Malta: rent reform

Malta: rent reform


Prime Minister Joseph Muscat presented the new rent reform, which will come into force January 1st, 2021, after a period of transition. The head of the government described the provision as “a response to the change taking place in society” and to “A market that until today was a jungle, causing serious social problems, despite rents representing a small slice of the real estate market in economic terms”.

These are the main new features of the regulation:

• 5% limit on annual increments

• Rental contracts for a minimum of one year

• The owners will receive tax credits for long-term contracts

• All rental contracts must be registered, including those of residence complexes: noncompliance will result in heavy penalties

• An obligation by part of the owner to give tenants a three month notice if he/she does not intend to extend their rental contract

• The new law, as specified in the English-language daily Malta Today, does not apply to leases done prior to 1995

Owners currently pay a withholding tax of 15% on rental income, but the market is currently penalised by violations and cases of tax evasion. The registration of the contract will therefore seek to reduce undeclared income.

The Housing Authority has the task of supervising the sector and enforcing the rules.

Finally, the law does not involve rents for tourist purposes, which will be treated in a separate provision, and provides exceptions for short stays, which must, in any case, have a minimum duration of six months.