Estonia's crypto exchange

Bitcoin is now regarded as an investable asset. With all of the recent news regarding cryptocurrencies like Bitcoin, Ethereum, and Cardano, the talk about how Malta has had an open-door policy on this new class of assets for a long time.

Malta was one of the first countries to regulate Malta’s cryptocurrency exchange license and transactions. Malta implemented tax guidelines on deals involving digital assets, such as cryptocurrencies, in 2018, providing a comprehensive regulatory framework for digital assets.

Also, Learn About the Working of Income Tax 

When it comes to the taxation of cryptocurrencies in terms of income tax, the Malta Commissioner for Revenue has taken a rather basic approach. By analogy, all of the previous rules and laws in relation to income & capital apply to cryptocurrency transactions. As a result, when assessing a cryptocurrency transaction, the same questions would be asked as if the transaction involved “ordinary” assets. As a result, concerns like the transaction’s purpose, the parties’ position, the type of the transaction, and so on are still significant.

The tax rules distinguish between coins and tokens, with tokens further separated into financial and utility tokens. According to Maltese tax legislation, “coins” are identical to conventional currency payment methods. To be considered a “coin,” a cryptocurrency must lack characteristics that would make it equivalent to traditional stock, bond, or other sorts of financial property. It’s worth should not be determined by its ability to be redeemed for a service or a good. When such a coin is used in a transaction, the tax law handles it the same as if it were a standard fiat currency transaction.

Gains earned by exchanging cryptocurrencies, for example, are treated the same as profits earned through ordinary fiat exchanges. Any gains or profits made by a firm holding coins as part of its trading stock are taxed as income. Any coins earned as a result of mining activities are also considered normal income.

If a person makes a capital gain through holding a coin for a long time and is not doing so as part of his usual trading activity, he should not be subject to capital gains tax.

If the transaction is considered to be of a capital character, it’s still worth checking to determine if the gains are subject to a particular clause of the Maltese Income Tax Act that imposes income tax on certain capital gains. Gains from financial securities trades are one type of gain that is included. If the transaction appears to involve a token that resembles typical financial security such as a stock, share, bond, or debenture, it will still be subject to income tax. 

On the other hand, the token resembles a utility token; no income tax is imposed on capital gains realized in connection with that transaction, as long as it is not a trading transaction.

How to Obtain Malta Crypto Exchange License 

Malta’s Prime Minister unveiled new legislation and named the country a blockchain island during one of the year’s largest blockchain conferences. 

Malta divides cryptocurrency licenses into classes with differing degrees of limitations. The cost of obtaining a license, including an annual renewal charge, ranges from USD $3500 to $13000 (round figure), which is much higher than the cost of a similar license in Estonia. A Maltese license requires a minimum of USD $55,000 and a maximum of $800,000 in registered capital.

Even after going through all of the procedures and getting pricey permits, one of the primary characteristics of the blockchain and cryptocurrency business in Malta is the difficulty in opening a current account.

An application for cryptocurrency licensing in Malta must be presented exclusively through a VFA agent registered in line with the Law, the form and procedure specified by the relevant authorities, and must include the following information:

  • Supported by information and documents in addition to that needed by this act, in compliance with the competent authority’s or laws’ requirements;
  • Be checked in the manner specified that the relevant authority requires;
  • Contain a Malta address for sending notifications or other papers to the applicant in conformity with the law;
  • Be accompanied with a description of the security protocol’s principles, as well as any other documentation that a competent authority may demand;
  • It is necessary to pay a non-refundable charge.

Even with Estonia’s crypto exchange, the assistance of experts will be better.