Malta’s transposition of DAC8 and other amendments to the DAC Regulations
 

Malta has recently published legislation amending the Cooperation with Other Jurisdictions on Tax Matters Regulations, (S.L. 123.127) (the “DAC Regulations”). The most prominent addition to the Regulations is the transposition of the eighth amendment to the EU Administrative Cooperation Directive, Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation and repealing Directive 77/799/EEC, known as “DAC8”, into local law.

Other amendments of note are amendments to the reportable information under the Common Reporting Standard (“DAC2”), and a change to the Legal Professional Privilege afforded by Malta’s Mandatory Disclosure Rules (“DAC6”).  The amendments are deemed to have come into force on 1 January 2026.

This alert briefly delves into these and other main amendments made to the Regulations.

Transposition of DAC8 into local law

DAC8 provides for an automatic exchange of information on certain crypto-assets between EU Member States. In order to enable this, DAC8 requires Reporting Crypto-Asset Service Providers to perform certain due diligence procedures and fulfil certain reporting requirements on an annual basis.

Who is subject to DAC8 and from when?

DAC8 will apply to Reporting Crypto-Asset Service Providers vis-à-vis any calendar year or other appropriate reporting period as from 1 January 2026.

A Reporting Crypto-Asset Service Provider means any legal person or other undertaking whose occupation or business is the provision of one or more crypto-asset services to clients on a professional basis, and that is allowed to provide crypto-asset services in accordance with article 59 of Regulation (EU) 2023/1114 (the “EU Regulation”) and any other provider of crypto-asset services as defined in article 3(1), point (16) of the EU Regulation that conducts one or more crypto-asset services effectuating ‘Exchange Transactions’ for and on behalf of customers constituting a ‘Reportable User’.

In order to be subject to the reporting and due diligence requirements in Malta and save for certain exceptions, the Reporting Crypto-Asset Service Providers must be an Entity authorised by the Malta Financial Services Authority or otherwise allowed to provide crypto-asset services following a notification to a Member State in accordance with article 60 of the EU Regulation, or otherwise is:

• an Entity or individual resident for tax purposes in Malta;
• an Entity that: 
  • is incorporated or organised under the laws of Malta; 
  • and which has a legal personality in Malta or has an obligation to file tax returns of tax information returns in Malta with respect to its income;
• an Entity managed from Malta; or
• an Entity or individual that has a regular place of business in Malta.

A Reporting Malta Crypto-Asset Service Provider meeting any of the above criteria shall be subject to the reporting and due diligence requirements established therein with respect to ‘Reportable Transactions’ effectuated through a Branch based in Malta.

Which transactions fall within the purview of DAC8?

DAC8 focuses on Reportable Transactions entered into by any Crypto-Asset User that is a Reportable Person on the basis that, amongst other, such a person is an individual or an Entity other than an Excluded Person that is a customer of a Reporting Malta Crypto-Asset Service Providers for the purpose of carrying out a Reportable Transaction, and that is resident in a Member State other than Malta.

In the case of Entities, the reporting requirements also extend to Entities other than Active Entities and Excluded Persons that have Controlling Persons that are Reportable Persons.

In turn, Reportable Transaction captures:

• Exchange Transactions, that is to say, any exchange between Reportable Crypto-Assets and Fiat Currencies and an exchange between one or more forms of Reportable Crypto-Assets. In turn, a Reportable Crypto-Asset is a digital representation of a value or of a right that is able to be transferred and stored electronically using distributed ledger technology or similar technology other than those adequately determined by the Reporting Crypto-Asset Service Providers to be unusable for payment or investment purposes and excludes a Central Bank Digital Currency and Electronic Money.
• Transfers of Reportable Crypto-Assets, that is to say, any transaction moving Reportable Crypto-Assets from, or to the Crypto-Asset address or account of one Crypto-Asset User.

What must a Reporting Malta Crypto-Asset Service Provider do to identify Reportable Users and Entities that have Controlling Persons that are Reportable Persons?

When establishing a relationship with a Crypto-Asset User, or, with respect to Pre-existing Crypto-Assets Users by 1 January 2027, the Reporting Malta Crypto-Asset Service Provider shall obtain a self-certification that allows the Reporting Malta Crypto-Asset Service Provider to determine the Crypto-Assets User’s residences for tax purposes and confirm the reasonableness of such self-certification based on the information obtained by the Reporting Malta Crypto-Asset Service Provider.

In determining whether an Entity has one or more Controlling Persons who are Reportable Persons, one must first determine the Controlling Persons of the Entity Crypto-Asset User and subsequently, determine whether any of the Controlling Persons identified is a Reportable Person.

What must be reported by Reporting Malta Crypto-Asset Service Providers?

• Reportable information includes:
• identification details of Reportable Users;
• identification details of Entities who have Controlling Persons who are Reportable Persons;
• identification details and roles of Controlling Persons who are a Reportable Person;
• identification details of the Reporting Crypto-Asset Service Provider;
• details for each type of Reportable Crypto-Asset with respect to which the Reporting Malta Crypto-Service Provider has effectuated Reportable Transactions during the reporting period.

The communication of such information shall be made within nine months following the end of the calendar year to which the reporting requirements applicable to Reporting Malta Crypto-Asset Service Provider relate.

In addition to the above, the new regulations also set out penalties for non-compliance, record keeping obligations and registration obligations for certain operators.

Other amendments

Amendments to the DAC2

The definition of a Financial Asset has been expanded to include a Reportable Crypto-Asset, such that the reporting requirements applicable for Financial Assets now also apply to Reportable Crypto-Assets.  Similarly, other definitions have been updated to cater for this amendment, particularly the definition of an Investment Entity and Pre-Existing Account.

Furthermore, in addition to the information that has already been established as reportable in the Regulations, each Reporting Malta Financial Institution shall also report the following:

• Whether a valid self-certification has been provided for each Account Holder/ Reportable Person;
• The roles by virtue of which each Reportable Person that is a Controlling Person of an Entity Account Holder is a Controlling Person of the Entity;
• The type of account, whether the account is a Pre-Existing Account or a New Account, and whether the account is a joint account, including the number of joint Account Holders; and
• In the case of any Equity Interest held in an Investment Entity that is legal arrangement, the roles by virtue of which the Reportable Person is an Equity Interest holder.

Amendments to the DAC6

The Legal Professional Privilege (“LPP”), which allows an intermediary the right to a waiver from filing information on a reportable cross-border arrangement, has, with effect from 1 January 2027, been limited to legal professionals as defined in terms of Directive 98/5/EC of the European Parliament and of the Council.

Therefore, intermediaries not falling within the definition above will, as from 1 January 2027, no longer be eligible to waive their reporting obligation onto another intermediary or relevant taxpayer in terms of the Legal Professional Privilege.

Furthermore, the amendments also provide that:

• In the case of intermediaries who are advocates, notary and legal procurators waiving such a reporting obligation, the notification required by the Regulations shall be issued to the intermediary’s client, if such a client is an intermediary, or in the absence of such, such client is the relevant taxpayer;
• the details of intermediaries who are exempt from reporting obligations in accordance with the LPP need not be disclosed as part of the reportable cross-border arrangement; and
• the summary of the content of the reportable cross-border arrangement should now include a description of the relevant arrangements and also any other information which may assist the receiving competent authority in assessing a potential tax risk, instead of a description in abstract terms of the relevant business activities or arrangements.

Penalty for tipping off

Any person from whom the Commissioner had requested information in accordance with these regulations or article 10A of the Income Tax Management Act, (Cap. 372)  discloses to the person concerned or to a third party the fact that information has been requested by the Commissioner or that information has been or may be transmitted to the Commissioner shall be guilty of an offence and be liable on conviction to a fine not exceeding €115,000 or to imprisonment for a term not exceeding 2 years or to both such fine and imprisonment.

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