Gaming in Malta
Wednesday 26 April 2017
By Colin Gregory, Managing Director, Equiom Malta
It’s no secret that gaming is a thriving sector in Malta, making up 12% of the country’s GDP and employing more than 6,000 people as of mid-2016. It is one of the leading jurisdictions when it comes to eGaming and the numbers speak for themselves.
Although 35% is the headline rate of corporate tax for Maltese companies, there are generous reliefs and exemptions available. These include relief on dividends from non-Maltese subsidiaries, no double taxation on the payment of a dividend from a Maltese subsidiary to its Maltese parent and the refundable tax credit system, which allows for refunds on the distribution of profits such that the effective rate of tax can often be reduced to 5%. There is a separate gaming duty, which ranges from 0.5 – 5% depending on the type of licence, but it is all capped at €466,000 per annum, so it is easy to keep taxation under control. The process of applying for a gaming licence is also favourable with a typical timescale of 12 – 16 weeks, far quicker than competing jurisdictions. For those concerned with filling highly technical positions, there are schemes for bringing workers from overseas when the right talent isn’t available locally. The Highly Qualified Persons scheme introduces a flat rate of 15% tax on income for professionals in the areas of finance, aviation and eGaming, who meet the criteria.
Incentives for attracting gaming companies are abundant. In addition to discounts on personal income tax, Malta also offers tax exemptions on income derived from patents and operates a favourable Participant Holding Exemption regime whereby certain companies are exempt from tax on dividends and capital gains. As an EU Member State, Malta enjoys access to several EU Directives, some of which make it more attractive as a jurisdiction.
The Malta Gaming Authority (MGA) currently offers four types of licences for the varying businesses in the sector:
- Class 1 - Is a remote gaming licence (examples of Class 1 licences would include casino-type games and online lotteries) whereby operators manage their own risk on repetitive games. It is also possible to have a Class 1 on 4 licence whereby the Class 1 licensee operates its games on the software and in certain cases through the equipment of a Class 4 licensee;
- Class 2 - Is a remote betting licence (an example of a Class 2 licence would include fixed-odds betting) whereby operators manage their own risk on events based on a matchbook. It is possible to have a Class 2 on 4 licence whereby the Class 2 licensee operates its games on the software and in certain cases through the equipment of a Class 4 licensee;
- Class 3 - Offers a licence to promote and/or aid remote gaming in or from Malta (an example of a Class 3 licence would include poker networks, peer-to-peer (P2P) gaming and game portals). It is also possible to have a Class 3 on 4 licence whereby the Class 3 licensee operates its games on the software and in certain cases through the equipment of a Class 4 licensee;
- Class 4 - Is for licensees who offer hosting and management services to remote gaming operators, excluding the licensee itself, whereby software vendors provide management and hosting facilities on their platform. In essence this is a business to business (B2B) gaming licence.
Growth in Gaming in Malta
The gaming sector has mushroomed over the past few years and technological advancements have paved the way for new products. The majority of gaming companies based in Malta are made up of online casino type games and lotteries, followed by betting companies, P2P betting, poker networks and software providers. However, newer trends including fantasy sports and eSports are experiencing tremendous growth. Malta has recently granted its first licence to daily fantasy sport website, DraftKings. The company has now launched in Germany after the MGA created a new Controlled Skill Games Licence this year to support its entrance into the market. We expect to see more types of licences emerging in Malta as new gaming activities such as digital games of skill and secondary lottery services are also gaining momentum.
The Malta gaming industry is not without its challenges and with its continued growth comes outside impacts such as Brexit and legislation changes. Given that Malta is inside the EU the impacts of Brexit could be positive and the jurisdiction may even experience an influx of new licensees as a result. In terms of legislation changes, the MGA is currently undergoing a regulatory overhaul which comes into force this year. The new regulatory regime is expected to have a positive effect on the sector by streamlining the Maltese legal framework and allowing for simplification of the licensing process across different types of gaming businesses. It is also intended to create greater transparency between operators and players while strengthening licensees’ obligations in respect of consumer protection.
The 4th EU Anti-Money Laundering Directive is one the gaming sector will be watching closely as it comes into effect later this year. With a wider scope, the updated directive now considers providers of gambling services as ‘obliged entities’ in terms of anti-money laundering and countering of terrorism obligations. This could mean a lot of work for the sector as it will increase due diligence requirements and it is likely that gambling operators in Malta will have a number of considerations ahead of the deadline. MGA’s recent implementation of a new monitoring system for enhancing compliance processes will go some way to helping gaming businesses prepare but there is still a great deal of work to do.
Malta’s gaming industry has a bright future, growth is on the horizon and there are a number of new opportunities. With fresh products and providers emerging and the ability to streamline processes and transparency in the sector, Malta is in a good position to thrive as a premier gaming jurisdiction.
For advice on setting up your gaming business in Malta, please contact Colin Gregory