In our last article, we saw that advisory services are always taxable, no matter what token they relate to. Portfolio management sits in the same bucket — but with one important twist: in Malta, portfolio management of security tokens may benefit from a reduced VAT rate of 12%.
This makes portfolio management one of the few crypto services where the VAT rate, not just the liability, depends on the underlying asset.
What MiCA Says
MiCA defines portfolio management in Article 3(1)(25) as:
“Managing portfolios in accordance with mandates given by clients on a discretionary client-by-client basis where such portfolios include one or more crypto-assets.”
This mirrors traditional wealth management services, where a manager takes discretionary decisions on behalf of the client.
Why Portfolio Management Is Taxable
Under EU VAT legislation, exemptions apply to transactions in currency or securities — not to the management of assets.
The CJEU confirmed this in:
- Deutsche Bank (C-44/11): Portfolio management is a composite taxable service (advice + execution), even if the underlying assets are exempt.
- GfBk (C-275/11): Advisory/management services remain taxable unless they form part of the management of a collective investment fund (not relevant for CASPs).
The result: portfolio management of crypto-assets is taxable, regardless of whether the portfolio contains payment tokens, securities, or utilities.
VAT Treatment by Token Type
🔹 Payment Tokens
- Managing a portfolio of for example Bitcoin or stablecoins → Taxable at 18%.
- No exemption applies, since Article 135(1)(e) only covers transactions in currency, not management.
🔹 Security Tokens
- Managing tokenised shares, bonds, or fund units → Taxable, but in Malta a reduced 12% VAT rate may apply (Item 12, Eighth Schedule to the VAT Act).
- This reflects the treatment of traditional portfolio management of financial instruments.
🔹 Utility or Other Tokens
- Managing utility tokens → Taxable at 18%.
Place of Supply Rules
- B2B clients: Place of supply = where the client is established. Reverse charge applies within the EU if the client is VAT-registered.
- B2C clients: Place of supply = where the CASP is established (Malta).
- If services are provided in a fully automated form (e.g. algorithmic portfolio rebalancing), they may qualify as electronically supplied services (ESS), with VAT due in the consumer’s country under OSS rules.
Final Thoughts
For portfolio management, the VAT story is straightforward: always taxable. The only nuance is that Maltese law offers a 12% reduced rate for portfolios involving security tokens, aligning them with traditional financial instruments.
For CASPs, this means:
- Keep clear records of token classifications in managed portfolios,
- Apply the correct VAT rate (18% or 12%), and
- Watch out for OSS obligations when managing portfolios for EU retail clients.
⚠️ Disclaimer: This article is for general information only and does not constitute tax, legal, or financial advice. Always consult a qualified advisor for tailored guidance.