The following is meant to provide some insight on the licensing process for gaming operators establishing in Malta:
Licensing Classes
One of the salient features of the Remote Gaming Regulations is that these are technology-neutral, meaning that they are not limited by a specific technology but cover all forms of gambling by remote means. Licensees are classified according to manner they assume game risk and are divided into four (4) different Classes:
Class 1: Operators who partake in the gaming risk based on games based on repetitive events (Random Number Generators).
Class 2: Operators who partake in gaming risk on markets based on singular events (betting).
Class 3: Operators who promote games and in return get a commission. Normally this includes multiplayer games and betting exchanges.
Class 4: Operators who run a software platform to host the service of any of the above classes. Such operators are not involved in player management functions.
The Licensing Process
The licensing procedure is essentially a two-phase process, upon successful completion of which a letter of intent (i.e. a provisional licence), is issued by the Gaming Authority. This is followed by certification of the operation, which should normally be carried out within 6 months from the obtaining of the provisional licence. Upon successful certification, the 5-year licence is issued.
During phase one, a prospective licensee submits an application form and provides detailed information about the proposed business and persons involved in the proposed operation. The information submitted forms the basis of the due diligence process carried out by the Gaming Authority, evaluating the suitability of the applicant for the grant of the licence.
Information that an applicant must make available to the Authority includes personal background of the promoters, financial information, participation in other commercial ventures, details of the proposed operation, business reputation, description of the system to be used for the gaming operation, and other information.
In determining whether to grant a licence, the Authority takes into considerations a number of factors, including the financial background and business reputation of the shareholders, directors and promoters, whether the applicant will be, in the opinion of the Authority, in a position to maintain adequate financial reserves during the course of the business, the commitment of the applicant to maintain a physical presence in Malta, whether the applicant will be in a position to take steps to prevent money laundering and other illegal operations, and other factors, whether the applicant demonstrate business and technical ability to carry out the operation. Provided all necessary information is submitted, the first stage is normally completed within 2-3 weeks.
During phase two, the ability to carry out operations and the gaming system are assessed. The system must be such as to ensure proper functioning of all games / betting procedures, system and application architecture, security and controls on the gaming operation, rules of the games, including accounting procedures, computer security of gaming transactions and general procedures and standards used for recording transactions. This stage normally takes about 3-4 weeks and upon successful completion the applicant is issued with a provisional license. A very important consideration for the Gaming Authority when assessing a licence application is players’ protection.
Fees
An application fee of EUR 2,300 is payable to the LGA upon submitting the application. Once the license is granted, a yearly fee of EUR 6,988 is payable.
Taxation
Online betting operations in Malta are charged corporate tax and gaming tax.
Corporate Tax
The normal corporate tax for companies established in Malta is 35% on profit. The recent overhaul of the taxation regime sees the introduction of a refund mechanism which could reduce the net tax liability of gaming companies to 5% since shareholders of gaming companies are entitled to benefit from a tax refund when the profits are distributed by way of dividend. The payment of a dividend to the shareholder attracts a tax refund of 86% (6/7ths) of the advanced corporation tax levied in Malta. Another tax advantage is that Malta does not levy a withholding tax on outbound dividend distributions.
Gaming Tax
Under the current Regulations, the gaming tax is charged according to the type of license as follows:
On casino-type games: EUR 4,600 per month during the first 6 months after issue of the license and subsequently EUR 6,900 per month for the entire duration of the license period. However, in those cases where a casino operator (under Class 1 license) operates from the host platform (under Class 4 license) the following taxation rules apply:
- The gaming tax payable by casino operator is EUR 1,150 per month, and
- The gaming tax payable by the host platform is as follows:
- NO TAX for the first 6 months of operation;
- EUR 2,300 per month for the subsequent 6 months; and
- Subsequently EUR 4,600 per month for the entire duration of the licence.
On betting: 0.5% on the gross amount of bets accepted.
On real income: taxed at 5%, real income is defined as net revenue less direct costs (bonuses, affiliate commissions and payment processing fees).
Tax capping: The maximum gaming tax payable annually by one licensee in respect of any one licence is approximately EUR 460,000. However, in case where casino operators (under Class 1) operate from the host platform (under Class 4 licence), the tax cap is applicable to the total tax payable by all licensees in this cluster. In other words, in this case, the tax cap is reached when the sum of tax payable by all casino operators licensed under Class 1 and their common host platform reaches EUR 460,000.
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