Malta Crypto Tax

Currently, Maltese companies carrying out activities involving distributed ledger technology (DLT) are obligated to pay the same types of taxes as any other business. They can also avail of tax allowances and incentives, as well as benefit from Malta’s substantial network of the double tax elimination agreements.

Maltese crypto companies might be subject to paying the following taxes:

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

The taxes are administered by the Commissioner for Revenue (CFR) who issued guidelines determining the application of the Income Tax, Stamp Duty and VAT to the activities involving DLT assets. The foundational rule is that VAT, Stamp Duty, and Income Tax handling of any DLT asset depends on the purpose for which the asset is used, not the category of the asset.

Nevertheless, for the taxation purposes, DLT assets are divided into the following categories:

• Coins – cryptocurrencies, functionally constituting the cryptographic equivalent of fiat money (created to be used as a means of payment or medium of exchange, or function as a store of value)
• Financial tokens – 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 typically coincides with the calendar year, but under certain circumstances companies can also choose to change the dates by submitting a written request to the CFR.

In order to ensure proper calculation of taxable income and allowable deductions, all Maltese companies must keep meticulous records of income and expenditure as determined in the Article 19 of the Income Tax Management Act.

Corporate Income Tax

Companies registered in Malta are required to pay corporate income tax on their income worldwide. Activities related to DLT assets are governed by the current provisions of the Income Tax Act and are analysed by reference to the nature of the activity, the status of the parties and the specific facts and circumstances of the particular case.

Principles of the income tax regime:

• The tax value of transactions with DLT assets is determined by reference to the market value of the DLT asset; the market value can be determined either by the relevant Maltese authority or by reference to the average quoted price on reputable exchanges
• Proper and adequate records of transactions with DLT assets must be maintained 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 as payment in any other currency for income tax purposes (e.g. for businesses paying wages or accepting payments for products or services in cryptocurrency the general taxation principles are still applied)

Examples of the application of general taxation principles to transactions with DLT assets:

• Profits from coin exchange activities are considered as profits from fiat currency exchange business and proceeds from the sale of coins held as trade reserve in business are regular income
• Profits earned by the owner of financial tokens on his holdings, such as payments equivalent dividends, interest, bonuses, etc., in cryptocurrency or in other currency are treated as income
• The ability to tax the transfer of financial or communal tokens depends on whether the transfer is a trade transaction or a transfer of fixed capital
• If the transfer is a trade transaction, the payment is treated as a receipt in the revenue account
• Normal income tax rules apply and, accordingly, profits from 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
• If the transfer of financial tokens is not a trade transaction, it should be determined whether they can be treated as securities that are subject to capital gains tax regulations under section 5 of the Income Tax Act
• The capital collected for the initial offer is not regarded as the income of the issuer and the issuance of new tokens is not considered as transfer for capital gains taxation purposes
• Profits or profits derived from the provision of services or products to token holders are treated as income

When calculating the taxable amounts, it is worth remembering that the Maltese tax system allows each company engaged in activities related to DLT assets to benefit from more than 70 international agreements on the elimination of double taxation, which ensures that income from crypto-activities is not taxed twice.

Value Added Tax

Currently, VAT guidelines are provided for coins, financial and communal tokens and initial offers. Activities related to DLT assets are analysed according to their nature, the status of the parties and the specific facts and circumstances of the particular case.

The following legislation applies to DLT enterprises:

• The VAT Act (Cap 406, Laws of Malta)
• EU VAT directive (2006/112/EC)
• Provisions and case law of the Court of Justice of the European Union (EU) applicable to specific transactions

If the place of delivery of the goods or services is not in Malta, the rules of another relevant jurisdiction shall apply. In the case of providing electronic services to clients based in the EU, the enterprise may register and take into account the VAT of another EU country under the Mini One Stop Shop (MOSS) scheme.

Guide to coins:

• If the instrument serves as a means of payment accepted by certain operators, it is treated as fiat money for the purposes of VAT application, which means the exchange of cryptocurrencies to other cryptocurrencies or fiat money is exempt from VAT
• Services of digital wallet providers are exempt from VAT when they are clearly related to the permission of users to hold and use cryptocurrencies
• Cryptographic mining itself does not fall within the scope of VAT if there is no recipient, but if crypto-mining service providers are paid for such actions as transaction verification, the standard VAT rate applies
• Cryptographic exchange platforms are taxed VAT when they charge users for their services (e.g., by charging a transaction fee or commission)

The following VAT rules apply to markers:

• If financial tokens are issued solely for the purpose of raising capital, they are not subject to VAT because they do not represent the provision of products or services
• If the utility token is characterized as a voucher (issued for exchange for specific products or services provided by a known supplier), it is usually subject to VAT

The initial proposals should be considered as follows:

• If investors transfer their money to finance the project and at these stages no specific products or services are provided, VAT is not charged
• If the issued tokens give rights to identifiable products or services, such activities are subject to VAT

 

Stamp Duty

If transfers involve DLT assets that have the same characteristics as marketable securities defined in the Duty on Documents and Transfers Act (DDTA), they are normally subject to the Stamp Duty. However, every transaction has to be analysed individually by looking at the nature and circumstances of activities and the profile of the involved parties.

How do I pay taxes on crypto in Malta in 2024?

In 2024, Malta continues to build its reputation as one of the leading centres for cryptocurrency and blockchain technology, thanks to its progressive approach to the regulation and taxation of cryptocurrency income. It is important to understand local tax rules and obligations in order to effectively manage your finances and avoid potential penalties for tax non-compliance. Below is an overview of the process of paying taxes on cryptocurrency income in Malta.

Basics of cryptocurrency taxation in Malta

In Malta, cryptocurrencies and income from them are subject to general tax rules, but there are certain peculiarities relating to the classification of this income. The income may be treated as capital gains or business income, as the case may be.

Tax on capital gains

If a cryptocurrency is held as an investment and a profit is realised from its sale, such profit may be subject to capital gains tax. However, it is important to note that in Malta, certain types of cryptocurrency transactions may not be subject to capital gains tax, making it important to consult a tax professional to determine tax liability.

Income tax

Income from cryptocurrency related activities such as mining or trading can be considered as business income and is subject to the standard rate of income tax. The income tax rate for companies in Malta is 35%, but thanks to the shareholder clawback system, the effective tax rate can be significantly reduced.

Declaration of income and payment of taxes

Taxpayers are required to declare their cryptocurrency income in their annual tax return. It is important to keep detailed records of all cryptocurrency transactions to ensure accurate declaration and compliance with tax obligations.

VAT and cryptocurrencies

According to European Union guidelines, transactions exchanging traditional currency for cryptocurrency and vice versa are exempt from VAT. This rule is also applied in Malta, which makes cryptocurrency transactions more attractive for entrepreneurs and investors.

Recommendations

• Expert Consultation: Given the complexity of tax legislation and its specificity in relation to cryptocurrencies in Malta, it is highly recommended that you seek professional advice. A qualified tax professional will assist you in determining your tax status, income classification and relevant tax obligations.
• Keep detailed records: Accurately keeping records of all your cryptocurrency transactions will ensure easy income declaration and tax calculation. Include transaction dates, volumes, exchange rates to the currency of purchase and sale, and any expenses associated with the income.
• Explore tax incentives: Malta offers a number of tax incentives for investment in innovative technologies, including cryptocurrencies and blockchain. Explore opportunities to optimise your tax burden with these incentives.

Conclusion

Taxation of cryptocurrency income in Malta is a complex process that requires an understanding of local tax laws and careful record keeping of financial transactions. While Maltese law offers an attractive environment for cryptocurrency investments and businesses, it is important to comply with all tax requirements and obligations. Tax compliance will not only save you from potential penalties, but will also ensure the sustainability of your business in the long run. Speaking to professional tax advisors can help you navigate the complexities of Malta’s tax system, maximising your financial benefits and minimising risks.

Table with the main tax rates in Malta for 2024. This table includes rates of personal income tax, corporate tax, VAT, and a mention of capital gains tax applicable to 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.