Malta: Guidelines Published On The Gambling VAT Exemption

IN SUMMARY

On 21st November 2017, two sets of Guidelines were published in the Government gazette in relation to the gambling VAT exemption, entitled 'Guidelines on Item 9 of Part Two of the Fifth Schedule to the VAT Act' and 'Guidelines for the determination of the taxable value of gambling and betting services'.

The first set of Guidelines establishes which gambling supplies qualify for the VAT exemption provided in the VAT Act. This is in line with the EU VAT Directive which requires Member States to exempt without a right of deduction of input VAT 'betting, lotteries and other forms of gambling, subject to the conditions and limitations laid down by each Member State'. In essence, whereas most forms of gambling will remain VAT-exempt, certain online supplies of skill games and casino-type games, whether peer-to-peer or not, will become VAT-taxable as from 1st January 2018. Land-based table games, slot machines, lotto, lottery and lottery-type games, sports and horse betting, betting on the outcome of events, bookmaking and betting exchanges will remain exempt from VAT. The VAT exemption covering supplies which are strictly required, related and essential to, and which form part of an underlying gambling or betting transaction ('intrinsic services'), will be limited to those that are related to exempt gambling/betting transactions as aforesaid.

Given the particular nature of gambling supplies, the second set of Guidelines seeks to establish the specific rules applicable for the computation of the value of gambling services on which VAT should be charged or otherwise.

KPMG INSIGHTS

The changes will mainly effect providers of online casino games such as blackjack, baccarat, roulette and poker, which to date have exempted their supplies and which, as from 1st January 2018 will have output supplies bearing a VAT-taxable status.

To the extent that most gambling operators established in Malta provide such VAT-taxable services to players not established in Malta, the main implication for them is on their right to recover input VAT and possibly on the need to change their type of VAT registration.

Following the 2015 VAT changes, gambling operators engaged in the provision of electronically supplied services (or 'ESS') already have the right to recover input VAT in respect of gambling supplies subject to VAT in other jurisdictions where their players are located. With effect from 1st January 2018, the right to recover input VAT will be extended to those gambling operators engaged in supplies which will become VAT-taxable in nature, irrespective of the place where the gambling supplies are made.

In turn, gambling operators engaged in the provision of VAT-taxable services to players established in Malta, will generally have an obligation to shift to an Article 10 VAT Registration and charge VAT on the taxable value as determined by the Guidelines. This applies unless such i-gaming operators are established outside Malta and opt for the Mini One Stop Shop in some other EU Member State.

An Article 10 VAT registration brings with it different VAT compliance obligations, namely the submission of VAT returns on a quarterly basis and where relevant, the determination of the extent of input VAT recovery on the basis of a partial attribution in the case of i-gaming operators engaged in both VAT-taxable supplies and supplies which are not subjected to VAT.

Furthermore, a switch in VAT registration may trigger an 18% VAT charge on any office premises leased by the gaming operators if the lessee was previously not so registered under Article 10.

Having said this, for gambling operators who are exclusively (i) engaged in the provision of gambling ESS to players established outside Malta when such services are VAT-taxable in nature in Malta, and/or (ii) engaged in supplies that are VAT-taxable in the Member State of consumption, the shift to an Article 10 registration is optional but necessary for their entitlement to a right to input VAT recovery. This means that, before switching to an Article 10 VAT Registration, gaming operators would need to weigh the benefits of VAT recovery against any sunk VAT cost on any office lease, bearing in mind that the exemption on intrinsic services procured by operators (i.e. which are required, related and essential to, and which form part of an underlying gambling or betting transaction) will, as from 1st January 2018, be restricted to those supplies incurred in the provision of VAT exempt gambling services.

In turn, it could prove challenging to those providing 'intrinsic services' to gambling operators, who, as from 1st January 2018, would need to determine their VAT charging obligations based on the VAT treatment of the output supplies of their clients i.e. the gaming operators. In the circumstances, it would be advisable that:

  1. such providers of 'intrinsic services' reassess their VAT obligations based on their clientele (which clientele may be engaged in both VAT-taxable and exempt gambling supplies) and establish a modus operandi that is both practical and VAT compliant; and
  2. gambling operators engaged in a mix of VAT-taxable and exempt supplies evaluate their position vis-à-vis the procurement of 'intrinsic services', potentially considering some restructuring, also taking into account the announcement made by the Minister of Finance, in his 2018 Budget Speech, that VAT Grouping will be introduced for the gaming sector.

Another point worth considering in the analysis is the interaction of the VAT Guidelines with the proposed overhaul to Malta's gaming licenses regime. Whereas the proposal is to replace the multi-licence system (i.e. Classes 1 to 4) with just two forms of licences (i.e. B2C and B2B), thereby allowing suppliers of B2C gambling services to consolidate their activities under one licence, such consolidation may make it more difficult to comply with the VAT obligations. This would notably be the case when the operator would be engaged in a mix of supplies that are VAT-taxable and exempt in nature.

The Guidelines in respect of the determination of the taxable value of gambling and betting services, clarify the manner in which the taxable value should be calculated in a sector where the remuneration is not the traditional VAT consideration. In addition the Guidelines, which follow EU jurisprudence, contribute to having consistency across the industry and seek to minimise the implications of the change-over on gambling operators.

THE GUIDELINES

A.'Guidelines on Item 9 of Part Two of the Fifth Schedule to the VAT Act'

Item 9 of Part 2 of the 5th Schedule to the VAT Act exempts without credit Government lotto and lotteries, the supply of agency services related thereto and such other supplies related to gambling as may be approved by the Minister. The first set of Guidelines clarify the scope of the said exemption by providing that with effect from 1st January 2018, the Gambling VAT exemption in Malta will be limited to the provision of the following supplies:

  1. The provision of facilities for the placing of bets and wagers, including the services of book makers, betting exchanges and any equivalent facilities.

    The term placing of bets and wagers:

    • Refers to gambling on the outcome of an event, which outcome is unknown at the time of the placing of the bet or wager, while the term event includes, but is not limited to a sporting event (real life and virtual), a competition, a lottery, the performance of an index, and a natural phenomenon.
    • Excludes gambling on the outcome of

      1. casino-type games such as blackjack, poker and roulette; and
      2. any games of chance, the outcome of which is determined by a random generator.
  2. The granting of the right to participate in a lotto or lottery, including Grand Lottery, Super 5, scratch cards, keno and any other lottery-type games;
  3. The granting of the right to participate in bingo games;
  4. The provision to players of devices or equipment for the playing of casino-type games of chance, the outcome of which is determined by a random generator, including tables for playing of roulette, blackjack, baccarat, poker when played against the house, and slot machines.

    The Guidelines clarify that the terms devices or equipment:

    • Refer to game tables, machines and other similar objects which are physically located in premises or locations which are licensed or otherwise recognised by the Malta Gaming Authority ('MGA'), whether accessed by the player physically or remotely.
    • Exclude "amusement machines" and "remote gaming equipment" as defined in the Lotteries and Other Games Act and in the Remote Gaming Regulations.
  5. Supplies which are strictly required, related and essential to, and which from part of an underlying gambling or betting transaction falling within paragraphs (i) to (iv) above, as shall from time to time be determined by the MGA.

B. 'Guidelines for the determination of the taxable value of gambling and betting services'

The second set of Guidelines deal with the calculation of the taxable value of gambling and betting services. Specifically the Guidelines establish that:

  1. Where the supplier receives a commission or participation fee ('rake'), the said commission or fee shall be regarded as consideration for the service provided; and
  2. In all other cases, the consideration received by the operator shall be equal to the revenue of the supplier (i.e. the total stakes/bets placed by the player) less the winnings and other amounts paid out to players in connection with that bet.

The consideration is deemed to be inclusive of VAT chargeable under the VAT Act.

In arriving at the taxable value there shall be deducted any amount of commission or fee received by a supplier, or of stakes/bets placed by the player which is immediately allocated by the supplier to a jackpot pool as well as bonuses and other incentives provided by a supplier and which had been included within the consideration.

The Guidelines also establish that the taxable value should be determined on the last day of a given tax period, by reference to the aggregate taxable value of the transactions during the respective tax period, and exempt suppliers of gambling services from the obligation to issue fiscal receipts.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions