The removal of Malta’s current multi-licence system and the introduction of only two different licences – a B2C and a B2B licence – are major steps forward for Malta’s iGaming industry, but it remains to be seen how new tax rates and licence fees will affect companies of different sizes, iGaming professionals said after reviewing the draft of the Gaming Act.
The Malta Gaming Authority (MGA) is currently rewriting the rulebook for the industry and untangling the ever-growing web of regulatory, legislative and compliance challenges that iGaming companies have to deal with. The new law is expected to come into force in the first quarter of 2018, and it will replace the Remote Gaming Regulations, which were introduced in 2004.
A New Tax System
When contacted by MaltaProfile, Dr Silvana Zammit, Partner at Chetcuti Cauchi Advocates, said that she believes that the introduction of a single tax rate of 5% of gaming revenue could simplify tax matters, while the proposal to exempt B2B licensees from gaming tax could make Malta more attractive as a base for service providers. However, she highlighted that the annual licensing fee will be increased from €8,500 annually to a fixed fee of €25,000 annually. “Prima facie this is a hefty increase. However, one would need to analyse better whether the practical advantages that the new law is seeking to provide will outweigh this increase.”
Dr James Scicluna, Partner at law firm WH Partners, which was involved in advising the MGA on developing the new Gaming Act, agreed that the new system is extremely attractive to B2B operators due to the fiscal incentives. He said that the new regime also makes it easier for start-ups and SMEs to increase their offering and add new channels, although, he admits that they will “need to make some calculations in relation to the taxation and licence fees”. He explained that the new tax system is based on Gross Gaming Revenue (GGR) generated from customers located in Malta, but that the current point of supply tax has been integrated in the licence fee. “This will probably have some impact on operators.” Scicluna also adds that the industry should not underestimate the introduction of an administrative appeals procedure for MGA decisions as this is expected to result in greater transparency.
A Simplified Licensing System
Beverly Pace, Head of Legal & Compliance at LeoVegas, commented that the firm is in particular looking forward to the new, simplified licensing system. “This, together with the streamlining of taxation, will heavily improve the licensing system in Malta for operators such as ourselves.” She adds: “The fact that there will also be an enhancement in terms of responsible gambling, compliance and the key official role also shows that the Malta Gaming Authority is steadfast in their aim to ensure that Malta remains a reputable jurisdiction for online gaming, with utmost importance being placed on player protection and effective measures in place to combat problem gambling issues.”
Kostandina Zafirovska, CEO of Btobet, said that the proposals undeniably reflect the experience which the MGA has garnered from years of regulating the sector. “The proposed regulatory framework allows the MGA to be more agile in its decision-making, and at the same time improve the supervision of areas with a higher risk profile. The reform offers the enhancement of consumer protection standards and responsible gaming measures to crackdown on suspicious practices related to the gaming industry.”
According to Reuben Portanier, CEO of Avviza Advisory, the real value of the proposed law lies in the many novel concepts that it will bring to the iGaming industry in Malta and abroad, such as the introduction of an independent administrator, a concept widely used in the financial services sector. “The new law recognises the importance of having small start-up operators, while it mitigates the risk that start-ups bring with them by introducing the concept of having an independent administrator should a company face financial difficulties, with the clear intention of the latter to strengthen the protection of player funds,” he says.
“The draft legislation comes across as less bureaucratic and more transparent”, said Russell Mifsud of KPMG. “It is clear that the strategy to increase Malta’s competitiveness for B2B operations, by exempting B2B licensees from gaming tax, is a worthwhile, forward-looking initiative and will contribute to Malta’s overall ecosystem as a robust hub of excellence. This point will also likely put Malta in good stead for future initiatives on the AI and VR front.” KPMG iGaming specialist however also agreed that start-up B2C operators might find the new rules challenging: “A single licence holder who is expected to make profits upon hitting the standard three year forecast may find the newly proposed compliance fees to be more costly than the gaming taxes under the current legal framework. This may also ring true for small time Daily Fantasy Sport operators hoping to make a mark within Europe.”
Valéry Bollier, CEO of fantasy football operator OulalaGames, commented that Oulala was the first company to obtain the Maltese B2B controlled skill game licence. This licence was a giant step for the young and fast growing skill game industry. We are therefore very satisfied that the skill game legislation will be incorporated into the new licences."