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Trading vs CG

  • Sergio Montebello
  • Jun 27
  • 2 min read

Personal tax return season always serves as a refresher of Lesson 1 in Maltese tax law: The distinction between trading and capital gains. With the increasing number of individuals who venture into the stock and crypto markets, having a sound grasp of how profits and gains are taxed in Malta is an essential part of both traders' and investors' considerations when entering and closing a position. 


With this in mind, we are summarising below the salient points that warrant attention if you have a trading or investment account but you are unsure of the potential tax implications:


  1. Malta taxes all income from a trade or business


If your activity on the stock and/or crypto market is deemed to be a trading activity, you will always be taxed on the profits you crystallise.


  1. Not all capital gains are taxed


On the other hand, only prescribed transactions are subject to tax on the resulting capital gain. With particular reference to the stock market, securities are within the list of assets that Malta taxes when a transaction results in a capital gain.


  1. What are securities?


A security is defined as shares and stocks and similar instruments that participate in any way in the profits of the company and whose return is not limited to a fixed rate of return. From a crypto perspective, this may include a security token but generally does not capture utility tokens and coins. However, the definition specifically includes units in collective investment schemes. 


  1. Are all securities’ capital gains taxed?


No. Capital gains arising on the disposal of securities that are listed on a recognised stock exchange (here for the full list: CFR recognised stock exchanges) are exempt from tax in Malta. However, this exemption does not extend to trading in stocks, irrespective of listing or otherwise on recognised exchanges. 


  1. How to distinguish capital gains from trading profits? 


Despite the importance of the distinction between trading and capital profits, Maltese tax law does not go into the merits of how to differentiate between the two. Case law utilises a number of indicators (badges on trade in tax jargon) to determine such a classification. The main indicators in the case of transactions in the stock and crypto markets are: the intention at the time of acquisition, the frequency and number of the transactions, the reason for disposal, and, where applicable, the method of financing and the affinity with the person’s trade.


  1. Crystallisation


In the case of both trading and capital transactions, there is no tax charge until the position is closed and the gain or profit crystallises. This should not be confused with when the funds are withdrawn. Closing a position on a crypto position but retaining the funds on a platform (for example, in the form of a coin or a stable coin) suffices to trigger the tax point under Maltese tax law.  


For further information or assistance, please contact Quazar at quazaroffice@quazar.mt

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