Forward the Original Title‘走进“区块链岛”马耳他：加密税收与监管’

1. Introduction

Malta, located in the central Mediterranean, holds a strategic position as a hub connecting Europe, North Africa, and the Middle East. Economically, Malta is predominantly service-oriented, with particularly developed tourism, financial, and information technology sectors. In recent years, Malta has actively promoted the development of the blockchain and cryptocurrency industries, earning the nickname “Blockchain Island.” Its financial and legal environment has attracted a significant number of international investors and companies. As a member of the European Union, Malta has adopted a proactive regulatory stance in the field of cryptocurrency and blockchain, becoming a global leader in this area. This article will analyze Malta’s cryptocurrency asset system from four aspects: the basic tax system, the cryptocurrency tax system, cryptocurrency regulatory policies, and a summary and outlook on its future development direction.

2. Malta’s Basic Tax System

2.1 Maltese tax system

Malta has a progressive tax rate, with personal income tax rates ranging from 0% to 35%. The government taxes its residents on their worldwide income, while non-residents are taxed only on their income generated in Malta. The definition of resident status is mainly based on the length of residence of an individual in Malta and the principle of center of economic interests. Malta also offers special tax plans for resident foreigners and high net worth individuals, such as the Malta Retirement Plan and the Global Resident Plan, which offer fixed tax rates and tax relief benefits. According to the Maltese Constitution, taxation power is mainly concentrated at the national level, and the taxation power of local governments is relatively limited. In addition, Malta’s tax system is based on income tax and value-added tax. Other major taxes include capital gains tax, property tax, import and export duties and payroll taxes. Local governments have the authority to levy real estate taxes, business taxes, and license and registration fees. Special taxes such as consumption tax and environmental tax are levied on specific goods, services and environmental protection. The government aims to ensure fiscal revenue through comprehensive taxes, support social and economic development, and attract foreign investment and promote international business activities through preferential tax policies.

2.2 Income Tax

According to Maltese tax law, a Maltese tax resident company is a legal entity whose main place of business or effective management is located in Malta. In tax agreements, Malta usually follows the OECD Model Convention’s definition of a resident company. Under this model convention, a resident company is defined as a person who, under the laws of that country, is liable to tax due to their domicile, residence, place of management, place of incorporation (with Malta’s tax agreements), or other similar criteria, but does not include persons who are only taxed on income from that country. In principle, if a legal entity does not meet the definition of a Maltese tax resident company, it is considered a Maltese non-resident company. The subject of corporate income tax is enterprises and companies engaged in business activities within Malta. Non-resident companies with a permanent establishment in Malta need to pay corporate income tax on the income of that permanent establishment and the income sourced from Malta. Non-resident companies without a permanent establishment in Malta only need to pay corporate income tax on income sourced from Malta. The income of non-resident companies is subject to different tax rates depending on its source and nature, but net taxable gains from the sale of real estate and shares, and short-term construction and similar projects are taxed at higher rates. In specific circumstances, if such companies are identified as having income within the scope of income tax and have permanent or fixed operations in Malta, they must follow the tax rules for Maltese resident companies from the time of identification, and be taxed as a branch of a foreign company registered in Malta. Capital gains from the sale of fixed assets, stocks, and real estate by companies are considered ordinary income and are subject to corporate income tax. Malta’s corporate income tax rate is 35%, but the actual tax burden can be reduced through a tax credit mechanism, making Malta’s corporate income tax rate lower compared to most countries.

According to Maltese tax law, individuals who have a permanent residence in Malta are considered Maltese residents. If such individuals also have a permanent residence abroad, the main factor determining their tax residency status is the location of their center of vital interests. If, in a calendar year, more than 50% of an individual’s total income is sourced from Malta, or the main place of their professional activities is in Malta, they should be considered Maltese residents. Individuals who do not meet the aforementioned conditions are considered non-residents. Maltese residents are required to pay personal income tax on their worldwide income; non-resident individuals must pay personal income tax under two circumstances: first, if they operate through a permanent establishment in Malta and earn income, and second, if they earn income sourced from Malta. Foreigners residing in Malta are only taxed on their income generated within Malta. Personal income tax is progressive, with a maximum rate of 35%.

It is important to note that Malta taxes capital gains, which primarily applies to gains arising from the sale of fixed assets, shares and other capital assets. Capital gains tax rates may vary depending on the type of asset and the holding period. Typically, the tax rate is lower on assets held for the long term and the tax rate is higher on assets held short term. When calculating taxable capital gains, the sale price of the asset minus the original purchase price and related expenses is considered, and only the actual appreciation is taxed. Malta also offers a number of tax benefits and exemptions, such as intra-company reorganizations and certain transactions by international investors.

2.3 Value-Added Tax (VAT)

Malta’s VAT applies to the sale of goods, provision of services, rental income, and the importation of goods and services. When determining the applicable tax rate, both non-VAT taxable income and VAT taxable income are considered. When taxpayers fulfill their tax obligations and enjoy their exemption rights, the tax transferred to consumers due to investment expenditures must be adjusted in subsequent tax years. Currently, Malta’s standard VAT rate is 18%, with a reduced rate of 5% or a zero rate applied to certain specific goods and services. Malta’s VAT system aims to ensure the fairness and effectiveness of taxation while encouraging the development of specific industries and the enhancement of social welfare.

2.4 Other Taxes

Most countries levy property taxes on their citizens to fund public services and infrastructure development. However, Malta, as a small open economy reliant on attracting foreign investment and businesses, chooses to exempt property taxes to enhance its international competitiveness. By exempting property taxes, Malta hopes to attract more foreign investment and affluent individuals to acquire real estate, promoting economic development. To fill the gap left by property taxes, Malta’s tax structure mainly relies on other forms of taxation, such as income tax, real estate transfer tax, and stamp duty.

For real estate transfers, Malta implements a withholding tax (WHT) system. Since January 1, 2015, real estate transfers within Malta are generally subject to an 8% or 10% withholding tax on the transfer value, depending on the acquisition time of the real estate. In certain specific cases, the withholding tax rate may vary. Particularly, when the first €400,000 of the transfer value meets certain conditions, a reduced rate of 5% can be applied. Transfers of real estate obtained through inheritance or donation are subject to a 12% withholding tax on the difference between the transfer value and the acquisition value, or the default tax rate on the transfer value as per the above regulations. The first €100,000 of gains from the initial transfer of rights to real estate or the termination or suspension of any rights will be taxed at a rate of 15%.

Stamp duty is also an important component of Malta’s tax system. Stamp duty applies to real estate transfers and marketable securities transfers. For real estate transfers, residents and non-residents are taxed at a rate of 5%, while real estate transfers in the Gozo region are subject to a rate of 2%. For marketable securities transfers, the rate is 2%; if it involves the transfer of shares in a real estate company, the rate is 5%. Malta also offers various stamp duty exemptions, such as exemptions for intra-group restructuring. Transfers of partnership interests from one company to another within the same group or transfers of partnership interests between partnerships are also exempt from stamp duty. Additionally, the gift of marketable securities or business leases to close relatives through a public contract before January 1, 2025, is taxed at a preferential rate of 1.5%.

Malta’s tax system is designed to ensure reasonable taxation of different incomes, promote market transparency and regulation, while providing various tax incentives and exemptions to support the development of specific sectors and healthy economic growth. Through these measures, Malta not only maintains the fairness and transparency of its tax system but also effectively attracts international investment, promoting sustainable economic growth.。

3. Malta’s Cryptocurrency Tax System

Malta’s cryptocurrency tax system is relatively clear, primarily relying on general tax law provisions for handling crypto assets. Income from cryptocurrency transactions is regarded as capital gains and is subject to personal or corporate income tax. Both individuals and businesses must pay taxes on the profits from buying and selling cryptocurrencies according to Malta’s progressive tax rates, which depend on the total income of the taxpayer.

Malta generally does not apply VAT to cryptocurrency transactions because, as an EU member state, cryptocurrencies are considered part of financial services under EU law, and thus buying and selling cryptocurrencies do not require VAT payment. However, businesses and individuals engaged in cryptocurrency transactions must fulfill their tax filing obligations, especially businesses involved in crypto-related activities, which need to report their transaction details to the Inland Revenue Department (IRD) and comply with anti-money laundering (AML) and customer due diligence (CDD) regulations. Through these measures, the Maltese government ensures transparency and compliance in the cryptocurrency market, preventing tax evasion and money laundering, and protecting the rights of investors and consumers.

To promote the development of blockchain and cryptocurrency businesses, Malta offers a range of tax incentives. Eligible companies can benefit from lower corporate tax rates and reduce their actual tax burden through tax credit mechanisms. Malta provides various tax incentives for companies using blockchain technology to encourage research and innovation. Specifically, eligible companies can receive tax credits ranging from 25% to 70% of their R&D expenditures, depending on the size of the company and the nature of the project. Additionally, Malta offers favorable tax treatment for startups and early-stage companies, which can benefit from reduced corporate tax rates and additional deductions for eligible expenses. In the area of intellectual property, Malta offers favorable tax regimes for income derived from qualifying intellectual property, allowing investors to enjoy significant tax reductions from income generated from patents, copyrights, and trademarks.

To avoid double taxation on the global income of international investors, Malta has an extensive network of double taxation treaties. These tax policies and incentives demonstrate Malta’s commitment to becoming a leading center in the blockchain and cryptocurrency industry, providing a favorable tax environment for global businesses and investors.

4. Malta’s Cryptocurrency Regulatory Policy

Malta is one of the earliest countries to establish a comprehensive legal framework to regulate blockchain and cryptocurrency. Its regulatory policies mainly revolve around the Virtual Financial Assets Act (VFAA), the Innovative Technology Arrangements and Services Act (ITAS), and the Malta Digital Innovation Authority Act (MDIA). In 2018, Malta passed the VFAA, which provides detailed definitions and classifications of cryptocurrencies and related activities, and sets specific regulatory requirements. According to this law, virtual financial asset service providers (VASPs) engaged in cryptocurrency transactions, management, and custody must register with the Malta Financial Services Authority (MFSA) and comply with strict regulatory standards. These standards include anti-money laundering (AML) and counter-terrorist financing (CFT) measures, transparency requirements, and regular reporting.

Additionally, companies conducting initial coin offerings (ICOs) in Malta must submit detailed white papers to the MFSA, disclosing comprehensive project information, including token functions, risks, and funding plans. The MFSA reviews and approves these white papers. All VASPs must comply with international AML/CFT standards, including conducting due diligence on customers, reporting suspicious transactions, and maintaining transaction records. Under the ITAS, Malta has also established the MDIA, which is responsible for certifying and regulating the application of blockchain and other innovative technologies to ensure their security and transparency. The MDIA Act establishes the Malta Digital Innovation Authority, which promotes and regulates national digital innovation, including blockchain and cryptocurrency. Malta’s cryptocurrency regulatory framework, through stringent legal and regulatory measures, ensures market transparency and security, protects investor rights, and encourages fintech innovation and industry development. This comprehensive and strict regulatory approach not only safeguards the healthy development of the market but also provides a regulatory model for other countries worldwide.

5. Summary and Outlook of Malta’s Cryptocurrency Asset System

Malta’s cryptocurrency asset tax system is relatively clear and forward-looking, with tax regulations primarily based on general tax law. Malta treats cryptocurrency assets according to its legal definitions of virtual financial assets, considering income from cryptocurrency transactions as capital gains subject to personal income tax or corporate income tax, and exempting cryptocurrency transactions from VAT. Malta imposes strict tax filing and anti-money laundering requirements on businesses and individuals engaged in cryptocurrency transactions to ensure compliance and market transparency. Although the primary aim of Malta’s tax system is to protect investor interests and prevent financial risks, the Maltese government is evidently encouraging the development of the cryptocurrency sector by actively attracting blockchain and cryptocurrency enterprises through the ITAS and other preferential policies, promoting fintech innovation and industry growth.

Going forward, Malta will continue to play a leading role in the global regulation and taxation of cryptocurrency assets. As countries around the world become more accepting of cryptocurrencies, Malta may further refine its tax system to adapt to the development and changes in the cryptocurrency market. By finding the best balance between economic development, financial security, and monetary sovereignty, Malta aims to maintain its leading position in the field of cryptocurrency assets. Through continuous adjustments and optimization of tax policies, Malta can attract more blockchain and cryptocurrency enterprises, occupy a more advantageous position in the international financial market, and drive sustained economic growth and innovation domestically.

References

[1].Malta Financial Services Authority. (2018). Virtual Financial Assets Act. Malta Financial Services Authority.

[2].Malta Financial Services Authority. (2018). Innovative Technology Arrangements and Services Act. Malta Financial Services Authority.

[3].Malta Digital Innovation Authority. (2018). Malta Digital Innovation Authority Act. Malta Digital Innovation Authority.

[4].Malta Financial Services Authority. (2024). Regulation on cryptocurrencies and initial coin offerings. Malta Financial Services Authority.

[5].Malta Digital Innovation Authority. (2024). Certification and regulatory requirements for innovative technology arrangements and services. Malta Digital Innovation Authority.

[6].European Union. (2024). VAT regulations for cryptocurrencies. Official Journal of the European Union.

[7].Government of Malta. (2024). Tax Rates and Taxation System 2024.

[8].Malta Institute of Taxation. (2023, October 30). Malta Budget 2024.

[9].PwC. (2024). Malta-Overview.

Disclaimer：

1. This article is reprinted from [TaxDAO]. Forward the Original Title‘走进“区块链岛”马耳他：加密税收与监管’. All copyrights belong to the original author [TaxDAO]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned, copying, distributing, or plagiarizing the translated articles is prohibited.