The Maltese tax treatment of cryptocurrencies : a comparative research

Abstract

Crypto assets are private digital assets that are intended to act as a means of exchange and use cryptography. Cryptocurrencies, the most popular form of crypto assets, find many uses, among which as a means of trade on exchanges and trading platforms. These were developed as a replacement for fiat currency. The income tax treatment of virtual currencies varies from one jurisdiction to another, as the concept of virtual currencies within a country determines how they fall into current tax laws governing the taxation of various types of income. Digital currencies are often classified as part of a pre-existing income group and taxed in the same manner as other forms of income. This paper discusses the way in which specific jurisdictions seek to tax cryptocurrencies, a subject which has prompted much debate, considering the premature nature of the technology. By means of a critical analysis of the current Maltese legal framework, as well as foreign regulatory approaches by other jurisdictions to the tax treatment of cryptocurrencies, the author sought to raise awareness on the legal challenges that this phenomenon may create. In the United Kingdom as well as in certain European jurisdictions, for example, tax regulations do not, in the opinion of the author provide for the different stakeholders partaking in this technology. Furthermore, for tax purposes, few countries consider digital currencies as a form of currency. Although the reasons for this may differ, the issue in question revolves around their decentralisation, lack of financing, market fluctuations, and restricted use as a medium of trade. The author is therefore in the view that most countries that have commented on the issue have considered cryptocurrencies to be a form of property for income tax purposes.