Malta has recently introduced regulations for the licensing of gaming companies running remote or online gambling operations. The licensing procedure is not expensive and coupled with the favourable taxation, this explains why major European gaming operators have moved their operations to Malta in recent months.

Malta is a member of the European Union since May 2004 and licences issued by the Malta Lotteries and Gaming Authority are valid and recognized throughout the 25 member states of the Union.

The three key elements required by the LGA for licensing of companies are:

  • That the applicant is an International Trading Company registered in Malta; there is no restriction on the nationality or residence of the shareholders or the directors of the company.
  • That one of the directors is appointed as the Key Person to represent the company and must become resident in Malta.
  • That the company has an effective presence in Malta and locates its computer hardware, servers and software in Malta.

The key considerations for an application to be successful are the following:

  • Clear and full disclosure of information about directors, shareholders and key officials of the company
  • Proof that the applicant has the business ability to conduct remote gaming successfully;
  • Proof that the applicant is able to obtain appropriate resources to maintain minimum required reserves to ensure that players winnings can be paid and deposits returned;
  • Suitable IT technology to run the operations remotely.

There are four classes of licences:

Class 1 - online gaming
Class 2 - online betting office or online betting exchange
Class 3 - to promote and abet gaming from Malta
Class 4 – to host and manage third party online gaming operators

The first licence costs Euro 9,320 and the annual renewal fee costs Euro 1,2000.

Taxation is on a two-tier level. There is a tax on the turnover of the bets places and there is corporate taxation on profits.

Tax on turnover is as follows:

  • at a fixed rate of Euro 4,650 per month (nil tax for a class 4 licence) for the first six months and subsequently Euro 6,990 per month (Euro 4,660 for a class 4 licence); plus
  • 0.5% on the gross amount of bets placed (or in case of betting exchanges 0.5% on the sum of all net winnings calculated per player per betting market; or in the case of pool betting 0.5%

However the total tax bill on turnover is capped so that the total tax shall not exceed Euro 465,000 per year in total.

Apart from the tax on turnover, the licensed company is also charged corporate tax on its operating profits at an effective tax rate of 4.17% and there is no withholding tax on the subsequent distribution of the dividends to the shareholders.

The licensing procedure takes approximately two months for processing following which a temporary licence is issued for a six-month period. During that period the operation is established in Malta and once the set-up is complete, the final licence is issued. The licence is valid for a five-year period and can then be renewed.

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.