A guide to new laws, contracts, taxes and regulations for short-term rental of real estate in Valletta, Malta
In recent years, significant changes have been made to the way property is leased in Malta. Some of these changes reflect the increased demand for properties for rent required by the influx of foreign workers arriving in Malta, the same for students and, of course, the rapid and continuous growth of their tourism market.
The residential property market in Malta has also changed quite drastically, especially around sites with high tourist activity. It's easier than ever to manage a consistent supply of occupants paying a higher rental rate than traditional long-term rentals. This multi-million-person market, created by the introduction of short-term rental platforms like Airbnb, is changing the look of tourism and the way these popular cities operate, quite dramatically.
The preferred tourist stay showed a radical change from shared accommodation means, such as hotels and bed and breakfasts, in favour of private accommodation as a "complete housing unit". And why not? They offer a more personal, private and authentic experience of city life, and often at a lower cost to the tourist.
How tourist accommodation affects government procedure in Malta
This change in the accommodation preferences of the typical tourist is global. Malta is one more destination to be part of this evolution. The impact of this change on tourism data and reactions is worrying at the international level. The same obvious patterns occur in Malta as in London, Paris, New York and in almost every popular capital and tourist spot in the world.
Because it's so easy to rent a property thanks to new technology platforms, property owners and agencies reap higher profits from the continuous flow of short-term tourist rentals than the once safer solution of long-term rentals to residents and workers moving to these cities.
The problem is that this has a ripple effect when residential rental prices rise, as long-term opportunities are less available and highly sought after.
There is also a shift in focus, as these cities will soon have a predominantly tourist population, taking away much of what feeds the soul of cities, turning them into mere playgrounds for travelers instead of the cultural destinations they once were.
The 120-day ceiling does not apply to Malta
The increase in the number of properties for rent on short-term rental sites is a topic that has been examined by the tourism authorities in Malta.
From just 813 Maltese properties advertised on Airbnb in 2013, the number reached 6,800 in 2018, showing huge growth in private tourist rentals. Subsequently, Malta experienced a real estate boom, perhaps due to the lack of long-term availability for residential rentals as well as the ever-increasing tourism figures.
This rise in the popularity of private rentals is also responsible for the decline in hotel stays. For the government, the loss of revenue due to the lack of regulation and taxes is another point of contention.
In an attempt to combat this development, many popular establishments have limited short-term rentals to 120 days a year. This makes it possible to impose that the properties remain a principal residence for the owner, who can thus enjoy a small additional income when the property is empty. If an owner wishes to rent his property for a longer period, he must modify the building permit or the use of the property and the letter must be accompanied by the corresponding taxes and commercial fees.
However, because platforms don't have a reputation for being properly controlled, much of this policy falls through the cracks.
Taxes, regulations and authorizations
Pay tax on your short-term rental income
Malta requires any property intended to generate income through rental pay its share of rental tax, income tax and VAT where applicable.
The fiscal year runs from January 1 to December 31, with taxes due on June 30 of the following year. The tax system for short-term rentals can be quite complicated, which is why we suggest that you seek professional advice from the Maltese tax authorities for which you are liable.
What types of regulations apply in Malta?
There are regulations that must be respected when renting real estate in Malta. These include legal contracts, local law and Community directives. Again, we advise you to seek professional advice when you want to rent a property from the appropriate industry and local authority.
You will likely find clauses in contracts with the city council, local authority or your landlord regarding rental and subletting. Mortgage policies often come with restrictions that prevent subletting and accommodation from happening as well.
Changes to Malta's rules on long- and short-term residential rentals
The year 2019 brought significant changes to the housing rental system in Malta. Over the past decade, there has been a real estate boom in Malta, aimed at managing the influx of foreign workers, students and tourists, which has led to an increase in demand for rental housing.
The Residential Leases Act was introduced to regulate the private rental sector, ideally to curb abusive landlord practices and grant more rights to tenants. It entered into force on 1 January 2020.
- All contracts must be registered within 30 days of their entry into force
- Unregistered leases are considered "void".
- Late check-in incurs an additional fee
- Automatic renewal of leases for long-term rentals
- Minimum duration of the long-term lease of one year
- Short-term private residential leases, of 6 months or less, must be offered to non-residents seeking housing for work or study purposes.
For short-term residential leases, a contract is only available in the following cases:
- Non-residents have enrolled in courses of less than 6 months' duration
- Non-residents must be employed for 6 months or less
- Non-residents who are not looking to establish their residence in Malta but need to rent a property for less than 6 months
- Residents who need an alternative to their main residence for less than 6 months
A short-term rental agreement must specify one of the above categories when applying with supporting documents of their choice. When the correct documents cannot be presented, the tenant must apply for the long-term contract for a minimum duration of one year.
Terminations and notice periods
Tenants can give advance notice for both short- and long-term rental agreements, but they must comply with the regulations.
A landlord must give the tenant at least 3 months' notice by registered letter to terminate a long-term rental agreement.
For short-term rentals, the contract is terminated on the agreed date or, if applicable, the tenant can withdraw from the contract after one month but must give the owner one week's notice by registered letter.
Tenants on long-term rentals can be released from the contract by:
- By giving one month's notice after a period of 6 months during a one-year contract
- Give 2 months' notice after a period of 9 months during a 2-year contract
- Give 3 months' notice after a period of 12 months during a 3-year contract
It is obvious that there are opportunities and acts that would break the terms of the contract and result in the immediate eviction of a tenant.
In the same way, tenants are protected from unfair treatment by landlords. In case of conviction, fines of up to 4,000 euros can be imposed.