Understanding cryptocurrency taxation in Malta

Regulatory uncertainty is a significant limitation to the general adoption of cryptocurrency and blockchain technology.In many jurisdictions, the government’s position on crypto is restrictive, severely limiting the legal use of digital assets and imposing heavy taxes. In some others, crypto regulation changes as the industry evolves and developers push new projects and features into the market. However, a few jurisdictions, like Malta, are known for their general support and clear position on cryptocurrencies.

Crypto status in Malta

Malta easily stands out because its approach to cryptocurrencies encourages industry growth and innovation. The Maltese government legally considers cryptocurrency a medium of exchange, store of value, and unit of account. This sets the tone for new crypto legislation, which focuses on enabling the digital asset landscape in the country and allowing relevant agencies to create supportive frameworks for developers.

The Maltese crypto landscape suggests that authorities understand the many benefits the sector contributes to the economy. Cryptocurrencies serve many purposes and are commonly used as a store of value and an investment tool. Favourable crypto regulations encourage more crypto investments in the country and attract new participants to the sector. Michael from 99Bitcoins recommends a few options to Maltese investors looking for the best crypto to buy for a good chance of exciting returns. Options include Pepe Unchained (PEPU), WienerAI (WAI), PlayDoge (PLAY), and Shiba Shootout (SHIBASHOOT). In addition to an increase in their values, these assets offer other opportunities to earn, including staking rewards and exciting loyalty programs. 

Crypto tax and regulatory landscape

Tax liabilities on crypto transactions

To encourage crypto investments, the Maltese government does not collect capital gains taxes on many cryptocurrency transactions, a position beneficial to regular or infrequent traders. Also, long-term crypto holders are exempt from capital gains taxes when they eventually sell their holdings for fiat. This directly positions Malta as one of the best destinations for crypto investments for all local and foreign investors.

Nonetheless, investors in the country should note that, in general, Malta may enforce capital gains tax rates on cryptocurrencies and other assets, ranging from 15% to 35%, for professional traders and those engaged in frequent asset disposal. In addition, authorities may consider certain transactions as business income and therefore subject them to some income tax.

Furthermore, an individual’s residential status may affect tax obligations. This means that where tax is applicable, authorities may charge residents an amount different from non-residents for the same transaction type or size. 

For crypto losses, the Malta Financial Services Authority (MFSA) has no clear guidelines that specify whether or not users can deduct losses. However, crypto investors may gain some insight into possible regulations by considering rules that apply to trading losses in business or other vocations. The MFSA allows the taxpayer to reduce chargeable gains, which could cut the user’s tax liabilities. Nonetheless, taxpayers are advised to consult with professionals for specific guidance. 

Crypto holders should note that the government may tax some transactions, including staking, yield farming, and liquidity farming. On the other hand, taxes may not apply to purchasing digital assets using fiat, holding these assets, or transferring them between wallets. On gifts and donations, the MFSA has no specific guidance on taxation. However, these are likely tax-free if authorities consider them similar to regular fiat gifts or inheritances.

Malta’s favourable crypto position may also boost the country’s crypto gambling sector. Already, figures from the Malta Gambling Authority state that 56% of the population engages in some form of gambling. Furthermore, the country’s online gambling market is projected to hit $331.4 million this year. Combining Malta’s budding gambling industry with cryptocurrency could open the country to new investors and attract more revenue than projected.

Functions of the Malta Financial Services Authority

In 2018, Malta branded itself as “The Blockchain Island” as it introduced clear legislation to support its crypto ecosystem. Through the MFSA, Malta regulates the crypto landscape in the country through three acts: the Virtual Financial Assets (VFA) Act, the Innovative Technology Arrangements and Services (ITAS) Act, and the Malta Digital Innovation Authority (MDIA) Act.

Virtual financial assets (VFA) Act

The VFA Act was created to oversee virtual financial assets in Malta. It helps the MFSA create strong regulations for wallet providers, cryptocurrency exchanges, and initial coin offerings (ICOs). Through the VFA Act, the MFSA sets clear rules, requirements, and guidelines for licensing and operating crypto businesses while also protecting Maltese customers and investors. 

Innovative Technology Arrangements and Services (ITAS) Act

The ITAS Act establishes regulations for cryptocurrency agencies and specifies compliance standards and best practices. The aim is to create a secure environment that supports innovation through a comprehensive framework designed for distributed ledger technologies (DLTs). Also, the ITAS Act covers the certification of blockchain-based projects and other related services.

Malta Digital Innovation Authority (MDIA) Act

The MFSA provides a legal policy for all users and safeguards customers by enforcing internal governance standards for all companies operating in the crypto space. Like the ITAS Act, the MDIA Act ensures that Malta remains a favorable regulatory environment that supports growth and development in the Maltese blockchain sector.

Conclusion

Malta’s deliberate efforts to clarify crypto regulation have made the country attractive for crypto businesses. These efforts support strategic partnerships and birth new services for SMEs to help boost crypto adoption in the country. In addition, investors are well protected as AML/KYC rules require companies to conduct regular independent audits. Furthermore, Malta’s safe trading environment has contributed significantly to international recognition from several finance organizations, which attracts more foreign direct investment.

Disclaimer: ​Players must be 18 years + to partake in any gambling, betting or casino activity. Players are urged to seek help if they require it. Players play at their own risk.