Malta Crypto Tax

Currently, Maltese companies operating in the DLT-related field are subject to the same type of tax burden as any other company. They also can utilize the same system of tax deductions and incentives, and benefit from a broad network of Malta’s double taxation avoidance agreements.

Maltese crypto companies may be liable to pay the following taxes:

• Corporate Income Tax (CIT) – 35%
• Value Added Tax: 18%
• Stamp Duty: 2-5%
• Social Security Contributions: vary depending on an employee’s age, salary and other conditions

The taxes are administered by the Commissioner for Revenue who issued guidelines determining the application of the Income Tax, Stamp Duty and VAT to the activities involving DLT assets. A fundamental principle is that the VAT, Stamp Duty and Income Tax treatment of any DLT asset shall not depend on the nature of the DLT asset but on the purpose of its use.

Nevertheless, for the purposes of taxation, DLT assets have been classified below:

• Coins – cryptocurrencies, functionally representing the crypto equivalent of fiat money, created for use as a means of payment or medium of exchange, or to function as a store of value
• Financial tokens – being analogous to equities, debentures, units in collective investment schemes or derivatives
• Utility tokens – utility, value or application is restricted to the acquisition of goods or services either solely within the DLT platform on, or in relation to which they are issued or within a limited network of DLT platforms

The financial year usually is aligned with the calendar year; however, in specific cases, entities may also opt for date variation upon filing a written request to the CFR.

All Maltese companies are required to maintain records of income and expenditure, as determined in Article 19 of the Income Tax Management Act, with a view to correctly computing the taxable income and allowable deductions.

Corporate Income Tax

Companies incorporated in Malta are liable to tax in Malta on their worldwide income. The income tax act currently in force regulates activities involving DLT assets and it does so by reference to the nature of the activity, the status of the parties concerned, and also in relation to the particular facts and circumstances of each case.

Principles of the income tax regime:

The market value of the transactions in DLT assets serving as a consideration for tax purposes could either be determined by the relevant Maltese authority or by reference to the average quoted price on reputable exchanges.

Records of the transactions involving DLT assets should be made and available at all times; values expressed in cryptocurrency are converted into a reporting currency in which the taxpayer submits its financial statements.

Payments made or received in cryptocurrency are considered to be payment in any other currency for income tax purposes. The general taxation principles still apply in respect of, for example, a business which pays wages or accepts payment in cryptocurrency for products or services.

Examples of Application of General Taxation Principles to DLT Assets Transactions:

Profits derived from coin exchange activity will be treated as profit from fiat currency exchange business and proceeds from the sale of coins held as trade reserve in business are regular income.

Profits derived by the owner of financial tokens on his holding such as payment equivalent to dividends, interest, bonus, etc., in cryptocurrency or in other currency will be treated as income.

These are the issues that determine whether the transfer of some financial or communal tokens can be taxed or not, whether it is a trade transaction or a transfer of fixed capital; the payment in case of a trade transaction is accounted for as a receipt in the revenue account.

The normal rules for taxation on income apply and, hence, profits coming under the sale of tokens that would have been acquired with intent to resell with profit or from profitable activities should be treated as trading profits.

In case the transfer of financial tokens is not considered a trade transaction, then it would have to be seen if they can be treated as securities under Section 5 of the Income Tax Act that are subject to the capital gains tax regulations.

The capital raised through the offering is not treated as the issuer’s income and the issue of new tokens is not deemed transfer for capital gains tax purposes.

Profits or gains that arise from providing services or goods to token holders are deemed as income.

Worth noticing in this respect is the fact that, when calculating the taxable amounts, more than 70 international agreements in respect of the elimination of double taxation allow each company engaged in DLT assets activities to prevent double taxation of income derived from crypto-activities.

Value Added Tax

So far, VAT guidelines have been issued for coins, financial and communal tokens and initial offers. Other DLT asset-related activities are assessed based on their nature, the status of the parties and the facts and circumstances of the particular case.

Following legislation is relevant to DLT businesses:

The VAT Act (Cap 406, Laws of Malta)

EU VAT directive (2006/112/EC)

EU Court of Justice case law and provisions relevant to given transactions

Where the place of delivery of the goods or services is not in Malta, then the rules of another relevant jurisdiction apply. The enterprise, with regard to providing electronic services to clients based in the EU, may register and take into account the VAT of another EU country under the scheme of Mini One Stop Shop – MOSS.

Guide to coins:

• In case the instrument is a means of payment accepted by some operators, for the purpose of application of VAT, it is to be considered fiat money; this again implies that “an exchange of cryptocurrency for another cryptocurrency or for fiat currency” is exempt from being taxed under VAT;
• Services supplied by digital wallet providers are out of the ambit of VAT in cases where services provided are clearly connected with the permission granted to the holders of the wallets to hold and use cryptocurrencies.
• Crypto mining as such is outside the scope of VAT in case there is no recipient, while in cases where crypto-mining service providers are remunerated for such activities as verification of transactions, the standard VAT rate is applicable.
• Crypto exchange platforms are subject to the payment of VAT in case they receive consideration by way of, for example, any transactional fee or commission in respect of their services.

The following VAT rules apply to markers:

• If financial tokens are issued only to raise capital, then no VAT is due because there is no supply of goods or services.
• Utility tokens that are characterized as vouchers—as issued against specific supplies of goods or services supplied by an identifiable supplier—will normally fall in the ambit of VAT.

The following should be considered initial proposals:

• Provided investors relocate their funds for financing the project and on these levels no respective goods are supplied or services provided, no VAT is payable;
• If tokens supplied provide rights to identifiable goods or services, all such activities will be chargeable to VAT.

Stamp Duty

The normal transfers of DLT assets with similar characteristics to marketable securities as described in the Duty on Documents and Transfers Act, normally referred to as DDTA, are subject to Stamp Duty. Every transaction, however, must be looked at in its own merits, either for the nature and circumstances of activities and/or the profile of parties involved.

How to Pay Taxes on Crypto in Malta in 2024

Malta, with its progressive approach toward regulating and taxing cryptocurrency income, further cements its position in 2024 as one of the leading global centers for cryptocurrency and blockchain technology. In consideration of local tax rules and obligations, an effective way to manage one’s financials and avoid potential penalties for tax non-compliance will be comprehended. A brief overview of how taxes on income generated by cryptocurrency are being paid in Malta follows.

Cryptocurrency taxation in Malta: An Overview

In Malta, for income gained through cryptocurrencies, general tax principles are applied but there are certain peculiarities related to the nature of that kind of income. In particular, such an income may be considered either a capital gain or a business income, as the case may be.

Taxation of capital gains

Should a cryptocurrency be held as an investment and a profit is made from its sale, it will in principle be subject to a capital gains tax. Nevertheless, there are certain types of transactions in cryptocurrencies that are exempt from capital gains tax in Malta, hence the need for determining whether any tax liability arises by consulting a tax professional.

Income tax

When cryptocurrency-related activities are deemed to accrue business income, such income is charged to income tax at the standard rate. For company income tax purposes, Malta applies an income tax rate of 35%, although the effective rate is considerably lower due to the shareholder clawback system.

Declaration and Payment of Taxes

Taxpayers should declare income in cryptocurrencies in their annual tax return. All cryptocurrency transactions are advisable to be well documented, for accuracy and completeness of declaration of this type of income and compliances relevant to the same.

VAT and cryptocurrencies

European Union guidelines exempt from VAT transactions which are an exchange of traditional currency for cryptocurrency and vice-versa. Exactly the same rule applies to Malta, which further makes this type of transaction even more attractive for entrepreneurs and investors.

Recommendation

Expert Consultation: In view of the complexity and specificity of the Tax legislation in Malta concerning cryptocurrencies, professional advice is highly recommended. A qualified tax practitioner will be in a position to guide you regarding your status, classification of income, and relevant tax obligations arising.

Keep detailed records: Proper records of all cryptocurrency transactions, including dates of transactions, volumes, exchange rates to currency of purchase and sale, and any expenses against income, will ensure the declaration of income and correct computation of taxes.

Explore tax incentives: Malta provides multiple tax incentives on investments made in innovative technologies, especially in cryptocurrencies and blockchain. Investigate and explore these opportunities for reducing your tax burden.

Taxation of cryptocurrency income in Malta is somewhat complicated and requires some knowledge in local tax laws and serious bookkeeping of financial transactions. Though the Maltese law is appealing for businesses and investments with regard to cryptocurrencies, all requirements and obligations concerning taxation should be followed. Tax compliance will save you not only from possible penalties but also ensure the long-term sustainability of your business. Professional advice by tax advisors will help you get through the various specifics of the Malta taxation system and gain maximum benefits with minimized risk.

Overview of the main Malta tax rates applicable for the year 2024, including personal income tax, corporate tax, VAT, and reference to a capital gains tax concerning cryptocurrency income.

This table gives a general overview of tax rates in Malta. However, it is important to remember that tax laws are subject to change and there are various exemptions and deductions that may apply depending on specific circumstances and activities

The team of Regulated United Europe (RUE) is pleased to offer tailored taxation advice to everyone who’s interested in running a crypto company in Malta and, for that matter, in standing out in the market. We can also guide you through the company formation and crypto licensing processes in Malta,as well as provide financial accounting services. Our experienced lawyers will be happy to familiarise you with all cryptocurrency regulations in Malta.

Also, lawyers from Regulated United Europe provide legal support for crypto projects and help with adaptation to MICA regulations.