Crypto Assets and Tax Law 1. Which laws, regulations and court cases exist dealing with crypto assets? On the 1st of November, 2018 the Maltese Government published and enacted the Virtual Financial Assets Act (Chapter 590 to the Laws of Malta) and the Innovative Technology Arrangements and Services Act (ITAS) (Chapter 592). Subsequently, the Virtual Financial Assets (VFA) Regulations came into force through Subsidiary Legislation, Legal Notice 357 of 2018. Following that the Maltese Commissioner for Revenue (“CfR”), issued its guidelines on the income tax, stamp duty and VAT perspective in relation to Digital Ledger Transaction (DLT) assets. These guidelines have been issued under Article 96(2) of the Income Tax Act. The Virtual Financial Assets Act seeks to provide regulation and investor protection through a variety of obligations, assurances, and guidelines. One particular part of the VFA Act pertains to Initial VFA Offerings, therefore covering inter alia Initial Coin Offerings and token offerings. Under the new rules, companies operating in the sphere of virtual financial assets may be required to apply for a licence with the Malta Financial Services Authority, as well as adhere to a number of stipulations regarding the whitepaper, marketing materials, and
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civil liabilities. They are also required to implement a fully compliant Know Your Customer (KYC)/ Anti-Money Laundering (AML) checks that are applied to all parties deemed necessary by both local, and EU law. Similarly, the Innovative Technology Arrangements and Services Act is intended to be an extension to the Malta Digital Innovation Authority Act (MDIA) and the VFA Act. The ITAS act provides the definitions to `Innovation Technology Arrangement` (UTA) and `Innovative Technology Services` (ITS) which are subject to eligibility under the Maltese Authority rulings.
2. What are crypto assets from an income tax point of view? The Maltese Commissioner for Revenue (CfR) has classified Distributed Ledger Technology (DLT) assets into two (2) categories. The first category is “Coins”, whereby the CfR determined that Coins refer to those DLT assets, that do not have the characteristics of a security and that have no connection with any project or equity in the issuer, and whose utility, value or application is in no way directly related to the redemption of goods or services. The CfR deems DLT assets as cryptocurrencies that are designed to be used as a means of payment or a medium of exchange, or else
