Malta Online Gaming

Malta is an established name in online gaming and as the smallest member of the EU punches well above its weight with around 10% of the world’s gaming companies registered in Malta. Hundreds of online gaming business of all sizes have chosen to operate from Malta to take advantage of its low tax rates (the lowest in Europe), excellent financial services environment, world class hosting facilities, skilled and affordable workforce and unparalleled access to the regulator. Online gaming makes up around 10% of Malta’s economy.

Regulation in Malta
Online gaming is well regulated in Malta. The different classes of licences are set out below. In all cases online gaming companies operating from or in Malta will require regulation.

Different Classes of Licence
Malta has three main types of remote gaming licence  (class 1, 2 and 3) and a fourth category for provision of operating software to one of these three classes (class 4). Licence holders may apply for a class 1, 2 or 3 using their own software or using the software of an existing class 4 licence holder (in which case the licence is referred to as a class 1 on 4, class 2 on 4 or class 3 on 4 respectively). The different classes have different licensing requirements and different tax rates which are set out in the table below.

Class 1
This is the highest level of regulation, the licence holder manages their own risk and operates online casino games, lotteries etc.

Class 2
This is a sportsbook (or matchbook) licence where operators manage their own risk based on fixed odds.

Class 3
This is a for operators who promote betting games between players such as poker networks, bingo, betting exchange etc.

Class 4
This is for the hosting and managing of online gaming software. In addition to their own tax obligations these licence holders also have to pay an additional fee for each operator they host who does not have a class 1, class 2 or class 3 licence.

Class 1 on 4
An online casino or lottery licence operated using software licensed in class 4.

Class 2 on 4
A sportsbooks operator using software licensed in class 4.

Class 3 on 4
A player to player operator using software licensed in class 4.

Taxation
Online gaming licence holders must be local companies and must pay local corporate tax. In addition to this they must also pay gaming tax (see below).

Corporation Tax
Corporation tax in Malta is effectively 5%. In fact all Maltese companies pay 35% tax but 6/7ths of all tax paid is refunded to its shareholders if they are non-Maltese. For a thorough explanation of companies and more detail on their tax treatment please see our main page on Maltese private companies.

Gaming Tax
In addition to the 5% tax paid above the licence holders must also pay gaming tax, the rate varies by class and is set out in the below table.

Value Added Tax (VAT)
Gaming companies are exempt without credit. This means that unlike most other businesses VAT is cost which cannot be recovered. Malta’s VAT rate is 18% (the lowest in Europe) and a number of international providers operate joint venture schemes aimed at reducing the amount of VAT leakage by outsourcing certain services (especially marketing) to non-EU service providers. The effectiveness of such schemes will depend on how they are set up and operated on a continuing basis. As to services which cannot be outsourced VAT will represent an 18% premium on costs.

Other Taxes
Malta does not impose capital gains tax, withholding tax or any other tax on companies with foreign shareholders.

Licence Fees
The following fees are charged by the regulator. These fees do not include any charges due for the provision of local services such as assistance with the licence application, company formation, the provision of local directors and key official etc.

Licensing Application
Malta gaming licences are issued for a period of five years and then renewed for a further five years and so on. The licensing process is in three stages is explained in the below table and requires the appointment of a local key official.

Role of Key Official
The Key Official must be approved by the regulator and is required to personally supervise operations in Malta and to ensure compliance  with local laws. They key official acts as an interface with the regulator, must be director of the licence holding company and must be resident in Malta. Almost all local providers have pre-approved key officials which can be engaged to fulfil this role subject to the satisfactory client take-on procedures. Since this area presents the most risk to local service providers it is likely to make up the bulk of their fees. For applicants considering relocating themselves or their staff to Malta our main article on Maltese residency may be of interest.

Licensing Process
The licensing process takes place in three stages with trading commencing at the end of Stage 2. These steps are explained here and summarised in the below table.

Stage 1
Stage 1 is concerned with identifying all involved persons including shareholders, beneficial owners (holding at least 10%), intermediary holding companies or other entities, directors, managers and key official. This area is principally concerned with collecting Know Your Client (KYC) documents such as passports and proofs of address and running background check (such as police check and online database searches). Documents requested at this stage will include all Due Diligence (DD) documents as well as a business plan. The timescale for completion of stage 1 depends on various factors including the complexity of the structure, the number of beneficial owners, whether or not any applicants such as the key official is known to the regulator, the amount of time required for the references to be returned and how busy the regulator is at present. It is best to allow 1-2 months for this process to be completed. A non-refundable fee of EUR 2,330 is paid at this point and following successful completion the regulator will indicate that the applicant should proceed to stage 2.

Stage 2
Stage 2 is concerned with understanding all operational and technical matters including systems and procedures. At this stage a thorough review of all internal systems and controls, outsourcing agreements (including joint venture agreements if applicable) and other operational matters is made. If a Random Number Generator (RNG) is used then at this point the regulator will request sight of an independent evaluation of it. After this a pre-go live audit is undertaken (and the fees for this must be paid) and following successful completion a letter of intent is issued which is effectively a provisional licence authorising the operator to begin trading immediately for a period of six months.

Stage 3
Stage 3 happens in the first six months of operation after the stage two provisional licence has been issued and if success leads to the grant of the full licence (at which point the licence fee must be paid). Stage 3 involves a second audit (the post-go live audit) where the regulator verifies that the systems approved in stage 2 have been properly implemented. Following the issue of the licence the licence holder will be subject to ongoing regulation which may take the form of inspection visits by the regulator.

Summary

Other Associated Costs
The bulk of fees are listed above include those due to the regulator, the gaming and corporate tax and the fees due to the local service provider (if applicable) for handling the licence application, drafting the business plan, forming the company or appointing directors or key official. In addition there may be other associated costs related to local hosting, if required, the registration of the applicant company (for a full discussion of Maltese companies please see our main article) though this may be bundled in with other services and the cost of accounts and financial audit (which is a requirement for all companies). Accounts and audit in Malta are amongst the cheapest in Europe and for a full description of accountancy service in Malta please see our main article.