value but – The Market.

In Malta, unlike continental Europe, we do not have a price per square metre for different property types - in different towns, villages and streets. Locally, it is common practice, that when we decide to place our home on the market, we tend to scout the papers, ask a few friends and neighbours for their opinion and finally determine the price. Is this however the right way to value our property? Is the price we decided on the right one?

It is always very tempting to ask just for that little bit more or at times, a lot more, but there are a number of hidden risks involved. Property valuations are not based on what the lady down the road is trying to sell her property for or by comparing to similar properties advertised in the papers or web sites. Pricing is determined by market forces, location, property type, any views that the property might enjoy, the standard of finishing, garden, size of swimming pool, size of garage, basement, parking availability, proximity to amenities, brightness and airiness, whether it’s south facing or otherwise, standard of fitted kitchen and bathrooms as also the quality of doors, floors and other extras. I would like to emphasize that the most important factor in the equation, is location. Yes! LOCATION, LOCATION, LOCATION. Without batting an eyelid I would advise anyone to invest in a room in a good location, rather than a castle in a bad one.

A typical example that would help you appreciate the above is Tower Road, Sliema. Although we are talking of one road, there is a significant difference in price between an apartment at the heart of the commercial centre to an identical apartment on the stretch between Fortizza and Torri or to the one on the stretch of Independence Gardens, apartments on this last stretch fetching much higher prices. Why does this significant price difference exist? You might argue that we are talking about an identical property in the same street and town, so what makes the property overlooking Independence Gardens worth several thousands more than the other two? The answer is simple…. idyllic views of Spinola Bay, the Casino and a south facing location. This explains why location plays a determining role and this is further accentuated in Malta being such a small country where even properties in the same street, having the same size and standard of finish can bear a different price tag just by being a few metres away from one another.

When toying with the idea of selling your property my main advice is to seek the services of an architect or a reputable estate agent before moving further. Should you decide to use the services of an agent, I would strongly recommend that you ensure that the person conducting the valuation has a number of years of experience in the market.

A property consultant with a minimum of 3 years experience would have gained enough market knowledge to know what is on the market, what was on the market, and more importantly what prices property in that particular area and street were sold for over the past few months. I would like to underline that it is very easy to ask for any price but the proof of the pudding is in the eating, being that, the selling and not the asking price is ultimately what really matters. Bear in mind that when you conduct a personal valuation you run the risk of under or over pricing and I am sure that you do not want to see your hard earned investment selling for a few thousands less or lying idle for asking a few thousands more. I would therefore suggest that you seek the services of three reputable estate agencies, a number of which offer this service free of charge, and then draw an average. This will reflect the true market value of your investment.

What are the risks? Think about it! Would you pay several thousand Euro more for something not worth paying for? I’m sure everyone would categorically answer No. So, how would you expect a potential purchaser to do so? Remember buyers spend months looking for the right property, just as you did with your original purchase. They know an overpriced home when they see one, and they simply walk away, leaving your property to languish there while sensibly priced properties are selling around you.

Here, I would suggest that we should stop and reflect. At one point or another we were all potential buyers. Put yourself back into those shoes. Definitely when you were looking for your dream home or an investment, you scouted the papers continuously and noticed the length of time a property was on the market, and may therefore have wondered if there was something wrong with it. Although a number of years might have passed since you went through the process, things have not changed; buyers today do the same, with the difference that nowadays they are more knowledgeable and up-dated thanks to the Internet.

The Internet makes it much easier for anyone to become experts on the asking prices of property in any given area. The larger estate agents all have web sites with a search engine that is accessible 24 hours a day. This has empowered buyers, and in my opinion it’s extremely important for the market in general, to have access to the information that will help them come to an informed decision. So please do not fool yourself - if you want to sell, price your property sensibly.

Now that we have ascertained that the buyer has the knowledge, we have to accept that many buyers won’t make a low offer for fear of insulting you, the seller – they just go away without even giving you the chance to negotiate. Even if at a later date, when you notice that interest is dwindling and no offers materialised, you reduce your price, it can be difficult to persuade a client to reconsider a property they might have rejected.

In the end you will either have to reduce your price or wait for the market to catch up with your asking price. The net effect is a loss of time and money. Some might reason that since they do not intend purchasing another property, they can afford to wait. In the meantime, however, the potential cost could also be the loss of bank interests, inflation or gains from other investments. Additionally, and most importantly, you would have missed out on all the initial market interest. International studies and my local experience clearly show that a house is viewed most during the first four to five weeks of its placing on the market, whilst activity declines noticeably by the 7th week. I strongly believe that it is best to take advantage of the initial burst of market interest, and maximize your chance of attaining the best price in the shortest possible time.

Apart from the above, you also have to consider the emotive side of selling your property. Having your home on the market for an extended period can be very stressful, because it can mean your life is on hold. Constantly trying to keep it in a suitable condition to be inspected by complete strangers can be inconvenient and hectic if not outright harassing. The longer your property is on the market, the greater the chance that something will need repairing; leading to expense that could have been avoided. Also, missing out on a sale may mean losing the dream home you want to buy. Worse still, you could end up trying to pay two bank loans for a while!

Remember, selling your home does not only mean that you are cashing in on what is probably your largest investment but you are also parting with a substantial part of your life, memories and all. On the other hand, whoever is acquiring your home is investing in his dream home and a new lifestyle, If this is so, both vendor and purchaser have a vested interest in avoiding the pitfalls briefly outlined in this article.

Trafford Busuttil
Chairman of the Real Estate Trade Section – Malta Chamber of Commerce
President of the Federation of Estate Agents
Managing Director of Propertyline International

HOW DOES THE MALTESE PROPERTY MARKET WORK?

There is much being said about the Maltese property market – There are those that are spelling doom, others taking a more cautious approach and those that are totally upbeat and see a great future in the market. Which view is the correct one?

Over the coming weeks a number of articles will be published and at the end of this period you will be the one to make this decision. Whatever anyone writes is immaterial especially when they are discussing about your Home, for many our largest single investment, it has to be you, the reader, to digest what you read and decide with an open mind on the future of your investment.

One myth that must be clarified is that the property market is immune to any illness, no coughs, no colds, since it’s been so healthy for so many years. A perfect analogy to the situation is that of a child that is rarely sick and as soon as he catches a cold, the parents start thinking that the child is living the last few days of his life. Coughs, colds and bouts of flu are important in the development of us humans and the same goes with the market – Nothing can continue growing and growing without taking a short rest.

Now let us take an in depth look at this market of ours. It seems that whenever, one wants to become rich, the first business that comes to mind is property. The property market is profitable for those that know how it works, but very hard on those that look at it in the short term and do not understand it’s mechanics.

Over the past few years, it seems that the majority of Maltese with disposable funds became developers. Why? They saw the market doing exceptionally well and thought that the only way for this industry was up. However, people failed to understand that the market they were investing in was also fuelled by a number of fiscal amnesties, in particular two overseas fund repatriations and another amnesty on cash funds held at home. A large portion of these funds found themselves into the market, since the island is extremely limited in the investments it offers and above all because the property market is a safe market. This was a spiked period and it was obvious that things were going back to pre boom levels, which in fact happened.

So far we should all be in agreement. These investors gobbled up any site available for sale at any price. Now to understand this statement below find a brief explanation in point form, how to calculate a site’s profitability or otherwise:

Cost of site divided by the allowable number of floors and units, this will give you a price per airspace.
This airspace price is critical, being the cost of the prime raw material.
Add construction and finishing costs, which are set to increase dramatically over the next period. This being primarily driven by the soaring cost of oil.
Add your planning costs, Bank interest, road and drainage contribution, selling fees, etc.,
Add a reasonable profit margin and you have your selling price

So as we can see the costing of property is just the same as any other commodity, there is nothing different.

Now based on the above, let us imagine, for one minute, two importers of tuna, importing the same quality of tuna, having the same weight. If importer A purchased his supply at X% above that of B, it is obvious that the selling price of A will be higher than that of B. Finally the consumer will judge which product to purchase.

The property market works in precisely the same way. Those that purchased land on the high side have to correct their prices to market value, if they want to sell, since no one is going to invest in something that is over current market value. Market value properties always sold well and will continue to sell well. One might argue that they can hold onto the property, which they can, however, please keep in mind inflation and Bank interest.

Now to add an ingredient to our recipe, in 2005, MEPA revised it’s regulations to allow an additional floor in many localities. Using the same criteria used above and removing the cost of airspace from the equation and we are left with properties priced below market value. This is not because the market slumped but for the simple reason that the cost of one of the main raw materials was substantially lower.

The conclusion to the above is that we are going through a corrective market, which is extremely healthy and profitable for those that take this opportunity, especially when one considers that the rental market is extremely active and vibrant. Critics will say ‘ It obvious, Trafford, is going to talk this way, he runs an estate agency’. For those that know me my ethics and professionalism are not negotiable. Any statement I make is because I truly believe in it and in my next article I will show you, the reader, why.


Trafford Busuttil
Chairman of the Real Estate Trade Section – Malta Chamber of Commerce
President of the Federation of Estate Agents
Managing Director of Propertyline International

Living in Malta – Nic and Lorna Ashby

Nic is no stranger to moving from one country to another. Born in Sweden, he left there in 1993 to move to the Isle of Man in the middle of the Irish Sea, where he worked within the Life Assurance industry. It was here that he met Lorna when working for the same company. They have traveled extensively over the years and one of the favorite destinations has been Malta, where they have always felt at home. “My father was originally from Malta which is one reason why I have always been attracted to the Island, but there are so many other reasons why we kept coming here on holiday. The Mediterranean climate is obviously wonderful when you come from the northern part of Europe, but more than anything, it is the open and warm welcome that you receive from the Maltese people that make it such a wonderful place to live,” says Lorna.

They started talking about making a permanent move to warmer climates three years ago when the winter showers were at their worst at home. Malta was very high on the agenda, but Nic had just started a new career within the real estate business and this took them to various countries such as Morocco, Portugal and Spain before they ended up moving to Malta on a permanent basis. “It was great to experience the other countries and their cultures for a while, but we never really put down any roots,” says Nic.

When they were on holiday in Malta in August last year, they started their property search in earnest. They found their dream property within a couple of days, a 300-year-old house of character. The decision to buy was made that same evening over a glass of wine in one of the local restaurants. Nic says that they had expert help all the way and the buying process was made very easy. The Maltese system is very straightforward and secure since a Notary will do all the searches on the property and is also present when the contract is signed to ensure that nothing has been excluded.

Nic and Lorna moved permanently to Malta in September this year to oversee the renovation of their house in Cospicua. The three-bedroom property enjoys very good views over a park area and distant see views towards the capital Valletta. “The hardest part was to come up with an internal design that we both agree on,” says Lorna. They have had very good help from a local designer so that the property retains the old charms and at the same time has a modern twist. Work is progressing and they look forward to moving in during next spring.

They have both joined a local Real Estate company and hope they will contribute to others finding their dream in beautiful Malta.

FEA calls for 15% tax on profits to replace capital gains

The Federation of Estate Agents is calling for a flat 15 per cent tax on realised profits to replace the capital gains tax on property sales, saying that this would mitigate a significant slow-down of the property market.

It explained that the impact of the capital gains regime would soon start to be felt as it has been almost 5 years since it was introduced and the full impact of the 5-year option would materialise.

“It is thus expected that the system of capital gains taxation in Malta, if not amended, will give rise to serious flaws in the operation of the real estate market over the coming 2 years,” it said.

The federation, in its pre-budget comments to government, said that the government would lose an estimated €70.5 million in revenue from this proposed revision, based on an average of 10,600 contracts a year, valued at an average of €97,000 each.

However, it calculated how much the government could generate as a result of the change, as it would incentivise the sale of vacant housing, especially to foreigners.

It calculated that annual government revenue would rise by at least €100 million if vacant properties in tourist areas were to be sole to foreigners over a 15-year-period, which would imply a net increase of €30 million.

However, the FEA believes that this alone will not be enough to stimulate the sale of property to foreigners.

It has been calling for some time for the removal of restrictions on foreigners renting out their property – which is only allowed in some specific cases, such as when the property has a swimming pool. It also suggested that any rental income should be taxed at a flat rate of 15 per cent, in line with income from a wide range of financial investments.

The FEA is arguing that vacant property is an inefficient use of resources as it could be used to provide residential services or to generate income from abroad. It said that the 53,000 vacant properties identified in the 2005 Census had a likely value of €7.6 billion.

“Assuming a 7 per cent annual rate of return on this capital stock – the normal rate of return for real estate – an imputed annual income flow from this vacant stock of around €535 million can be estimated, which represents over 10 per cent of the country’s GDP.”

Real estate is estimated to employ 1,637 directly and a total of 12,213 when construction, financial intermediation, and legal and architectural services are taken into account. This represents 7 per cent of the total economy, and 12.5 per cent of the GDP in 2007.

Article by Vanessa MacDonald - 28th October 2008

Working Together for Property Expansion

Working Together for Property Expansion - Trafford Busuttil is interviewed by Gerald Fenech in the Malta Business Weekly. Part 2 of the interview

Working Together for Property Expansion

Working Together for Property Expansion - Trafford Busuttil is interviewed by Gerald Fenech in the Malta Business Weekly. Part 1 of the interview

NEW FLIGHTS FUEL RUSSIAN TOURISM

A variety of new international routes have been launched to attract Russian and CIS holidaymakers and potential property buyers.

The national carrier of the UAE, Ethiad Airways, has launched new flights from the country to Russia and Kazakhstan, and increased the frequency of its flights to London, Sydney, India, Kuwait and Damascus.

The flagship routes of its new schedule are the direct flights from Abu Dhabi to Moscow and the Kazakh city of Almaty - beginning on the 1st and 2nd of December respectively. “With the additional routes, we remain on track to hit our target of flying six million passengers by the end of this year,” said James Hogan, Ethiad’s chief executive.

Two of Russia’s major airlines have also announced the launch of new routes and will start flying to the Dominican Republic as of spring next year as demand grows for such a service.

Airlines Transaero and Rossya will fly from Moscow and St Petersburg to Punta Cana and Puerto Plata, respectively, by March 2009 and this is expected to double the number of Russian tourists the Caribbean country receives each year.

The Punta Cana Life Realty Agency has already noticed an increase in Russian buyers and has employed Russian speaking staff to handle the sales. Some 40% of the agency's transactions in the last three months have been to Russian investors.

"Several planes land here every week with Russians onboard," said the firm's MD, Jocelyn Hernandez Irizzary. "They have quite a high expendable income compared to the tourist that travels on an all-inclusive package."

In South-East Asia, national carrier Vietnam Airlines has made public its intentions to increase the number of flights to Moscow from Ho Chi Minh, from four times weekly to a daily service. The news comes as the Vietnamese government looks to ban visa requirements for Russian tourists in the near future. Meanwhile, Finnair have introduced a new weekly route from Helsinki to the central Ural town of Yekaterinburg.

Tourism trends.
The launches come as Russian tourists increase the number of trips they are taking abroad every year.

According to tourism authorities, the number of Russians wishing to receive an international passport is growing by 12% y-o-y, and in 2007 over five million received their new international passport.

Data released by Rogosstrakh, the country’s largest insurer, found that some 12,164,000 Russian tourists have travelled or booked to head abroad this year, with China (2.58m), Turkey (1.91m), Egypt (1.73m) and Finland (1.23m) the most visited destinations. Singapore, which only received 42,000 Russian holiday and business visitors in 2008, is predicted to see the highest rise in tourists next year (33.7%), followed by Mexico (30.9%), Cuba (26%) and Croatia (25.2%). The insurer said that the number of Russians heading overseas in 2009 is expected to rise 13.8% to 13,840,000.

Article courtesy of the Overseas Property Professional Magazine

TRAINING ACADEMY TIME-TABLE

The Propertyline Training Academy schedule is listed hereunder. Canditates and Propertyline Personnel are invited to attend the listed sessions led by the Company's Managing Director and President of the Federation of Estate Agents , Trafford Busuttil , at Propertyline St. Julians Office 47, George Borg Olivier Street, St. Julians. This extensive training course on 'How to be an estate agent' is open to the general public and is being offered free of charge. It is spread over two months, starting on October 6th, and will be held twice weekly between 6.30 and 8.30 p.m. It will cover subjects like communication, body language, legal aspects and the cycle of a sale. At the end of the course, candidates are asked to take an exam and those who succeed will be given the opportunity to work within the Propertyline team.

6th October, 2008 – Monday – 6.30 p.m. – 8.30 p.m.
6.30 – 7.30 - Introduction – Scope of Training Academy – Participants to introduce themselves
7.30 – 8.30 - The Role of a Property Consultant - Trafford Busuttil

7th October , 2008 – Tuesday – 6.30 p.m. – 8.30 p.m.
6.30 – 8.30 - Communication Part 1 - Trafford Busuttil

14th October, 2008 – Tuesday – 6.30 p.m. – 8.30 p.m.
6.30 – 8.30 - Communication Part 2 – Trafford Busuttil

17th October, 2008 - Fiday – 6.30 p.m. – 8.30 p.m.
6.30 – 8.30 - Time Management – Trafford Busuttil

20th October , 2008 - Monday – 6.30 p.m. – 8.30 p.m.
6.30 - 8.30 - Selling Techniques - Cycle of a Sale - Prospecting - Meeting Client - Qualification - Presentations - Addressing Concerns - Closing - Referrals – Follow-up on the Konvenju - Trafford Busuttil

24th October, 2008 - Friday – 6.30 p.m. – 8.30 p.m.
6.30 – 8.30 - Legal Part 1 - Konvenju - Notarial Functions - Deposits - Conditions Of Residency - AIP permits - Foreign buyers’ Legal requirements - Ground Rents - Servitudes - Stamp Duty - Capital Gains – Trafford Busuttil

27th October, 2008 - Monday - 6.30 p.m. – 8.30 p.m.
6.30 – 8.30 – Legal Part 2 - Konvenju - Notarial Functions - Deposits - Conditions Of Residency - AIP permits - Foreign buyers’ Legal requirements - Ground Rents - Servitudes - Stamp Duty - Capital Gains – Trafford Busuttil

31st October, 2008 - Friday – 6.30 p.m. – 8.30 p.m.
6.30 – 8.30 – Foreign Buyers – EU and Non EU – Thresholds – Designated Areas - AIP permits - Foreign buyers’ Legal requirements – Residency Permits - Foreign Sellers- Trafford Busuttil

3rd November, 2008 - Monday – 6.30 p.m. – 8.30 p.m.
6.30 – 8.30 - Bank and Financing -Buy to Let - Bridge Loans - Normal Loans – Questions

7th November, 2008 - Friday – 6.30 p.m. – 8.30 p.m.
6.30 – 8.30 - Why Use an Estate Agent? - Why Propertyline? – Capital Growth -The Way the Market works in Malta - Important points to mention to Overseas Clients -Trafford Busuttil

10th November, 2008 – Monday - 6.30 p.m. – 8.30 p.m.
6.30 – 8.30 – Body Language - Trafford Busuttil

14th November, 2008 – Friday – 6.30 p.m. – 8.30 p.m.
6.30 – 8.30 – Body Language – Trafford Busuttil

17th November, 2008 – Monday – 6.30 p.m. – 8.30 p.m.
6.30 -8.30 - Sales Skills – Viewings and Appointments – Tips on Presenting a property - Owners Best –Trafford Busuttil

21st November, 2008 – Friday – 6.30 p.m. – 8.30 p.m.
6.30 – 8.30 - Experience Tips - Role Playing – Trafford Busuttil

24th November 2008 - Monday – 6.30 p.m. – 8.30 p.m.
6.30 – 8.30 – Role Playing – Trafford Busuttil

28th November 2008 – Friday 6.30 p.m. – 8.30 p.m.
6.30 - 8.30 – Inspections - Importance of Sole Agencies - Importance of Proper Inspections - Updating your Inspection – Building a Relationship with vendor - Phoning For Inspections – Site Visit – Trafford Busuttil

1st December 2008 – Monday - Time to be established
Examination

RUSSIANS ABANDON SHARES FOR OVERSEAS PROPERTY

Russian investors are increasingly diversifying their assets into overseas property as a result of unstable global markets, it has been reported.

According to the New York Times, an unfriendly business climate and ambiguous Russian economic policy, has contributed to an outflow of capital from Russia, with 46% wiped off the value of the country’s RTS index in the last week alone.

“The unstable local securities market, a high price tag of real estate in Moscow and the involvement of Russia in world events, coupled with the growth of wealth of Russians, led to an understanding that it is best to diversify assets rather than invest in a local market that has become rather unstable and which is experiencing the slowing of price growth,” said Natalya Zavalishina, director of Moscow-based property agency Miel.

Hadleigh Bolt, of Bolt Property Group, which develops property in La Zagaleta, Spain, has noted a recent influx of Russian buyers. “We’ve seen a certain rise in the number of Russian nationals expressing interest in our bespoke properties. Somewhere like La Zagaleta offers enormous appeal to affluent Russians due to heightened security measures, the countryside environment, direct air access to Málaga and, of course, year-round warm weather.”

Amidst the negative news eminating out of the world capital markets, rating agency Standard & Poor’s has lowered the future credit rating of Russia and Moscow from “positive” to “stable”. The outflow of capital in August 2008 equalled 1% of the country’s GDP, or about $13billion.

Article courtesy of the Overseas Property Professional Magazine

THREE MILLION BRITS WANT TO BUY ABROAD WITHIN TWO YEARS

Over three million Brits are likely to buy a property overseas within the next two years as economic conditions in the UK make strong returns less likely, according to new research from Cater Allen Private Bank, part of Banco Santander.

Its survey of UK clients found that some 2.3 million people already own a property abroad, with around 500,000, or less than 25%, having bought for investment purposes.

However, the bank believes that in light of current domestic market conditions in the UK this number will rise and nearly double (42%) the amount of future buyers will look to purchase for investment reasons.

According to the research, 17% of people aged over 45 are likely to buy abroad by 2010, making them the age group most likely to do so, while one in ten of those aged between 18 and 34 (10%) are also looking to buy overseas - the majority of them, (60%) looking purely as an investment.

Regionally, Londoners are most likely to own a property abroad, with one in ten (10%) doing so, however London’s property-owners are also the least likely to visit their property each year. On average, Britons who own a home abroad will visit the property between two and three annually.

Sally Watts, marketing manager at Cater Allen, said: “With concerns that a deteriorating property market will not guarantee the returns that people expect from buying a property, more and more people are investigating how they can find investment returns elsewhere.”

Article courtesy of the Overseas Property Professional Magazine

WELCOME ON BOARD

We take this opportunity to welcome aboard Lorna Ashby who is going to be based in St.Julian's as a Sales Consultant.

Whilst we wish Lorna the very best in her new career, I am sure that all of us will do our utmost to make her feel at home and part of the Propertyline TEAM.

Her e-mail address is lorna.ashby@propertylinemalta.com while her skype account is lorna.ashby. Her mobile number is 7967 9102.

OPEN HOUSE - SUNDAY 9TH NOVEMBER 2008 9AM - 4PM

SUMMERFIELD - QAWRA

OPEN HOUSE - SUNDAY 9TH NOVEMBER FROM 9AM TILL 4PM
View a selection of 1, 2 and 3 bedroom highly finished apartments, maisonettes and penthouses. Furnished Show Flat available for viewings. Follow the Propertyline signs on the 9th November on entering Qawra.
Prices from €73,300

MALTA - An Overview of the Tax Refund Regime and Other Business Incentives and Opportunities

Malta is proving to be a tax and cost-efficient EU jurisdiction for trading and holding activities, financial services and other industries. Malta offers a number of tax and financial incentives for foreign investors. The Maltese economy is a very open one in which foreign direct investment in many of its sectors is vital to its continued growth. The overriding climate is one of encouraging and assisting inward investment particularly in key and targeted sectors such as financial services and related industries. This document contains general legal and tax information intended for investors wishing to set up a Maltese limited liability company or carrying on business through Malta.

Why Malta ?

Malta is an independent state since 1964, a member state of the European Union since May, 2004 and a member of Eurozone since 1st January 2008. There are many reasons to consider using Malta as a base for international operations. These include:
Malta’s strategic location in the centre of the Mediterranean…1 hour flight from Rome
Favourable weather and high standard of living
A convenient European time zone
A stable political situation and a strong industrial relations record
An educated and skilled English-speaking labour force
Excellent communications infrastructure
A culture of hard working professionals
A reasonably-priced location where the cost of living and cost of labour are relatively low by European standards
Interesting real estate and other investment opportunities
A booming and competitive EU jurisdiction for financial services, trading and holding structures

These factors, combined with a modern legal and tax framework, EU-approved tax refunds and participation exemption regime and a wide double taxation treaty network render Malta an attractive and tax efficient EU onshore base for financial services, trading and holding structures. Malta’s legislation package is harmonised with EU law and OECD rules and offers legal certainty for investors.

Financial Services Hub

Malta boasts of one of the fastest growing financial services market and a number of factors, including EU membership, a competitive tax regime and the possibility of passporting rights, have contributed and continue to contribute towards a steady growth of the financial services industry. Malta has a comprehensive set of legislation based on EU law regulating financial services including laws regulating credit & financial institutions, funds and the insurance business, trusts, professional secrecy and privacy (data protection), anti-money laundering and insider dealing/market abuse.

Company Taxation Overview

Companies incorporated in Malta are treated as domiciled and ordinarily resident in Malta and taxable on world-wide income. Companies incorporated outside Malta that are managed and controlled in Malta are treated as resident (but not domiciled) in Malta and taxed on income arising in Malta and income (but not capital gains) arising abroad and received in Malta. Companies incorporated outside Malta that are not managed and controlled in Malta are taxed only on income arising in Malta. It is possible for foreign companies to set up a branch in Malta and carry on business through a branch. The profits attributable to the branch are taxable in Malta and the overall tax burden can be significantly reduced through tax refunds available to the head office. Foreign companies can be redomiciled to Malta.
Companies are taxed at a flat rate of 35% on their chargeable income and capital gains. There is no separate capital gains tax or corporate tax. Gains realised from the transfer of shares, securities, intellectual property and certain other intangible property are treated as part of the income for the year and are taxed at 35%.
The transfer of immovable property situated in Malta is taxed at 12% of the transfer price but the law provides for an option (applicable in certain cases) for tax to be charged at 35% on the capital gain realised.
Local bank interest and other investment income are taxed at source at 15%. The law provides for group relief and exemptions from tax on intra-group transfers of assets. Special tax rules apply and specific tax considerations must be made where the company is set up as a fund or collective investment.

International Tax Provisions

Maltese law contains international tax measures which make Malta a very competitive, cost and tax efficient basis for setting up trading and holding structures. Besides being the only EU member state with a full tax imputation system, Malta’s tax laws allow shareholders of Maltese companies to claim a refund of tax paid by the company. A revised tax refund and participation exemption package was approved by the EU in November 2006 and became applicable as from 1 January 2007. Below are highlights of Malta’s international tax provisions:

combination of a high corporate tax rate of 35% (sometimes useful to defend against anti-CFC rules) and tax refunds to shareholders / participation exemption

EU-approved tax regime

4 types of tax refunds due to shareholders on tax paid at company level (see below)

participation exemption (see below)

no withholding tax on dividends

no withholding tax on interest and royalties paid to non-residents

exemption from tax on transfers of shares and securities held by non-residents (except for shares in companies owning real estate in Malta)

double taxation treaty network with 49 countries (including all EU states except Ireland) 1

other forms of double taxation relief (ex. unilateral relief, 25% flat rate foreign tax credit, underlying taxation)

access to EU Parent-Subsidiary & Interest-Royalties Directives and other EU directives

no thin capitalisation or CFC rules, no express transfer pricing rules

advance revenue rulings on international tax issues (legal certainty for investors)
Albania, Australia, Austria, Barbados, Belgium, Bulgaria, Canada, China, Croatia, Cyprus, Czech Rep., Denmark, Egypt, Estonia, Finland, France, Germany, Greece (awaiting ratification) Hungary, Iceland, India, Italy, Korea, Kuwait, Latvia, Lebanon, Libya, Lithuania, Luxembourg, Malaysia, Morocco, Netherlands, Norway, Pakistan, Poland, Portugal, Romania, San Marino, Singapore, Slovakia, Slovenia, South Africa, Spain Sweden, Switzerland (limited to international air and shipping traffic) Syrian Arab Rep., Tunisia, U.K., U.S.A. (USA treaty limited to international air and shipping traffic. New full USA treaty is being discussed and expected to be finalised soon)

Tax Refunds & Participation Exemption

Maltese companies pay tax at the rate of 35% but upon a distribution of profits, the shareholders are entitled to claim a refund of tax paid at corporate level. The extent of the refund depends on the nature and source of profits and on the account out which the profits are paid (companies are required to allocate profits to various tax accounts).
4 types of tax refunds

6/7ths refund - refund of 30% out of 35% tax thus producing a tax liability of 5%. This is the typical refund due on trading profits.

5/7ths refunds (refund of 25%) due in respect of passive interest & royalties.

2/3rds refund due where the company has claimed double taxation relief.

100% refund due where the profits derive from a Participating Holding (see below)
Profits deriving from real estate situated in Malta do not give a right to tax refunds.

Participation Exemption

Profits deriving from a Participating Holding or from gains realised on the disposal of such holding are exempt from tax. A Participating Holding exists where a Maltese company holds at least 10% equity shareholding in a non-resident company or similar entity – level of equity holding may be less than 10% subject to certain conditions.
It is interesting to note that the company has an option not to claim a tax exemption on Participating Holding but to pay tax at 35% instead. In such case, the company’s shareholders may (following a distribution of profits derived from the holding) claim a 100% refund of the tax paid by the company. This option affords flexibility in planning holding structures.

Branches of Foreign Companies

Another interesting feature of the international tax regime is that foreign companies are allowed to claim a refund of tax paid by their Maltese branch. This rule represents interesting tax planning opportunities for foreign companies wishing to operate from Malta through a branch rather than through a subsidiary.

Other Taxes

VAT

Maltese VAT legislation is harmonised with the EU Sixth Directive. The standard rate is 18% and a reduced rate of 5% applies in respect of hotel and holiday accommodation and other supplies. The law provides for a reverse charge mechanism in respect of intangible services and other supplies in terms of EU law. Maltese VAT legislation also provides for a number of exemptions. Foreign businesses (EU and non-EU) that are not required to register in Malta qualify for a refund of VAT incurred in Malta.

Stamp Duty

Stamp duty is due on the transfer and inheritance of immovable property (5%), transfer and inheritance of shares/securities (2%) and on certain documents originating or used in Malta including insurance policies and banking credit cards. A transfer or inheritance of shares in companies owning immovable property in Malta attracts duty at 5%. Issues and allotment of shares are not subject to duty. The law provides for certain exemptions, including an exemption on intra-group transfers, transfers and inheritance of listed shares and transfers of shares/securities in, to or by a company which operates mainly outside Malta.

Other

Customs and import duty are chargeable in terms of EU law. Excise tax is charged on petroleum, alcohol and tobacco. Maltese law provides for an ecological contribution (Eco-tax) which is chargeable on white goods, plastics and similar items. No other significant taxes are in place. Maltese law does not have a general inheritance tax nor does it impose a tax on property ownership or capital possession. There are no municipality or local taxes.

Setting up a Maltese Company

Companies are regulated by the Companies Act, 1995 which is largely based on UK law. A company has a legal personality distinct from that of its shareholders and the liability of the shareholders is limited to the amount of unpaid share capital, if any. A company may be formed as a private or public company and must have a registered address in Malta. All Maltese registered companies are required to prepare audited financial statements in accordance with International Accounting Standards.
Company registration procedure is relatively straightforward and cost effective. As an indication, a company may be formed within 7-10 days. It is also possible to set up a Maltese branch of a foreign company. A local branch is required to register in Malta as an overseas company and as outlined earlier, foreign companies carrying on business in Malta through a branch can benefit from the same tax refunds that are available to shareholders of a Maltese company.

Other Business Opportunities

Apart from the tax refund and participation exemption regime generally available in respect of all companies irrespective of the type of business carried on, Maltese law contains a number of tax and financial incentives aimed at target and specific industries. Below are some examples:

tax exemptions for shipping and commercial yacht operations

tax and financial incentives for the film industry

special VAT rules on yacht finance leasing

gaming & betting industry

pharmaceutical industry

call centres

information technology, back-office operations and e-services

special rules and tax exemptions on collective investment schemes, funds, fund managers and related financial services

Maltese law also contains an interesting scheme for foreign individuals wishing to take up residence in Malta and benefit from a 15% flat rate tax on their income.

Courtesy of Fiott Advocates , a law firm specialising in tax consultancy and commercial law.

Fiott Advocates core practice areas are tax consultancy and local and cross-border tax planning services. Our firm’s practice areas also include corporate law, general commercial law and special industries. We can provide a comprehensive package services to foreign investors wishing to invest or carry on business in Malta or setting up a Maltese company including:

corporate tax planning, tax and legal advice

setting up and registration of a Maltese company or a branch

company support, back-office and compliance services

international tax issues and cross-border operations

planning tax efficient holding structures and dividend routing

VAT advice and planning

commercial contract drafting and negotiations, joint-venture, franchise, distribution and other
commercial agreements
The above information is based on laws as in force as at 15 March 2008. This document is intended to provide general information and does neither constitute a legal or tax opinion or advice nor does it contain exhaustive information on the subject. No action or decision should be taken upon reliance of the above information without seeking prior professional advice.

Trafford Busuttil reconfirmed FEA President

The number of available properties on the market is far lower than that being bandied about by certain observers, the Federation of Estate Agents president for 2008, Trafford Busuttil, told the annual general meeting. The meeting reconfirmed Mr Busuttil as president.Mr Busuttil said that 2007 was a year full of achievements and challenges, and the main one was the misinterpretation of the number of vacant properties available on the market.He pointed out that the federation was carrying out a detailed study on the figures published by the National Statistics Office and would be publishing its findings later on this year.

“When one looks at a detailed breakdown of the number of vacant properties on a town by town basis and deducts a number of issues, the number of available properties is far lower than that being bandied about by certain observers,” he said.Apart from Mr Busuttil’s appointment as president, a new council was appointed. Joseph Sullivan has been appointed vice-president, Manjri Borg Bindra retained her post as secretary, and Ian Casolani, Douglas Salt, Joseph Mercieca and Stephen Sant Fournier were appointed members.

FAIRWELL

The Propertyline Team bids fairwell to Susan Debono , Secretary Propertyline Gozo Office, who also became a mother recently. Congratulations and we all wish you the best of luck.

We would like to welcome Sharon who will be joining our Gozo team as Secretary.

WELCOME ON BOARD

We take this opportunity to welcome on board Nic Ashby who is going to be based at the St.Julian's Office as a Sales Consultant.

Whilst we wish Nic the very best in his new career, I am sure that all of us will do our utmost to make him feel at home and part of the Propertyline TEAM.

His e-mail address is nick@propertylinemalta.com while his skype account is nick.ashby2.

OFFICE MEETINGS

Mondays - Starting Monday 13th October St.Julian's Office 5pm to 6pm
Tuesdays - Starting Tuesday 14th October Sliema Office 10am to 11am
Wednesdays - Starting Wednesday 15th October Qawra Office 9.30am to 10.30am
Thursdays - Starting Thursday 16th October Gozo Office 9 .00am to 10 .00am
Tuesdays - Starting Tuesday 21st October Valletta Office between 12pm and 1pm

SEPTEMBER BEST ACHIEVERS

SALES CONSULTANT - JOSEPH - Brilliant performance!
BEST PERFORMER - MARK - Fantastic performance!
RENTAL CONSULTANT - AUDREY - Great work!
SECRETARY OF MONTH - JUSTINE - Keep it up!
OFFICE OF MONTH - ST. JULIANS - Fantastic!

WEDDING BELLS

Wishing Maria Spiteri , who got married on the 3rd October 2008, all the very best for the future. Good Luck!