As crypto exchanging continue to professionalise under MiCA, a key question arises for tax compliance: Do exchange services trigger VAT? Whether you’re offering crypto-to-fiat trades or crypto-to-crypto swaps, the VAT treatment isn’t uniform — it all hinges on the type of token involved.
Crypto Exchanges as a VATable Service
Whenever a crypto-asset service provider (CASP) exchanges its own assets — whether crypto for fiat, or crypto for another crypto — a supply of services for consideration occurs, typically in the form of a fee, commission, or spread. This supply is within the scope of VAT unless an exemption applies.
The determining factor? The token’s classification as a payment token, security token, or utility/other token.
Exchange of Payment Tokens – VAT-Exempt
Payment Tokens are crypto-assets used as a medium of exchange (e.g. Bitcoin, USDT). The VAT treatment for exchanging these is well-established:
- CJEU Case C-264/14 (Hedqvist): Bitcoin qualifies for the VAT exemption applicable to currency.
- Article 135(1)(e) of the VAT Directive: Exempts transactions in “currency, banknotes and coins used as legal tender”.
- Maltese VAT Guidelines align fully — exchanges involving payment tokens are VAT-exempt.
- The VAT Committee Guidelines (120th Meeting, Working Paper No. 982) state that “Further, the VAT Committee agrees by almost unanimity that exchange of crypto-currencies for fiat currency or for other crypto-currencies shall be treated as taxable, but exempt under Article 135(1)(e) of the VAT Directive.”
Result:
Crypto-fiat and crypto-to-crypto exchanges involving payment tokens are exempt from VAT, whether the client is a business or a consumer.
Exchange of Security Tokens – Also VAT-Exempt
Security Tokens are digital representations of traditional financial instruments like shares, bonds, or fund units.
- Article 135(1)(f) of the VAT Directive exempts transactions in securities.
- The Maltese VAT Guidelines for DLT Assets specify that where a trading platform’s services go beyond the mere provision of a facility and involve an increased level of involvement in the exchange of security tokens, the service may fall within the exemption for transactions in securities:
“Where the DLT Assets being traded classify as ‘currency’ or ‘securities’ for VAT purposes and where the platform’s services go beyond the mere provision of a trading facility, with an increased level of involvement in the transfer or exchange, such services may potentially fall within the exemption for:
(ii) transactions in securities (item 3(5), Part Two, 5th Schedule, VAT Act – where the functions of the trading platform are similar to those performed by a traditional securities broker such as buying and selling security tokens).”
Result:
Whether exchanged for fiat or another crypto-asset, trades involving security tokens are VAT-exempt, assuming the CASP is providing an increased level of involvement in the exchange of security tokens.
Exchange of Utility or Other Tokens – Fully Taxable
Utility Tokens provide access to a product, service, or platform rather than acting as a currency or investment. They do not benefit from VAT exemptions.
- Utility tokens do not qualify as “currency” or “securities”, meaning they fall outside the scope of financial services exemptions.
- The provision of a exchange facility in consideration for the payment of a user/transaction fee or commission constitutes a supply of services for consideration. In principle, a supply of services falling within the scope of Malta VAT would be taxable.
- The Maltese VAT Guidelines for DLT Assets – State that where a crypto-asset is neither currency nor security, VAT treatment is taxable and no exemption applies (standard-rated).
Result:
- For B2B services, the reverse charge mechanism applies within the EU.
- For B2C services, Maltese VAT is charged unless the service is fully automated and qualifies as an electronically supplied service (ESS) — in which case the OSS (One Stop Shop) regime applies and VAT is due based on the customer’s location.
📊 VAT on Crypto Exchange Services – Summary Table
Final Thoughts
Whether you’re exchanging crypto as a CASP, the VAT treatment of exchange services is not token-agnostic. You must classify tokens carefully and apply the correct exemption or standard VAT rate.
Get it right, and your fees and reporting will align with both Maltese VAT law and EU rules. Get it wrong, and you risk undercharging VAT, misreporting cross-border sales, or facing compliance scrutiny.
📌 Written by Zachary Cachia – FCCA, FIA, CPA
Disclaimer
This article is provided for general informational purposes only and does not constitute legal, tax, or professional advice. While care has been taken to ensure the accuracy of the information herein, the VAT treatment of crypto-asset services is complex and evolving. Businesses should seek tailored advice based on their specific facts and circumstances, and consult with qualified tax professionals or local authorities before making any decisions.