Once an iGaming operator obtains the applicable remote gaming licence and a company is up and running, one might ask, "What's next from a regulatory point of view?" Francesca Caruana, CSB Group's Assistant Accounts Manager who handles the iGaming accounting client portfolio, gives a detailed overview on what is expected from an iGaming operator to meet specific accounting regulatory obligations.
Accounting in iGaming
Authorities in Malta, including the Malta Gaming Authority (MGA), impose a number of regulatory requirements applicable to MGA licensees, mainly the submission of the below;
- Yearly audited accounts;
- Interim management accounts;
- Tax returns;
- VAT returns;
- MOSS returns.
Yearly audited accounts
Audited set of financial statements need to be prepared and audited in accordance with the International Financial Reporting Standards (IFRSs), including a Directors' report. These are to be submitted to the MGA within 180 days of the company's financial year end. For instance, a company with a 31 December year end, must submit audited financial statements by end of June of the following year.
In light of the COVID-19 pandemic, the MGA informed its licensees whose last concluded financial year ended between December 2019 and March 2020, that the deadline for submission of audited financial statements, was extended to end of October 2020.
Nevertheless, by not later than 180 days after the end of their financial year, licensees were obliged to submit unaudited accounts, in order for the MGA to continue monitoring their financial position and performance.
The same financial statements must be approved within 10 months from the accounting year end and must be submitted to the Malta Business Registry (MBR) within 10 months plus 42 days from the accounting year end. Similarly, company with a 31 December year end, must submit audited financial statements to the MBR by 12 December of the following year (approval on 31 October plus 42 days for submission).
At audit stage, the auditors will perform audit procedures on material financial statement line items, according to International Standards of Auditing.
Prior and during the audit, a trusted accounting firm will aim at ensuring a smooth audit process with minimum inconvenience to its clients. The auditor will receive timely and accurate management accounts, together with all the supplementary information that is required during the course of the audit.
Management accounts covering the first 6 months of a company's financial year are to be submitted to the MGA by the end of the 8th month of its financial year. This means that, a company with a 31 December year end, must submit its interim accounts covering January – June by August of the same year. These need to be signed by the key compliance function holder of the company.
The documents needed in preparation of management accounts are:
- Monthly PSP statements;
- Monthly operational and players' bank account statements;
- Back end reports;
- Revenue invoices;
- Purchase invoices;
- Player liability reports as submitted to the MGA;
- Agreements entered into, including but not limited to, purchase of software agreements, service level agreements with third parties.
Reliability of operating systems and completeness of data are a must to ensure accurate accounting records and proper reconciliation amongst the different reports submitted.
A challenging area is undoubtedly the reconciliation of the player liability held at a period end.
Main components of player liability include;
Player liability is usually calculated as follows; [ a – b – c + d + e ]
Player movements should;
- show the results of the operation (at gross gaming revenue level);
- be reported on a monthly basis to the MGA;
- impact the compliance contribution computation to be paid to the MGA.
Gaming companies can also avail themselves of Malta's efficient tax system and the number of applicable tax treaties.
In addition to the standard corporate taxation system, gaming companies licensed as B2C are required to pay compliance contributions which are variable fees depending on the type of license held by the operators. B2C operators are charged 5% gaming tax on the gross revenue generated from Malta-based players. B2B clients are exempt from gaming tax. Both B2C and B2B licensees are required to pay a non-refundable fixed annual license fee to the MGA.
Tax return is to be electronically submitted by 28 November following the end of the company's financial year.
It is very important to understand the type of activity involved and what the company's intentions are. This will help to identify the place of supply considerations of gaming. Naturally, gaming activities, whether land based or online, carry VAT implications.
The latest VAT guidelines affecting gambling activities came into effect on 1 January 2018, whereby gambling verticals which fall under taxable and exempt without credit supplies, are outlined;
|Taxable supplies||Exempt without credit supplies|
|Casino games not on a device (i.e. online RNG casino excluding live casino)||Betting on events such as sports betting|
|P2P Games (e.g. poker)||Lotteries and lottery type games|
|Games of Skill||Bingo|
|Casino games on devices (including land based casino and online live casino)|
|Qualifying supplies in connection with the above|
When the B2C activity consists solely of the above vatable supplies, the company would be registered under Article 10 and is able to claim back all its input VAT incurred on Malta expenses.
When the B2C activity is solely made up of the above exempt without credit supplies, the company would be registered under Article 12, and is not able to claim back input VAT incurred on Malta expenses. Furthermore, the company will need to pay VAT in Malta on any supplies it procures from EU and non-EU suppliers.
When the B2C activity consists of mixed supplies, then the company would need to differentiate between the vatable and exempt supplies and only charge VAT on the portion that is vatable. The company would still be registered under Article 10. The company is able to claim back input VAT in relation to the vatable supplies in full and apply partial attribution in respect of the general expenses that cannot be linked to any particular supply, such as professional fees incurred.
In respect of B2B activity, one would need to assess the type of activity of the B2C for which the software is being provided by the B2B and apply VAT rules accordingly.
VAT returns for Article 10 registrations must be submitted within 6 weeks following the end of each VAT quarter. VAT notices for Article 12 registrations must be submitted by not later than 45 days after the end of the month up to which the VAT notice is being drawn up.
A reliable accounting firm can assist the company through the VAT registration process and compile and submit the necessary VAT related documents.
When taxable persons provide electronically supplied services (ESS) to non-taxable persons (players) in the EU (including remote gaming), the place of supply is shifted to where the customer is established.
Conditions for a service to qualify as an ESS in Malta:
- The service must be delivered over the Internet or an electronic network;
- The nature of the service must be such that it renders its supply essentially automated and involving minimal human intervention;
- The nature of the service must be such that it renders its supply impossible to ensure in the absence of information technology. In cases where the taxable person providing the services is not, or would like to avoid being, registered for VAT in the country where the player is established, they may opt for the MOSS scheme to facilitate the payment of VAT in the respective EU jurisdictions where their players are established. This scheme is available to taxable persons established both inside and outside the EU.
Maltese VAT would be chargeable when the player is established in Malta.
The company is required to submit a MOSS return electronically on a quarterly basis, to the Member State of identification within 20 days from the end of the relevant quarter. The payment of any VAT is also required by this date.
A trusted accounting firm can assist with MOSS registration, as well as with the submission of the periodic MOSS returns.
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.