The introduction of the Virtual Financial Assets Act (VFAA) in Malta leaves a big question with regards to the tax implications of the Act. There is no doubt that Malta is a favorable jurisdiction offering tax incentives to individuals and local companies, so anticipating that VFA will be treated equally makes sense.
From the cryptocurrency geek side things are different. Having dreamt of an ICO with a public corporate profile but free of strict regulations, the VFA regime could be a huge disappointment. Obtaining a VFA license means accountability, governance, liabilities and audit.
Paid up Capital
Contributing money to an ICO is no different than participating in a share capital increase. The injection must be recorded in the books of the company, while it is excluded from stamp duty or a capital increase tax, simply because there are no such nasty things in Malta.
Selling Tokens could be treated differently from an income tax perspective. Although it’s not clear yet, Utility Tokens, especially those who are connected with the provision of products or services, should be considered as a revenue for the VFA license holder. In this case, corporate tax of 35% will be levied in the profits of the company, whereas 25% or 30% will be refunded to the ultimate beneficiary, depending on his country of residence.
A wise Virtual Financial Asset Offering should consider all tax implications in their business model.
VAT implications could be the trickiest part of token sale when the underline asset is a product or service, because the general VAT rules will apply. For example, if a VFA is casino chips, selling of those chips will be exclusive of VAT, because casino and gambling services are VAT excluded in all cases. Same rule would apply for a token used a mean of payment, because such are services are by definition exclusive of VAT.
However, if a token is paid ex. for the delivery of streaming video content, any transaction between the company and the user, or among users, could trigger VAT.
Malta is fully compliant with International Financial Reporting Standards (IFRS) for the drafting and presentation of the Financial Statements. The annual accounts include the Profit and Loss account, Statement of Changes in Equity, Cash Flow Statement and obviously the Balance Sheet.
At some point VFA License holders will have to publish their financial statements based on IFRS and their independent statutory auditors will have to sign them according the International Auditing Standards and procedures.
A legit ecosystem
Surely this is not much of a decentralized philosophy and the blockchain geek will leave this first meeting with us quite disappointed, but this is how the game will play out with VFA. You can’t liken an ICO in the burger islands in the middle of Caribbean with a European Country which is granting you the right to have a license and operate in a fully legitimate manner.
Edited by: Nanopoulos Konstantinos