Gains of a capital nature are not taxable in Malta, whilst gains of an income nature are, barring statutory Exemptions, always taxable. The litmus test in determing whether capital gains are taxable or not, is tied to badges of trade.
Badges of trade are subjective tests which help evaluate whether the gain is of a capital nature (and therefore not taxable) or of an income nature (and therefore taxable). Badges of trade include, but are not limited to:
- frequency of transactions;
- profit-seeking motive;
- supplementary works;
- affinity to one’s own trade;
- quantity of the goods; and
- interval of time between purchase and re-sale
Badges of trade should be assessed cumulatively and objectively. The acquisiation of goods for speculation usually entails a gain of an income nature and would be taxable.
Where the gain is of a capital nature, the next test would be whether the gain is exempt or not. Unless listed in the Exemptions, any gains of a captial nature deriving from immovable property in Malta, securities, business goodwill, trademarks, trade names, copyright and beneficial interest in a trust, be, as a rule of thumb taxable.