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Malta has become the European hub of i-Gaming, licensing hundreds of gaming companies and service providers, including some of the largest and most profitable operators in the gaming industry. The Lotteries and Gaming Authority (LGA), the Malta remote gaming regulatory organisation, issues licences to gaming operators engaged in the online gaming business, offering games through distance communication, such as, casino games, poker, sports betting, P2P, lotteries, as well as gaming platforms. Remote gaming operators licenced in Malta benefit from a stable legal regime due to the robust and effective Remote Gaming Regulations (L.N. 176/04), as well as, very attractive fiscal incentives, such as very competitive corporate and gaming tax.

Since Malta is an EU Member State, where remote gaming is legally established and regulated through an effective legislation, the Maltese jurisdiction allows industry operators the free movement of goods and services within the European market. In 2004 Malta became the first EU Member State to introduce remote gaming regulations bringing forward new concepts to the i-Gaming industry. Malta’s Remote Gaming Regulations have been harmonised in accordance with the European Union legislation requirements and have been amended from time to time to reflect the requirements of the market.

Over the past six years, the Lotteries and Gaming Authority has issued in excess of 330 Remote Gaming Licences. Malta’s online gaming revenues have reached 19 million Euros in 2009, up nearly 20% from 15.9 million Euros generated during the previous year. Malta’s stable political and economic climate is also a contributing factor towards the rapid growth of the gaming industry.

Malta offers very attractive fiscal regime with advantageous corporate and gaming tax rates together with an extensive network of double taxation treaties and other legislation providing relief from double taxation. The corporate licensee is subject to income tax at 35%. However, if the shareholders are not resident in Malta or if the licensee is owned by a Maltese company 100% owned by persons who are not resident in Malta, the shareholders are entitled to a refund of 6/7 of the tax paid. Therefore, effectively the tax suffered would be of 5%. Furthermore, as Malta operates the full imputation system of taxation, any tax paid by the company is imputed to the shareholders in the event of a dividend distribution, thus tax is only paid once. Furthermore, gaming tax is capped at €466,000 per gaming licence and it is either a fixed gaming tax for certain classes of remote gaming licences or tax on Real Income generated by operators.

Apart from being regarded as a centre of excellence in the financial services sector, over the last 20 years, Malta also became a reputable ICT jurisdiction. Adopting a state-of-the-art telecommunications and hosting infrastructure with large bandwidth networks providing high capacity connections, Malta’s networks are completely digital and its international connections have been significantly expanded through satellite technology and high capacity fibre-optics linking Malta with Europe. The existence of support services to the industry, such as, online payment processors, data centers, financial services institutions, auditors, software platforms and developers, has indeed contributed towards the rapid development of the remote gaming industry on the island.

The strong regulatory regime and rigorous legislation, qualified Malta in 2007 in the United Kingdom government’s White List of jurisdictions from which online gaming companies are allowed to advertise their services into the UK market. As a result of this, in the summer of 2007, more than 20 international i-Gaming operators have moved their remote gaming operations to Malta.

The availability of highly qualified human resources is another major benefit of establishing a remote gaming operation in Malta. While the remote gaming industry is a relatively young industry, there is a vast availability of professionals specialised in the industry. Malta’s workforce is highly educated, diligent and is generally renowned for its strong work ethic and loyalty.

In 2005, the LGA introduced the Malta Remote Gaming Council (MRGC) to act as a forum between the Lotteries and Gaming Authority and the i-Gaming operators. The MRGC is made up of stakeholders in the gaming industry, including but not limited to licenced operators, lawyers and professional services providers directly involved in the industry. Any remote gaming licenced company, service provider or consultant is eligible to join MRGC.

The Malta Remote Gaming Regulations emphasizes on the adoption of anti-money laundering policies procedures, and responsible gaming and security measures for the protection of online players as well as for the gaming operators themselves.

Over the past years many international jurisdictions have been considering the liberalisation of remote gaming and opening and regulating the remote gaming market in their respective jurisdictions. Malta recognises the importance of the online gaming industry and is considering adopting further measures to make it more flexible and thus more competitive in anticipation of the worldwide changes and developments in the gaming industry.

by Denitza Dimitrova
LL.B., LL.M., Mag.Jur.

As from 1 January 2015, new VAT place of supply rules will come into effect for EU cross-border business of electronically supplied services to non-taxable consumers (B2C). The new rules will shift the place of supply of e-services from the location of the supplier to the country of consumption or residence of the consumer.

The general rule and the exceptions to the general rule

The general rule for the supply of electronic supplied services to non-taxable persons (B2C) is that the place of supply is the place where the supplier is established for vat purposes. There is however one exception where the services are being supplied by a taxable person who has established his business outside the Community to non-taxable persons who are established in, or who have their permanent address or usually resides in an EU Member State. In this case the place of supply is the place where the non-taxable person is established, or where he has his permanent address or usually resides.

What is the current situation?

The current situation with respect to electronically supplied services to a non-taxable customer (B2C) is as follows:
1. If supplied by an EU supplier to an EU customer, the place of supply is the country where the supplier is located i.e. in an EU member state and therefore taxed therein;
2. If supplied by a non EU supplier to an EU customer, the place of supply is the country where the customer is located i.e. in the non-EU member state and therefore taxed therein.
3. If supplied to a non EU customer, the transaction would be outside the scope of VAT legislation, unless the services are used and enjoyed in the EU, in which case VAT may become due.

What does the changes consist of?

With effect from 1st January 2015, the B2C supplies provided by EU suppliers to non-taxable customers within the EU will be treated as supplied in the EU member state where the recipient of the service is established, has a permanent address or usually resides.

What are electronically supplied services?

Electronically supplied services include services relating to website supply, webhosting, distance maintenance of programmes and equipment, supply of software and updating thereof, supply of images, text and information, and making available of databases, supply of music, films and games, including games of chance and gambling games, and of political, cultural, artistic, sporting, scientific and entertainment broadcasts and events, and the supply of distance teaching.

Electronically supplied services are generally defined as services the supply of which is essentially automated and involving minimal human intervention. Establishing whether the service is an electronically supplied service or otherwise is of paramount importance. Games where the outcome is determined by an automated random number generator require minimal or no human intervention at all, while games involving live events require more human intervention in the setting and amending of the odds, monitoring the event and analysing the statistics. The latter games involve more human intervention and will thus classify them as e-services.

What needs to be done?

Gaming companies established in Malta must therefore establish the jurisdiction in which their players are located so as to apply the correct VAT treatment. Verification of the client’s IP address is not sufficient and verification need to be backed up by other evidence of where the player usually resides.

Most EU member states apply an exemption from VAT on betting and gambling transactions, however each MS would have its own rules and conditions of how such an exemption will be applied. Furthermore not all EU MS apply a blanket exemption since some member states restrict the exemption to certain gaming activities such as land-based gaming activities.

In view of the change of supply rules, iGaming operators will as from 1 January 2015 might have to start charging VAT to their players who are located in these jurisdictions. The VAT rate will depend on the applicable rate of the member state concerned. Thus the following matters should be kept in mind:
• The different VAT rates applicable in the different member states;
• Whether supplies are being made to non-taxable customers and how to determine whether a customer is a taxable person or a non-taxable person
• Analysing any applicable exemptions in the different member states in which the players reside
• The effect that this change will have on the current profit margins
• The taxable value on which VAT will have to be charged
• The manner in which invoices will be issued depending on the rules in the different member states
• Record keeping and other VAT compliance obligations in the different member states
• Legal considerations in the different member states.

by Stephen Balzan and Denitza Dimitrova

During the Month of March 2016. Your Firm, ACT Consultus Limited (Malta) generated the most usage from our users for this category.
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