The CfR's guideline is largely principle based, but the
Reveue will also look at the facts of each case rather than
just referencing the guideline. In our view, both approaches
The guideline states that cryptocurrencies such as Bitcoin
and Ethereum – which are designed to function as a
means of payment, medium of exchange, or store of value
– is to be treated as the equivalent of fiat
currencies. Investors holding such cryptoassets by way of
investment may therefore freely dispose of these currencies
without liability to tax on capital gains, as cryptoassets are
not a chargeable asset in Malta.
Conversely, gains realised on the disposal of other types of
cryptoassets – such as security tokens or hybrid
tokens – are taxed in situations where their features
satisfy the definition of a "security". This includes "shares
and such like instruments that participate in any way in the
company's profits and whose return is not limited to a fixed
rate". This is becoming increasingly relevant as a growing
interest in security token offerings (STOs) is registered. The
source of any such gain is presumably determined with reference
to the location of the issuer. This is particularly relevant in
the context of Malta's remittance system of taxation, a system
where foreign sourced capital gains may be remitted to Malta by
a taxpayer that is resident but not domiciled in Malta free of
tax in Malta.
The guideline is less helpful with some practical issues
relative to capital gains tax computations, a key factor when
you consider Malta's income tax system is a self-assessment
based system. Some issues worthy of further elaboration
- Value: The quantum of the capital gain
realised following the disposal of a token is determined by
referencing its market value, which may be determined by the
CfR (highly unlikely for less generally available tokens) or
with reference to the average quoted price on reputable
exchanges. However, this raises many questions including: how
many quotes is one to seek, what range of prices should be
considered, and how does one determine a 'reputable'
exchange? One may consider a rule that requires all
transactions to be converted to euro on the date of the
transaction. In the absence of daily spot prices for most
tokens, one would advocate 'reasonable care' in arriving at
an appropriate valuation using a consistent methodology.
- Theft: Is the loss of one's private key
tantamount to a disposal? Presumably not. Likewise, what
happens if one is the victim of theft or fraud? Presumably,
the same applies here too.
- Pooling: Presumably, one is to pool
transactions per type of cryptoasset involved, in line with
- Deductions: Should new forms of tax
deductions (such as transaction fees paid before a
transaction is added to a blockchain, or the costs of making
a valuation) be considered?
- Records: Guidance on the type of records
to be maintained would also be welcomed. These could include
data as to type of cryptoasset, value of the transaction in
euro, details of the valuation methodology, bank statements,
and wallet addresses if required for audit.
The CfR's views will surely develop going forward, as will
the cryptoasset sector in question.